EXHIBIT 4.5
CONTROL AGREEMENT
This CONTROL AGREEMENT (the "Agreement") dated as of March 21, 2003
by and among Alaska Air Group, Inc. (the "Pledgor") and U.S. Bank National
Association, in its capacity as trustee (the "Trustee"), and U.S. Bank National
Association, a national banking association, in its capacity as securities
intermediary and depository bank (the "Account Holder").
PRELIMINARY STATEMENTS:
(1) The Pledgor has granted the Trustee a security interest (the
"Security Interest") in certain security entitlements (the "Pledged Security
Entitlements") with respect to certain U.S. Treasury securities (the "Pledged
Financial Assets") identified on Schedule I attached hereto maintained by the
Trustee with the Account Holder and carried from time to time in an account with
the Account Holder, ABA No. ▇▇▇▇▇▇▇▇▇, Account No. 221169000 at the Federal
Reserve Bank, Cleveland, Ohio, in the name of "U.S. Bank, National Association,
as Trustee for the benefit of the holders of the Senior Convertible Notes due
2023 of Alaska Air Group, Collateral Pledge Account" (the "Pledged Account") and
all additions thereto and substitutions and proceeds thereof (collectively, the
"Collateral"), pursuant to, and as more particularly described in, a Pledge
Agreement dated as of March 21, 2003, among the Pledgor and the Trustee (as the
same may hereafter be amended, supplemented or otherwise modified from time to
time, the "Pledge Agreement"; terms defined in the Pledge Agreement and not
otherwise defined herein are used herein as therein defined). The Pledgor
acknowledges having received value for such pledge of the Collateral.
(2) Terms defined in Article 8 or 9 of the Uniform Commercial Code
as in effect in the State of New York (the "UCC") are used in this Agreement
(including, without limitation, paragraph (1) above) as such terms are defined
in such Article 8 or 9.
(3) The Pledgor, the Trustee and the Account Holder are delivering
this Agreement pursuant to the terms of the Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, the parties hereto hereby agree as follows:
SECTION 1. Notice of Exclusive Control. The Pledgor and Trustee are
entering into this Agreement to perfect, and confirm the first priority lien of,
the Trustee's Security Interest in the Collateral. The Account Holder agrees to
promptly make all necessary entries or notations in its books and records to
reflect the Trustee's Security Interest in the Collateral and to apply any value
distributed on account of any Pledged Financial Assets as directed in writing by
the Trustee without further consent from the Pledgor. The Account Holder
acknowledges that the Trustee has exclusive control over the Pledged Account and
all Pledged Security Entitlements contained therein from time to time.
SECTION 2. The Account. The Account Holder represents and warrants
to, and agrees with, the Pledgor and the Trustee and the Holders of the Notes
that:
(a) The Account Holder has established the Pledged Account and shall
not change the name or account number of the Pledged Account without the
prior written consent of the Trustee.
(b) The Account Holder maintains the Pledged Account for the
Trustee, and all property (including, without limitation, all funds and
financial assets) held by the Account Holder for the account of the
Trustee is, and will continue to be, credited to the Pledged Account. The
Account Holder is a Securities Intermediary as defined in Section
8-102(a)(xiv) of the UCC and is acting as such in relation to the Trustee,
the Pledgor and the Pledged Account and with respect to all property
credited thereto, from time to time.
(c) To the extent that funds are credited to the Pledged Account,
the Pledged Account is a deposit account; and to the extent that financial
assets are credited to the Pledged Account, the Pledged Account is a
securities account. The Account Holder is (i) the bank with which the
Pledged Account is maintained and (ii) the securities intermediary with
respect to financial assets held in the Pledged Account. The Trustee is
(x) the Account Holder's customer with respect to the Pledged Account and
(y) the entitlement holder with respect to financial assets credited from
time to time to the Pledged Account.
(d) All financial assets in registered form or payable to or to the
order of and credited to the Pledged Account shall be registered in the
name of, payable to or to the order of, or endorsed to, the Account Holder
and in no case during the term of the Pledge Agreement will any financial
asset credited to the Pledged Account be registered in the name of,
payable to or to the order of, or endorsed to, the Pledgor, except to the
extent the foregoing have been subsequently endorsed by the Pledgor to the
Account Holder or in blank.
(e) Notwithstanding any other agreement to the contrary, the Account
Holder's jurisdiction with respect to the Pledged Account for purposes of
the UCC is, and will continue to be for so long as the Security Interest
shall be in effect, the State of New York.
(f) The Account Holder does not know of any claim to or interest in
the Pledged Account or any property (including, without limitation, all
funds and financial assets) credited to the Pledged Account, except for
claims and interests of the parties referred to in this Agreement.
SECTION 3. Control by Trustee. (a) The Account Holder will comply
with (A) all written instructions directing disposition of the funds in the
Pledged Account (such instructions, a "Payment Order"), (B) all notifications
and entitlement orders that the Account Holder receives directing it to transfer
or redeem any financial asset in the Pledged Account and (C) all other
directions concerning the Collateral, including, without limitation, directions
to distribute to the Trustee proceeds of any such transfer or redemption or
interest on any property
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in the Pledged Account (any such instruction, notification or direction referred
to in clause (A), (B) or (C) above being an "Account Direction"), in each case
of clauses (A), (B) and (C) above originated by the Trustee without further
consent by the Pledgor or any other person.
(b) The Trustee hereby acknowledges that it shall maintain and
exercise control of the Pledged Account on behalf of the Holders of the Notes.
(c) The Account Holder will not (i) comply with Account Directions
or other directions concerning the Collateral originated by the Pledgor or (ii)
distribute to the Pledgor interest or other distributions on or in respect of
the Collateral.
SECTION 4. Priority of Trustee's Security Interest. (a) The Account
Holder (i) subordinates to the Security Interest and in favor of the Trustee any
security interest, lien, or right of setoff the Account Holder may have, now or
in the future, against the Pledged Account or property in the Pledged Account,
and (ii) agrees that it will not exercise any right in respect of any such
security interest or lien or any such right of setoff until the Security
Interest is terminated, except that the Account Holder will retain its prior
lien on property in the Pledged Account to secure payment for property purchased
for the Pledged Account and normal commissions and fees for the Pledged Account.
(b) The Account Holder will not enter into any other agreement with
any Person relating to Account Directions or other directions with respect to
the Pledged Account.
SECTION 5. Statements, Confirmations, and Notices of Adverse Claims.
(a) The Account Holder will send copies of all statements and confirmations for
the Pledged Account simultaneously to the Pledgor and the Trustee.
(b) When the Account Holder knows of any claim or interest in the
Pledged Account or any property credited to the Pledged Account other than the
claims and interests of the parties referred to in this Agreement, the Account
Holder will promptly notify the Trustee and the Pledgor of such claim or
interest.
SECTION 6. The Account Holder's Responsibility. (a) The Account
Holder will not be liable to the Pledgor or the Trustee or the Holders of the
Notes for complying with an Account Direction or other direction concerning the
Collateral originated by the Trustee, even if the Pledgor notifies the Account
Holder that the Trustee is not legally entitled to issue the Account Direction
or such other direction unless the Account Holder takes the action after it is
served with an injunction, restraining order, or other legal process enjoining
it from doing so, issued by a court of competent jurisdiction, and had a
reasonable opportunity to act on the injunction, restraining order or other
legal process.
(b) This Agreement does not create any obligation of the Account
Holder except for those expressly set forth in this Agreement and in Part 5 of
Article 8 of the UCC and in Article 4 of the UCC. In particular, the Account
Holder need not investigate whether the Trustee is entitled under the Trustee's
agreements with the Pledgor to give an Account Direction or other direction
concerning the Pledged Account. The Account Holder may conclusively rely on
notices and communications it believes given by the appropriate party.
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(c) In no event shall the Account Holder or any of its affiliates,
shareholders, directors, officers, employees or agents be liable for indirect,
special, punitive, incidental or consequential damages of any kind whatsoever
even if advised of the possibility of such damages, other than such damages
caused by its own bad faith, gross negligence or willful misconduct.
(d) Without limiting the foregoing, and notwithstanding any
provision to the contrary elsewhere, the Account Holder and its affiliates,
shareholders, directors, officers, employees or agents:
(i) shall have no responsibilities, obligations or duties in respect
of the subject matter hereof other than those expressly set forth in this
Agreement, and no implied duties, responsibilities, covenants or
obligations shall be read into this Agreement against the Account Holder.
Without limiting the foregoing, the Account Holder shall have no duty or
authority to determine and/or investigate whether or not an event of
default exists under any agreement between the Pledgor and the Trustee, or
to determine and/or investigate whether or not the Trustee is entitled to
give any Account Direction with respect to the Collateral;
(ii) may in any instance where the Account Holder determines that it
lacks or is uncertain as to its authority to take or refrain from taking
certain action hereunder, or as to any of the requirements of this
Agreement under the circumstance before it, delay or refrain from taking
any action unless and until it shall have received appropriate written
instructions from the Trustee or advice from legal counsel selected by it
(or other appropriate advisor), as the case may be, detailing the action
required to be taken hereunder and the Account Holder may rely
conclusively on any such instructions or advice;
(iii) so long as it and they shall have acted (or refrained from
acting) in good faith and within the reasonable belief that such action or
omission is duly authorized or within the discretion or powers granted to
it hereunder, shall not be responsible or liable for any error of judgment
in any action taken, suffered or omitted by it or them, or for any act
done or step taken or omitted, or for any mistake of fact or law, unless
such action constitutes gross negligence or willful misconduct as finally
determined by a non-appealable judgment of a court of competent
jurisdiction on its (or their) part;
(iv) will not be responsible or liable to the Pledgor, the Trustee,
or any other person or entity whatsoever for the due execution, legality,
validity, enforceability, genuineness, effectiveness or sufficiency of
this Agreement (provided, however, that the Account Holder warrants that
the Account Holder has legal capacity and has been duly authorized to
enter into this Agreement) or for any statement, warranty or
representation made by any other party in connection with this Agreement;
(v) will not incur any responsibility or liability by acting or not
acting in reliance upon advice of counsel, or upon any notice, consent,
certificate, instruction,
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Account Direction, statement, wire instruction, telecopy or other writing
reasonably and in good faith believed by it or them to be genuine and in
conformance with this Agreement and signed or sent by the proper party or
parties and contemplated herein; and
(vi) shall not be required to expend or risk its or their own funds,
or to take any action (including the institution or defense of legal
proceedings) which in its or their reasonable judgment may cause it or
them to incur or suffer any expense or liability, unless the Account
Holder shall have been provided with security or indemnity, acceptable to
Account Holder in its sole discretion, for the payment of the costs,
expenses (including reasonable attorneys' fees) and liabilities which may
be incurred therein or thereby.
(e) If any Collateral subject to this Agreement is at any time
attached or levied upon, or in case the transfer or delivery of any such
Collateral shall be stayed or enjoined, or in the case of any other legal
process or judicial order affecting such Collateral, the Account Holder is
authorized to comply with any such order in any manner as the Account Holder or
its legal counsel reasonably deems appropriate. The Account Holder shall give
prompt written notice to the Pledgor and the Trustee of any such attachment,
levy, stay, injunction or legal process. If the Account Holder complies with any
process, order, writ, judgment or decree relating to the Collateral subject to
this Agreement, then the Account Holder shall not be liable or responsible to
the Pledgor, the Trustee, or any other person or entity whatsoever even if such
order, writ, judgment, decree or process is subsequently modified, vacated or
otherwise determined to have been without legal force or effect.
(f) The Account Holder shall not be liable or responsible for any
delays or failures in performance of any of its duties hereunder which result
from events or conditions beyond its reasonable control and so long as the same
exist or continue and cannot reasonably be remedied by the Account Holder in
accordance with its normal business practices. Such events or conditions shall
include, but shall not be limited to, acts of God, strikes, lockouts, riots,
acts of war or terrorism, epidemics, nationalization, expropriation, currency
restrictions, governmental regulations superimposed after the fact, fire,
communication line failures (including the unavailability of the Federal Reserve
Bank wire or telex or other wire or communication facility), power failures,
earthquakes or other disasters.
SECTION 7. Indemnity. The Pledgor will indemnify the Account Holder,
its officers, directors, employees and agents against claims, liabilities and
expenses arising out of this Agreement (including, without limitation,
reasonable attorney's fees and disbursements), except to the extent the claims,
liabilities or expenses are caused by the Account Holder's gross negligence or
willful misconduct as found by a court of competent jurisdiction in a final,
non-appealable judgment.
SECTION 8. Termination; Survival. (a) This Agreement shall terminate
automatically upon receipt by the Account Holder of written notice executed by
two officers of the Trustee that (i) all of the Secured Obligations have been
paid in full in cash or otherwise satisfied or (ii) all of the Collateral has
been released, which ever is earlier, and the Account Holder shall thereafter be
relieved of all duties and obligations hereunder. The Account Holder
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may terminate this Agreement on 60 days' prior notice to the Trustee and the
Pledgor, provided that before such termination the Account Holder and the
Pledgor shall make arrangements to transfer the property in the Pledged Account
to another securities intermediary that shall have executed, together with the
Trustee and the Pledgor, a control agreement in favor of the Trustee and the
Holders of the Notes in respect of such property in substantially the form of
this Agreement or otherwise in form and substance satisfactory to the Trustee.
(b) In the event that the Trustee no longer serves as Trustee for
the Collateral, the Trustee, the Account Holder and the Pledgor shall make
arrangements for another Person to assume the rights and obligations of the
Trustee hereunder, and such Person shall have executed, together with the
Account Holder and the Pledgor, a control agreement in favor of such Person and
the Holders of the Notes in substantially the form of this Agreement or
otherwise in form and substance satisfactory to the Trustee.
(c) Sections 7 and 8 will survive termination of this Agreement.
SECTION 9. Conflict with Other Agreements. (a) In the event of any
conflict between this Agreement (or any portion thereof) and any other agreement
now existing or hereafter entered into, the terms of this Agreement shall
prevail;
(b) No amendment or modification of this Agreement or waiver of any
right hereunder shall be binding on any party hereto unless it is in writing and
is signed by all of the parties hereto;
(c) The Account Holder hereby confirms and agrees that:
(i) There are no other agreements entered into between the Account
Holder and the Pledgor with respect to the Pledged Account;
(ii) It has not entered into, and until the termination of the this
Agreement will not enter into, any agreement with any other person
relating to the Pledged Account and/or any financial assets credited
thereto pursuant to which it has agreed to comply with entitlement orders
(as defined in Section 8-102(a)(8) of the UCC) of such other person; and
(iii) It has not entered into, and until the termination of this
Agreement will not enter into, any agreement with the Pledgor or the
Trustee purporting to limit or condition the obligation of the Account
Holder to comply with Account Directions as set forth in Section 3 hereof.
SECTION 10. Permitted Investments. In accordance with the Pledge
Agreement, the Trustee shall direct the Account Holder with respect to the
selection of investments to be made with the funds in the Pledged Account.
SECTION 11. Entire Agreement. This Agreement is the entire
agreement, and supersedes any prior agreements, and contemporaneous oral
agreements, of the parties
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concerning its subject matter. The Trustee and the Account Holder shall be
entitled to all the rights, benefits, privileges and immunities accorded to the
Trustee under the Indenture.
SECTION 12. Amendments. No modification, amendment or waiver of, nor
consent to any departure by any party from, any provision of this Agreement will
be effective unless made in writing signed by the parties hereto, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
SECTION 13. Financial Assets. The Account Holder agrees with Trustee
and the Pledgor that, to the fullest extent permitted by applicable law, all
property credited from time to time to the Pledged Account will be treated as
financial assets under Article 8 of the UCC.
SECTION 14. Notices. All notices, demands, requests, consents,
approvals and other communications required or permitted hereunder must be in
writing and will be effective upon receipt if delivered personally, or if sent
by facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the Pledgor's and the Trustee's
addresses as set forth in the Pledge Agreement, and to the Account Holder's
address as set forth below, or to such other address as any party may give to
the others in writing for such purpose.
SECTION 15. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Pledgor, the Trustee and the Account
Holder, and thereafter shall be binding upon and inure to the benefit of the
Pledgor, the Trustee and the Account Holder and their respective successors and
assigns.
SECTION 16. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
SECTION 17. Governing Law and Jurisdiction. THIS AGREEMENT WILL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. Each of the parties hereby irrevocably submits for itself and its property
in any legal action or proceeding relating to this Agreement, or for recognition
and enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction and venue of the courts of the State of New York, the courts of the
United States of America in New York, and appellate courts from any thereof.
SECTION 18. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) OF
ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. EACH
PARTY HERETO ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
Pledgor:
ALASKA AIR GROUP, INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President/Finance
& Chief Financial Officer
Trustee:
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:
-----------------------------------------
Name:
Title:
Account Holder:
U.S. BANK NATIONAL ASSOCIATION,
as Account Holder
By:
-----------------------------------------
Name:
Title:
SCHEDULE I
Pledged Financial Assets
Par Amount Ticker Maturity Date
---------- ------ -------------
1,452,000 B 6/19/03 ▇▇▇▇▇▇▇▇▇
1,422,000 SP 8/15/03 ▇▇▇▇▇▇▇▇▇
1,464,000 SP 11/15/03 ▇▇▇▇▇▇▇▇▇
1,566,000 S 2/15/04 ▇▇▇▇▇▇▇▇▇
1,713,000 S 5/15/04 ▇▇▇▇▇▇▇▇▇
1,867,000 SP 8/15/04 ▇▇▇▇▇▇▇▇▇
1,987,000 S 11/15/04 ▇▇▇▇▇▇▇▇▇
2,096,000 S 2/15/05 ▇▇▇▇▇▇▇▇▇
2,247,000 S 5/15/05 ▇▇▇▇▇▇▇▇▇
2,423,000 S 8/15/05 ▇▇▇▇▇▇▇▇▇
2,377,000 SP 11/15/05 ▇▇▇▇▇▇▇▇▇
2,322,000 SP 2/15/06 ▇▇▇▇▇▇▇▇▇