EXHIBIT 4.24
================================================================================
INDENTURE AND SECURITY AGREEMENT
Dated as of May 24, 2001
between
AMERICAN AIRLINES, INC.,
and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
as Loan Trustee
----------
One Boeing 777-223ER Aircraft
U.S. Registration No. N788AN
================================================================================
ARTICLE I
DEFINITIONS
Section 1.01. Definitions................................................... 5
Section 1.02. Other Definitional Provisions................................. 5
ARTICLE II
THE EQUIPMENT NOTES
Section 2.01. Form of Equipment Notes....................................... 5
Section 2.02. Issuance and Terms of Equipment Notes.........................10
Section 2.03. Method of Payment.............................................12
Section 2.04. Withholding Taxes.............................................13
Section 2.05. Application of Payments.......................................13
Section 2.06. Termination of Interest in Collateral.........................13
Section 2.07. Registration, Transfer and Exchange of Equipment Notes........14
Section 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes..........15
Section 2.09. Payment of Expenses on Transfer; Cancellation.................15
Section 2.10. Mandatory Redemption of Equipment Notes.......................16
Section 2.11. Voluntary Redemption of Equipment Notes.......................16
Section 2.12. Redemptions; Notice of Redemptions; Repurchases...............16
Section 2.13. Subordination.................................................17
Section 2.14. Certain Payments..............................................18
Section 2.15. Repayment of Monies for Equipment Note Payments Held by
the Loan Trustee..............................................19
Section 2.16. Directions by Subordination Agent.............................20
ARTICLE III
RECEIPT, DISTRIBUTION AND
APPLICATION OF INCOME FROM THE
COLLATERAL
Section 3.01. Basic Distributions...........................................20
Section 3.02. Event of Loss; Optional Redemption............................22
Section 3.03. Payments after Event of Default...............................23
Section 3.04. Certain Payments..............................................25
Section 3.05. Payments to the Company.......................................26
i
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES OF
LOAN TRUSTEE
Section 4.01. Events of Default.............................................26
Section 4.02. Remedies......................................................28
Section 4.03. Remedies Cumulative...........................................31
Section 4.04. Discontinuance of Proceedings.................................32
Section 4.05. Waiver of Past Defaults.......................................32
Section 4.06. Noteholders May Not Bring Suit Except Under Certain
Conditions....................................................32
ARTICLE V
DUTIES OF THE LOAN TRUSTEE
Section 5.01. Notice of Event of Default....................................33
Section 5.02. Action upon Instructions; Certain Rights and Limitations......34
Section 5.03. Indemnification...............................................34
Section 5.04. No Duties Except as Specified in Indenture or Instructions....34
Section 5.05. No Action Except under Indenture or Instructions..............35
Section 5.06. Investment of Amounts Held by the Loan Trustee................35
ARTICLE VI
THE LOAN TRUSTEE
Section 6.01. Acceptance of Trusts and Duties...............................36
Section 6.02. Absence of Certain Duties.....................................36
Section 6.03. No Representations or Warranties as to the Documents..........36
Section 6.04. No Segregation of Monies; No Interest.........................37
Section 6.05. Reliance; Agents; Advice of Counsel...........................37
Section 6.06. Instructions from Noteholders.................................37
ARTICLE VII
OPERATING COVENANTS OF THE
COMPANY
Section 7.01. Liens.........................................................38
Section 7.02. Possession, Operation and Use, Maintenance and Registration...39
Section 7.03. Inspection; Financial Information.............................45
Section 7.04. Replacement and Pooling of Parts; Alterations,
Modifications and Additions; Substitution of Engines..........47
Section 7.05. Loss, Destruction or Requisition..............................49
Section 7.06. Insurance.....................................................54
ii
ARTICLE VIII
SUCCESSOR AND ADDITIONAL TRUSTEES
Section 8.01. Resignation or Removal; Appointment of Successor..............60
Section 8.02. Appointment of Additional and Separate Trustees...............61
ARTICLE IX
AMENDMENTS AND WAIVERS
Section 9.01. Amendments to this Indenture without Consent of Holders.......63
Section 9.02. Amendments to this Indenture with Consent of Holders..........64
Section 9.03. Amendments, Waivers, Etc. of the Participation Agreement......65
Section 9.04. Revocation and Effect of Consents.............................65
Section 9.05. Notation on or Exchange of Equipment Notes....................65
Section 9.06. Trustee Protected.............................................66
ARTICLE X
MISCELLANEOUS
Section 10.01. Termination of Indenture......................................66
Section 10.02. No Legal Title to Collateral in Noteholders...................68
Section 10.03. Sale of Aircraft by Loan Trustee is Binding...................68
Section 10.04. Indenture for Benefit of the Company, Loan Trustee and
Noteholders...................................................68
Section 10.05. Notices.......................................................69
Section 10.06. Severability..................................................69
Section 10.07. No Oral Modification or Continuing Waivers....................70
Section 10.08. Successors and Assigns........................................70
Section 10.09. Headings......................................................70
Section 10.10. Normal Commercial Relations...................................70
Section 10.11. Voting by Noteholders.........................................70
Section 10.12. Section 1110..................................................70
Section 10.13. The Company's Performance and Rights..........................70
Section 10.14. Counterparts..................................................71
Section 10.15. Governing Law.................................................71
Section 10.16. Confidential Information......................................71
Section 10.17. Submission to Jurisdiction....................................71
iii
Exhibit A - Form of Indenture Supplement
Exhibit B - List of Permitted Countries
Schedule I - Description of Equipment Notes
Schedule II - Pass Through Trust Agreement and Pass Through Trust Supplements
Annex A - Definitions
iv
INDENTURE AND SECURITY AGREEMENT
This
INDENTURE AND SECURITY AGREEMENT, dated as of May 24, 2001 is made
by and between AMERICAN AIRLINES, INC., a Delaware corporation (together with
its successors and permitted assigns, the "Company"), and STATE STREET BANK AND
TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, as Loan Trustee hereunder (together with its permitted successors
hereunder, the "Loan Trustee").
WITNESSETH:
WHEREAS, the parties desire by this Indenture (such term and other
capitalized terms used herein without definition being defined as provided in
Article I), among other things, to provide for (i) the issuance by the Company
of the Equipment Notes and (ii) the assignment, mortgage and pledge by the
Company to the Loan Trustee, as part of the Collateral hereunder, among other
things, of all of the Company's estate, right, title and interest in and to the
Aircraft, as security for, among other things, the Company's obligations to the
Loan Trustee, for the ratable benefit and security of the Noteholders, subject
to Section 2.13 and Article III;
WHEREAS, all things have been done to make the Equipment Notes, when
executed by the Company and authenticated and delivered by the Loan Trustee
hereunder, the valid, binding and enforceable obligations of the Company; and
WHEREAS, all things necessary to make this Indenture a legal, valid and
binding obligation of the Company for the uses and purposes herein set forth, in
accordance with its terms, have been done and performed and have occurred;
GRANTING CLAUSE
NOW, THEREFORE, to secure the prompt and complete payment (whether at
stated maturity, by acceleration or otherwise) of principal of, Make-Whole
Amount, if any, and interest on, the Equipment Notes and all other amounts
payable by the Company under the Operative Documents and the performance and
observance by the Company of all the agreements and covenants to be performed or
observed by the Company for the benefit of the Noteholders and the Indenture
Indemnitees contained in the Operative Documents, and in consideration of the
premises and of the covenants contained in the Operative Documents, and for
other good and valuable consideration given by the Loan Trustee, the Noteholders
and the Indenture Indemnitees to the Company at or before the Closing Date, the
receipt of which is hereby acknowledged, the Company does hereby grant, bargain,
sell, convey, transfer, mortgage, assign, pledge and confirm unto the Loan
Trustee and its successors in trust and permitted assigns, for the security and
benefit of
the Loan Trustee, the Noteholders and the Indenture Indemnitees, a first
priority security interest in, and mortgage lien on, all estate, right, title
and interest of the Company in, to and under, all and singular, the following
described properties, rights, interests and privileges whether now or hereafter
acquired (hereinafter sometimes referred to as the "Collateral"):
1. the Aircraft, including the Airframe and the Engines,
whether or not any such Engine may from time to time be installed on
the Airframe or any other airframe or any other aircraft, and any and
all Parts relating thereto, and, to the extent provided herein, all
substitutions and replacements of, and additions, improvements,
accessions and accumulations to, the Aircraft, including the Airframe,
the Engines and any and all Parts (in each case other than any
substitutions, replacements, additions, improvements, accessions and
accumulations that constitute items excluded from the definition of
Parts by clauses (b), (c) and (d) thereof) relating thereto (such
Airframe and Engines as more particularly described in the Indenture
Supplement executed and delivered with respect to the Aircraft on the
Closing Date or with respect to any substitutions or replacements
therefor), and together with all flight records, logs, manuals,
maintenance data and inspection, modification and overhaul records and
other documents at any time required to be maintained with respect to
the foregoing, in accordance with the rules and regulations of the FAA
if the Aircraft is registered under the laws of the United States or
the rules and regulations of the government of the country of registry
if the Aircraft is registered under the laws of a jurisdiction other
than the United States;
2. the Warranty Rights, together with all rights, powers,
privileges, options and other benefits of the Company under the same;
3. all requisition proceeds with respect to the Aircraft or
any Part thereof, and all insurance proceeds with respect to the
Aircraft or any Part thereof, but excluding all proceeds of, and rights
under, any insurance maintained by the Company and not required under
Section 7.06(b);
4. all moneys and securities now or hereafter paid or
deposited or required to be paid or deposited to or with the Loan
Trustee by or for the account of the Company pursuant to any term of
any Operative Document and held or required to be held by the Loan
Trustee hereunder or thereunder; and
5. all proceeds of the foregoing;
PROVIDED, HOWEVER, that notwithstanding any of the foregoing
provisions, so long as no Event of Default shall have occurred and be
continuing, the Company shall have the right, to the exclusion of the Loan
Trustee, (i) to quiet enjoyment of the Aircraft,
2
the Airframe, the Parts and the Engines, and to possess, use, retain and control
the Aircraft, the Airframe, the Parts and the Engines and all revenues, income
and profits derived therefrom and (ii) with respect to the Warranty Rights, to
exercise in the Company's name all rights and powers of the Buyer (as defined in
the Purchase Agreement) under the Warranty Rights and to retain any recovery or
benefit resulting from the enforcement of any warranty or indemnity or other
obligation under the Warranty Rights; provided, further, that notwithstanding
the occurrence and continuation of an Event of Default, the Loan Trustee shall
not enter into any amendment or modification of the Purchase Agreement that
would alter the rights, benefits or obligations of the Company thereunder;
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Loan Trustee, and its successors and permitted assigns, in trust for the ratable
benefit and security of the Noteholders and the Indenture Indemnitees, except as
otherwise provided in this Indenture, including Section 2.13 and Article III,
without any preference, distinction or priority of any one Equipment Note over
any other by reason of priority of time of issue, sale, negotiation, date of
maturity thereof or otherwise for any reason whatsoever, and for the uses and
purposes and in all cases and as to all property specified in paragraphs (1)
through (5) inclusive above, subject to the terms and provisions set forth in
this Indenture.
It is expressly agreed that notwithstanding anything herein to the
contrary, the Company shall remain liable under the Purchase Agreement to
perform all of its obligations thereunder, and, except to the extent expressly
provided in any Operative Document, none of the Loan Trustee, any Noteholders or
any Indenture Indemnitee shall be required or obligated in any manner to perform
or fulfill any obligations of the Company under or pursuant to any thereof, 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 amount that may have been assigned to it or to which it may be
entitled at any time or times.
Notwithstanding anything herein to the contrary (but without in any way
releasing the Company from any of its duties or obligations under the Purchase
Agreement), the Loan Trustee, the Noteholders and the Indenture Indemnitees
confirm for the benefit of the Manufacturer that in exercising any rights under
the Warranty Rights, 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 relating to the
Warranty Rights, including, without limitation, the warranty disclaimer
provisions for the benefit of the Manufacturer, shall apply to and be binding
upon the Loan Trustee, the Noteholders and the Indenture Indemnitees to the same
extent as the Company. The Company hereby directs the Manufacturer, so long as
an Event of Default shall have occurred and be continuing, to pay all amounts,
if any, payable to the Company pursuant to the Warranty Rights directly to the
Loan Trustee to be held and
3
applied as provided herein. Nothing contained herein shall subject the
Manufacturer to any liability to which it would not otherwise be subject under
the Purchase Agreement or modify in any respect the contract rights of the
Manufacturer thereunder except as provided in the Manufacturer's Consent.
The Company does hereby constitute the Loan Trustee the true and lawful
attorney of the Company (which appointment is coupled with an interest) with
full power (in the name of the Company or otherwise) to ask, require, demand and
receive any and all monies and claims for monies (in each case including
insurance and requisition proceeds) due and to become due to the Company under
or arising out of the Purchase Agreement (to the extent assigned hereby), and
all other property which now or hereafter constitutes part of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or to take any action or to institute any proceedings which the
Loan Trustee may deem to be necessary or advisable in the premises; provided
that the Loan Trustee shall not exercise any such rights except during the
continuance of an Event of Default. The Company agrees that promptly upon
receipt thereof, to the extent required by the Operative Documents, it will
transfer to the Loan Trustee any and all monies from time to time received by
the Company constituting part of the Collateral, for distribution by the Loan
Trustee pursuant to this Indenture.
The Company does hereby warrant and represent that it has not sold,
assigned or pledged, and hereby covenants and agrees that it will not sell,
assign or pledge, so long as this Indenture shall remain in effect and the Lien
hereof shall not have been released pursuant to the provisions hereof, any of
its estate, right, title or interest hereby assigned, to any Person other than
the Loan Trustee, except as otherwise provided in or permitted by any Operative
Document.
The Company agrees that at any time and from time to time, upon the
written request of the Loan Trustee, the Company shall promptly and duly execute
and deliver or cause to be duly executed and delivered any and all such further
instruments and documents as the Loan Trustee may reasonably deem necessary to
perfect, preserve or protect the mortgage, security interests and assignments
created or intended to be created hereby or to obtain for the Loan Trustee the
full benefit of the assignment hereunder and of the rights and powers herein
granted, provided that any instrument or other document so executed by the
Company will not expand any obligations or limit any rights of the Company in
respect of the transactions contemplated by the Operative Documents.
IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as
follows:
4
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Indenture, unless
the context otherwise requires, capitalized terms used but not defined herein
shall have the respective meanings set forth or incorporated by reference in
Annex A.
Section 1.02. Other Definitional Provisions.
(a) The definitions stated herein and in Annex A apply equally to both
the singular and the plural forms of the terms defined.
(b) All references in this Indenture to designated "Articles",
"Sections", "Subsections", "Schedules", "Exhibits", "Annexes" and other
subdivisions are to the designated Article, Section, Subsection, Schedule,
Exhibit, Annex or other subdivision of this Indenture, unless otherwise
specifically stated.
(c) The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section, Subsection, Schedule, Exhibit, Annex or other subdivision.
(d) Unless the context otherwise, requires, whenever the words
"including", "include" or "includes" are used herein, it shall be deemed to be
followed by the phrase "without" limitation".
(e) All references in this Indenture to a "government" are to such
government and any instrumentality or agency thereof.
ARTICLE II
THE EQUIPMENT NOTES
Section 2.01. Form of Equipment Notes. The Equipment Notes shall be
substantially in the form set forth below:
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS
OF ANY STATE OR OTHER JURISDICTION. ACCORDINGLY, THIS EQUIPMENT NOTE
MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS EITHER REGISTERED UNDER THE
ACT AND SUCH APPLICABLE STATE OR OTHER LAWS OR EXEMPTIONS FROM SUCH
REGISTRATION REQUIREMENTS ARE AVAILABLE.
5
AMERICAN AIRLINES, INC.
SERIES 2001 [___] EQUIPMENT NOTE DUE [___]
ISSUED IN CONNECTION WITH THE BOEING [______] AIRCRAFT
BEARING UNITED STATES REGISTRATION NUMBER N[_____]AN
No.____ Date: [______,__] $_________________
INTEREST RATE MATURITY DATE
[____] [___________,____]
AMERICAN AIRLINES, INC. (together with its successors and
permitted assigns, the "Company") hereby promises to pay to
___________, or the registered assignee thereof, the principal amount
of ________________ Dollars ($_________) [on __________](1) [in
installments on the Payment Dates set forth in Schedule I hereto, each
such installment to be in an amount computed by multiplying the
original principal amount of this Equipment Note by the percentage set
forth in Schedule I hereto opposite the Payment Date on which such
installment is due,]2 and to pay interest in arrears on each Payment
Date at the Debt Rate on the principal amount remaining unpaid from
time to time (calculated on the basis of a year of 360 days comprised
of twelve 30-day months) from the date hereof until paid in full.
[Notwithstanding the foregoing, the final payment made on this
Equipment Note shall be in an amount sufficient to discharge in full
the unpaid principal amount and all accrued and unpaid interest on, and
any other amounts due under, this Equipment Note.](2) Notwithstanding
anything to the contrary contained herein, if any date on which a
payment under this Equipment Note becomes due and payable is not a
Business Day, then such payment shall not be made on such scheduled
date but shall be made on the next succeeding Business Day with the
same force and effect as if made on such scheduled date, and if such
payment is made on such next succeeding Business Day, no interest shall
accrue on the amount of such payment from and after such scheduled
date.
For purposes hereof, the term "Indenture" means the
Indenture
and Security Agreement, dated as of May 24, 2001, between the Company
and State Street Bank and Trust Company of Connecticut, National
Association, as Loan Trustee (the "Loan Trustee"), as the same may be
amended, supplemented
----------
(1) To be inserted in non-installment Equipment Notes.
(2) To be inserted in installment Equipment Notes.
6
or otherwise modified from time to time in accordance with its terms.
All capitalized terms used in this Equipment Note and not defined
herein, unless the context otherwise requires, shall have the
respective meanings set forth or incorporated by reference, and shall
be construed and interpreted in the manner described, in the Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (and not the Debt Rate) (calculated on the basis of a
year of 360 days comprised of twelve 30-day months) on any principal
amount and (to the extent permitted by applicable law) Make-Whole
Amount, if any, interest and any other amounts payable hereunder not
paid when due for any period during which the same shall be overdue, in
each case for the period the same is overdue. Amounts shall be overdue
if not paid in the manner provided herein or in the Indenture when due
(whether at stated maturity, by acceleration or otherwise).
There shall be maintained an Equipment Note Register for the
purpose of registering transfers and exchanges of Equipment Notes at
the Corporate Trust Office of the Loan Trustee, or at the office of any
successor trustee, in the manner provided in Section 2.07 of the
Indenture.
The principal amount and interest and other amounts due
hereunder shall be payable in Dollars in immediately available funds at
the Corporate Trust Office of the Loan Trustee, or as otherwise
provided in the Indenture. The Company shall not have any
responsibility for the distribution of any such payment to the
Noteholder of this Equipment Note. Each such payment shall be made on
the date such payment is due and without any presentment or surrender
of this Equipment Note, except that in the case of any final payment
with respect to this Equipment Note, the Equipment Note shall be
surrendered to the Loan Trustee for cancellation.
The holder hereof, by its acceptance of this Equipment Note,
agrees that, except as provided in the Indenture, including the
subordination provisions referred to below, each payment of an
installment of principal amount, Make-Whole Amount, if any, and
interest received by it hereunder shall be applied: first, to the
payment of accrued interest on this Equipment Note (as well as any
interest on any overdue principal amount, and, to the extent permitted
by law, any overdue Make-Whole Amount, if any, any overdue interest and
other overdue amounts hereunder) to the date of such payment; second,
to the payment of Make-Whole Amount, if any, and third, to the payment
of the principal amount of this Equipment Note (or portion hereof) then
due.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Company
pursuant to the
7
terms of the Indenture. The Collateral is held by the Loan Trustee as
security, in part, for the Equipment Notes. The provisions of this
Equipment Note are subject to the Indenture and the Participation
Agreement. Reference is hereby made to the Indenture and the
Participation Agreement for a complete statement of the rights and
obligations of the holder of, and the nature and extent of the security
for, this Equipment Note and the rights and obligations of the holders
of, and the nature and extent of the security for, any other Equipment
Notes executed and delivered under the Indenture, to all of which terms
and conditions in the Indenture and the Participation Agreement each
holder hereof agrees by its acceptance of this Equipment Note.
As provided in the Indenture and subject to certain
limitations therein set forth, this Equipment Note is exchangeable for
a like aggregate principal amount of Equipment Notes of the same Series
of different authorized denominations, as requested by the holder
surrendering the same. Prior to the due presentment for registration of
transfer of this Equipment Note, the Company and the Loan Trustee shall
deem and treat the Person in whose name this Equipment Note is
registered on the Equipment Note Register as the absolute owner and
holder hereof for the purpose of receiving all amounts payable with
respect to this Equipment Note and for all purposes, and neither of the
Company nor the Loan Trustee shall be affected by notice to the
contrary.
This Equipment Note is subject to redemption as provided in
Sections 2.10 and 2.11 of the Indenture but not otherwise.
The indebtedness evidenced by this Equipment Note [shall rank
in right of payment equally with all Series A-2 Equipment Notes and all
other Series A-1 Equipment Notes.](3) [shall rank in right of payment
equally with all Series A-1 Equipment Notes and all other Series A-2
Equipment Notes.](4) [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-1 Equipment Notes and Series A-2
Equipment Notes](5) [Series A-1 Equipment Notes, Series A-2 Equipment
Notes and Series B Equipment Notes](6) [Series A-1 Equipment Notes,
Series A-2 Equipment Notes, Series B Equipment Notes and Series C
Equipment Notes](7), and this Equipment Note is issued subject to such
provisions. The Noteholder of this Equipment
----------
(3) To be inserted in the case of a Series A-1 Equipment Note.
(4) To be inserted in the case of a Series A-2 Equipment Note.
(5) To be inserted in the case of a Series B Equipment Note.
(6) To be inserted in the case of a Series C Equipment Note.
(7) To be inserted in the case of a Series E Equipment Note.
8
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Loan Trustee on such
Noteholder'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 Loan Trustee such Noteholder's
attorney-in-fact for such purpose.
[Without limiting the foregoing, the](8) [The](9) Noteholder
of this Equipment Note, by accepting the same, agrees that if such
Noteholder, in its capacity as a Noteholder, shall receive any payment
or distribution on any Secured Obligation in respect of this Equipment
Note that it is not entitled to receive under Section 2.13 or Article
III of the Indenture, it shall hold any amount so received in trust for
the Loan Trustee and forthwith turn over such amount to the Loan
Trustee in the form received to be applied as provided in Article III
of the Indenture.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Loan Trustee by manual signature, this
Equipment Note shall not be entitled to any benefit under the Indenture
or be valid or obligatory for any purpose.
THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
IN WITNESS WHEREOF, the Company has caused this Equipment Note
to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
AMERICAN AIRLINES, INC.
By:
-------------------------------------
Name:
Title:
----------
(8) To be inserted in the case of a Series B Equipment Note, a Series C
Equipment Note or a Series E Equipment Note.
(9) To be inserted in the case of a Series A-1 Equipment Note or a Series
A-2 Equipment Note.
9
LOAN TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the within-mentioned
Indenture.
[----------------------------------]
not in its individual capacity but
solely as Loan Trustee
By:
-------------------------------------
Name:
Title:
SCHEDULE I(10)
EQUIPMENT NOTE AMORTIZATION
Percentage of Original
Principal Amount
Payment Date to be Paid
------------ ----------------------
[SEE "EQUIPMENT NOTES AMORTIZATION" ON SCHEDULE I TO
INDENTURE WHICH IS TO BE INSERTED UPON ISSUANCE]
* * *
Section 2.02. Issuance and Terms of Equipment Notes. The Equipment
Notes shall be dated the date of issuance thereof, shall be issued in (a) four
(or if the Series E Equipment Notes are issued, five) separate series consisting
of Series A-1 Equipment Notes, Series A-2 Equipment Notes, Series B Equipment
Notes, Series C Equipment Notes and, if issued, Series E Equipment Notes and (b)
the maturities and principal amounts and shall bear interest at the applicable
Debt Rates specified in Schedule I (or, in the case of a Series E Equipment Note
issued after the Closing Date, as specified in an amendment to this Indenture).
On the Closing Date, each Series A-1 Equipment Note, Series A-2 Equipment Note,
Series B Equipment Note and Series C Equipment Note shall be issued to the
Subordination Agent on behalf of each of the Pass Through Trustees for the Pass
Through Trusts created under the Pass Through Trust Agreements
----------
(10) To be inserted on installment Equipment Notes.
10
referred to in Schedule II. Subject to complying with the conditions set forth
in Section 6.02(g) of the Participation Agreement, the Company shall have the
option to issue Series E Equipment Notes at or after the Closing Date. The
Equipment Notes shall be issued in registered form only. The Equipment Notes
shall be issued in denominations of $1,000 and integral multiples thereof,
except that one Equipment Note of each Series may be in an amount that is not an
integral multiple of $1,000.
Each Equipment Note shall bear interest at the Debt Rate (calculated on
the basis of a year of 360 days comprised of twelve 30-day months), payable in
arrears on each Payment Date on the unpaid principal amount thereof from time to
time outstanding until such principal amount is paid in full, as further
provided in the form of Equipment Note set forth in Section 2.01. The principal
amount of each Series A-1 Equipment Note, Series B Equipment Note and Series C
Equipment Note shall be payable in installments on the Payment Dates set forth
in Schedule I to such Equipment Note, each such installment to be in an amount
computed by multiplying the original principal amount of such Equipment Note by
the percentage set forth in Schedule I hereto, the applicable portion of which
shall be attached as Schedule I to such Equipment Note, opposite the Payment
Date on which such installment is due. The principal amount of each Series A-2
Equipment Note shall be due in a single payment on May 23, 2011. Each Series E
Equipment Note shall be payable in installments or in a single payment as set
forth in an amendment to this Indenture, and if payable in installments, such
installments shall be calculated as set forth in the third preceding sentence.
Notwithstanding the foregoing, the final payment made under each Series A-1
Equipment Note, Series B Equipment Note and Series C Equipment Note shall be in
an amount sufficient to discharge in full the unpaid principal amount and all
accrued and unpaid interest on, and any other amounts due under, such Equipment
Note. Each Equipment Note shall bear interest, payable on demand, at the Past
Due Rate (and not at the Debt Rate) (calculated on the basis of a year of 360
days comprised of twelve 30-day months) on any principal amount and (to the
extent permitted by applicable law) Make-Whole Amount, if any, interest and any
other amounts payable thereunder not paid when due for any period during which
the same shall be overdue, in each case for the period the same is overdue.
Amounts shall be overdue under an Equipment Note if not paid in the manner
provided therein or in this Indenture when due (whether at stated maturity, by
acceleration or otherwise). Notwithstanding anything to the contrary contained
herein, if any date on which a payment hereunder or under any Equipment Note
becomes due and payable is not a Business Day, then such payment shall not be
made on such scheduled date but shall be made on the next succeeding Business
Day with the same force and effect as if made on such scheduled date, and if
such payment is made on such next succeeding Business Day, no interest shall
accrue on the amount of such payment from and after such scheduled date.
The Equipment Notes shall be executed on behalf of the Company by the
manual or facsimile signature of one of its authorized officers. Equipment Notes
bearing the
11
signatures of individuals who were at the time of execution the proper officers
of the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Equipment Notes or did not hold such offices at the respective
dates of such Equipment Notes. No Equipment Note shall be secured by or entitled
to any benefit under this Indenture or be valid or obligatory for any purposes
unless there appears on such Equipment Note a certificate of authentication in
the form provided herein executed by the Loan Trustee by the manual signature of
one of its authorized officers, and such certificate upon any Equipment Notes
shall be conclusive evidence, and the only evidence, that such Equipment Note
has been duly authenticated and delivered hereunder.
Section 2.03. Method of Payment. The principal amount of, interest on,
Make-Whole Amount, if any, and, except to the extent expressly provided herein,
all other amounts due to any Noteholder under each Equipment Note or otherwise
payable hereunder shall be payable by the Company in Dollars by wire transfer of
immediately available funds not later than 10:00 a.m. (
New York City time) on
the due date of payment to the Loan Trustee at the Corporate Trust Office for
distribution among the Noteholders in the manner provided herein. The Company
shall not have any responsibility for the distribution of such payment to any
Noteholder. Notwithstanding the foregoing or any provision in any Equipment Note
to the contrary, the Loan Trustee will use reasonable efforts to pay or cause to
be paid, if so directed in writing by any Noteholder (with a copy to the
Company), all amounts paid by the Company hereunder and under such Noteholder's
Equipment Note or Equipment Notes to such Noteholder or a nominee therefor
(including all amounts distributed pursuant to Article III) by transferring, or
causing to be transferred, by wire transfer of immediately available funds in
Dollars, prior to 12:00 p.m. (
New York City time) on the due date of payment, to
an account maintained by such Noteholder with a bank located in the continental
United States the amount to be distributed to such Noteholder, for credit to the
account of such Noteholder maintained at such bank; provided that, in the event
the Equipment Notes are not held by the Subordination Agent on behalf of the
Pass Through Trustees, the Loan Trustee may at its option pay such amounts by
check mailed to the Noteholder's address as it appears on the Equipment Note
Register. If, after its receipt of funds at the place and prior to the time
specified above in the immediately preceding sentence, the Loan Trustee shall
fail (other than as a result of a failure of the Noteholder to provide it with
wire transfer instructions) to make any such payment required to be paid by wire
transfer as provided in the immediately preceding sentence on the Business Day
it receives such funds, the Loan Trustee, in its individual capacity and not as
trustee, agrees to compensate such Noteholders for loss of use of funds at the
Federal Funds Rate until such payment is made and the Loan Trustee shall be
entitled to any interest earned on such funds until such payment is made. Any
payment made hereunder shall be made without any presentment or surrender of any
Equipment Note, except that, in the case of the final payment in respect of any
Equipment Note, such Equipment Note shall be surrendered to the Loan Trustee for
cancellation. Notwithstanding any other provision of
12
this Indenture to the contrary, the Loan Trustee shall not be required to make,
or cause to be made, wire transfers as aforesaid prior to the first Business Day
on which it is practicable for the Loan Trustee to do so in view of the time of
day when the funds to be so transferred were received by it if such funds were
received after 1:00 p.m. (
New York City time) at the place of payment.
Section 2.04. Withholding Taxes. The Loan Trustee shall exclude and
withhold at the appropriate rate from each payment of principal amount of,
interest on, Make-Whole Amount, if any, and other amounts due hereunder or under
each Equipment Note (which exclusion and withholding shall constitute payment of
such amounts payable hereunder or in respect of such Equipment Notes, as
applicable) any and all withholding taxes applicable thereto as required by law.
The Loan Trustee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future taxes or similar charges are required
to be withheld with respect to any amounts payable hereunder or in respect of
the Equipment Notes, to withhold such amounts (which withholding shall
constitute payment of such amounts payable hereunder or in respect of such
Equipment Notes, as applicable) and timely pay the same to the appropriate
authority in the name of and on behalf of the Noteholders, that it will file any
necessary withholding tax returns or statements when due, and that as promptly
as possible after the payment thereof it will deliver to each Noteholder (with a
copy to the Company) appropriate documentation showing the payment thereof,
together with such additional documentary evidence as any such Noteholder may
reasonably request from time to time. The Loan Trustee agrees to file any other
information reports as it may be required to file under United States law.
Section 2.05. Application of Payments. Subject always to Section 2.13
and except as otherwise provided in Article III, in the case of each Equipment
Note, each payment of an installment of principal amount, Make-Whole Amount, if
any, and interest paid thereon shall be applied:
first, to the payment of accrued interest on such Equipment
Note (as well as any interest on any overdue principal amount and (to
the extent permitted by law) any overdue Make-Whole Amount, if any, any
overdue interest and any other overdue amounts thereunder) to the date
of such payment;
second, to the payment of Make-Whole Amount, if any; and
third, to the payment of principal amount of such Equipment
Note (or portion thereof) then due thereunder.
Section 2.06. Termination of Interest in Collateral. No Noteholder or
Indenture Indemnitee shall, as such, have any further interest in, or other
right with respect to, the Collateral when and if the principal amount of,
Make-Whole Amount, if any, and interest
13
(including interest on any overdue amounts) on and all other amounts due under
all Equipment Notes held by such Noteholder and all other sums then payable to
such Noteholder or Indenture Indemnitee, as the case may be, hereunder and under
the Participation Agreement by the Company (collectively, "Secured Obligations")
shall have been paid in full.
Section 2.07. Registration, Transfer and Exchange of Equipment Notes.
The Loan Trustee shall keep a register or registers (the "Equipment Note
Register") in which the Loan Trustee shall provide for the registration of
Equipment Notes and the registration of transfers of Equipment Notes. No such
transfer shall be given effect unless and until registration hereunder shall
have occurred. The Equipment Note Register shall be kept at the Corporate Trust
Office of the Loan Trustee. The Loan Trustee is hereby appointed "Equipment Note
Registrar" for the purpose of registering Equipment Notes and transfers of
Equipment Notes as herein provided. A holder of any Equipment Note intending to
exchange or transfer such Equipment Note shall surrender such Equipment Note to
the Loan Trustee at the Corporate Trust Office, together with a written request
from the registered holder thereof for the issuance of a new Equipment Note of
the same Series, specifying, in the case of a surrender for transfer, the name
and address of the new holder or holders. Upon surrender for registration of
transfer of any Equipment Note and subject to satisfaction of Section 2.09, the
Company shall execute, and the Loan Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Equipment
Notes of a like aggregate principal amount and of the same Series. At the option
of the Noteholder, Equipment Notes may be exchanged for other Equipment Notes of
the same Series of any authorized denominations of a like aggregate principal
amount, upon surrender of the Equipment Notes to be exchanged to the Loan
Trustee at the Corporate Trust Office. Whenever any Equipment Notes are so
surrendered for exchange, the Company shall execute, and the Loan Trustee shall
authenticate and deliver, the Equipment Notes which the Noteholder making the
exchange is entitled to receive. All Equipment Notes issued upon any
registration of transfer or exchange of Equipment Notes (whether under this
Section 2.07 or under Section 2.08 or otherwise under this Indenture) shall be
the valid obligations of the Company evidencing the same respective obligations,
and entitled to the same security and benefits under this Indenture, as the
Equipment Notes surrendered upon such registration of transfer or exchange.
Every Equipment Note presented or surrendered for registration of transfer,
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Loan Trustee, duly executed by the Noteholder or such
Noteholder's attorney duly authorized in writing, and the Loan Trustee shall
require evidence satisfactory to it as to the compliance of any such transfer
with the Securities Act of 1933, as amended, and the securities laws of any
applicable state or jurisdiction. The Loan Trustee shall make a notation on each
new Equipment Note of the amount of all payments of principal amount previously
made on the old Equipment Note or Equipment Notes with respect to which such new
Equipment Note is issued and the date to which interest on such old Equipment
Note or Equipment Notes
14
has been paid. Principal, interest and all other amounts shall be deemed to have
been paid on such new Equipment Note to the date on which such amounts shall
have been paid on such old Equipment Note. The Company shall not be required to
exchange any surrendered Equipment Notes as provided above (a) during the
ten-day period preceding the due date of any payment on such Equipment Note or
(b) that has been called for redemption. The Company and the Loan Trustee shall
in all cases deem and treat the Person in whose name any Equipment Note shall
have been issued and registered on the Equipment Note Register as the absolute
owner and Noteholder of such Equipment Note for the purpose of receiving payment
of all amounts payable with respect to such Equipment Note and for all other
purposes, and neither the Company nor the Loan Trustee shall be affected by any
notice to the contrary. The Loan Trustee will promptly notify the Company of
each registration of a transfer of an Equipment Note. Any such transferee of an
Equipment Note, by its acceptance of an Equipment Note, agrees to the provisions
of the Operative Documents applicable to Noteholders, and shall be deemed to
have represented, warranted and covenanted to the parties to the Participation
Agreement as to the matters represented, warranted and covenanted by the
Noteholders, including the Pass Through Trustees, in the Participation
Agreement. Subject to compliance by the Noteholder and its transferee (if any)
of the requirements set forth in this Section 2.07 and in Section 2.09, the Loan
Trustee and the Company shall use all reasonable efforts to issue new Equipment
Notes upon transfer or exchange within ten Business Days of the date an
Equipment Note is surrendered for transfer or exchange.
Section 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes. If
any Equipment Note becomes mutilated, destroyed, lost or stolen, the Company
shall, upon the written request of the holder of such Equipment Note and subject
to satisfaction of this Section 2.08 and of Section 2.09, execute and the Loan
Trustee shall authenticate and deliver in replacement thereof a new Equipment
Note of the same Series, payable in the same principal amount, dated the same
date and captioned as issued in connection with the Aircraft. If the Equipment
Note being replaced has become mutilated, such Equipment Note shall be
surrendered to the Loan Trustee, and a photocopy thereof shall be furnished to
the Company. If the Equipment Note being replaced has been destroyed, lost or
stolen, the holder of such Equipment Note shall furnish to the Company and the
Loan Trustee such security or indemnity as may be required by them to save the
Company and the Loan Trustee harmless and evidence satisfactory to the Company
and the Loan Trustee of the destruction, loss or theft of such Equipment Note
and of the ownership thereof.
Section 2.09. Payment of Expenses on Transfer; Cancellation.
(a) No service charge shall be made to a Noteholder for any
registration of transfer or exchange of Equipment Notes, but the Loan Trustee,
as Equipment Note Registrar, may require payment of a sum sufficient to cover
any Tax or other
15
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Equipment Notes.
(b) The Loan Trustee shall cancel all Equipment Notes surrendered for
replacement, redemption, transfer, exchange, payment or cancellation and shall
destroy the canceled Equipment Notes.
Section 2.10. Mandatory Redemption of Equipment Notes. The Company
shall redeem the Equipment Notes in whole in connection with an Event of Loss in
respect of the Airframe or the Airframe and the Engines installed thereon
(unless the Company shall have performed the option set forth in Section
7.05(a)(i) with respect thereto) on or before the Loss Payment Date at a
redemption price equal to 100% of the unpaid principal amount thereof, together
with all accrued and unpaid interest thereon to (but excluding) the date of
redemption, but without any Make-Whole Amount.
Section 2.11. Voluntary Redemption of Equipment Notes. All, but not
less than all, of the Equipment Notes may be redeemed in whole by the Company
upon at least 20 days' revocable prior written notice to the Loan Trustee at a
redemption price equal to 100% of the unpaid principal amount of the Equipment
Notes being redeemed, together with accrued interest thereon to (but excluding)
the date of redemption and all other amounts payable hereunder or under the
Participation Agreement to the Noteholders plus the Make-Whole Amount, if any.
Any notice shall become irrevocable three days before the redemption date if not
previously revoked.
Section 2.12. Redemptions; Notice of Redemptions; Repurchases.
(a) No redemption of any Equipment Note may be made except to the
extent and in the manner expressly permitted by this Indenture. At such time as
no Pass Through Certificates are outstanding, the Company may at any time
repurchase any of the Equipment Notes at any price in the open market and may
hold, resell or surrender such Equipment Notes to the Loan Trustee for
cancellation.
(b) Notice of redemption with respect to the Equipment Notes shall be
given by the Loan Trustee by first-class mail, postage prepaid, mailed not less
than 15 nor more than 60 days prior to the applicable redemption date, to each
Noteholder at such Noteholder's address appearing in the Equipment Note
Register. All notices of redemption shall state: (1) the redemption date, (2)
the applicable basis for determining the redemption price, (3) that on the
redemption date, the redemption price will become due and payable upon each such
Equipment Note, and that, if any such Equipment Notes are then outstanding,
interest on such Equipment Notes shall cease to accrue on and after such
redemption date and (4) the place or places where such Equipment Notes are to be
surrendered for payment of the redemption price.
16
(c) On or before the redemption date, the Company (or any person on
behalf of the Company) shall, to the extent an amount equal to the redemption
price for the Equipment Notes to be redeemed on the redemption date shall not
then be held in the Collateral, deposit or cause to be deposited with the Loan
Trustee by 11:00 a.m. (
New York City time) on the redemption date in immediately
available funds the redemption price of the Equipment Notes to be redeemed.
(d) Notice of redemption having been given as aforesaid (and not
revoked as permitted by Section 2.11), the Equipment Notes to be redeemed shall,
on the redemption date, become due and payable at the Corporate Trust Office of
the Loan Trustee, and from and after such redemption date (unless there shall be
a default in the deposit of the redemption price pursuant to Section 2.12(c))
any such Equipment Notes then outstanding shall cease to bear interest. Upon
surrender of any such Equipment Note for redemption in accordance with said
notice, such Equipment Note shall be redeemed at the redemption price.
Section 2.13. Subordination.
(a) The indebtedness evidenced by the Series A-1 Equipment Notes and
Series A-2 Equipment Notes shall rank in right of payment equally with all other
Series A-1 Equipment Notes and Series A-2 Equipment Notes. The indebtedness
evidenced by the Series B Equipment Notes is, to the extent and in the manner
provided in this Indenture, subordinate and subject in right of payment to the
prior payment in full of the Secured Obligations in respect of the Series A-1
Equipment Notes and Series A-2 Equipment Notes, and the Series B Equipment Notes
are issued subject to such provisions. The indebtedness evidenced by the Series
C Equipment Notes is, to the extent and in the manner provided in this
Indenture, subordinate and subject in right of payment to the prior payment in
full of the Secured Obligations in respect of the Series A-1 Equipment Notes,
the Series A-2 Equipment Notes and the Series B Equipment Notes, and the Series
C Equipment Notes are issued subject to such provisions. The indebtedness
evidenced by the Series E Equipment Notes, if issued, shall be, to the extent
and in the manner provided in this Indenture, subordinate and subject in right
of payment to the prior payment in full of the Secured Obligations in respect of
the Series A-1 Equipment Notes, the Series A-2 Equipment Notes, the Series B
Equipment Notes and the Series C Equipment Notes, and the Series E Equipment
Notes, if issued, shall be issued subject to such provisions. By acceptance of
its Equipment Notes of any Series, each Noteholder of such Series (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Loan
Trustee on such Noteholder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Indenture and
(c) appoints the Loan Trustee as such Noteholder's attorney-in-fact for such
purpose.
17
(b) The Company, the Loan Trustee and, by acceptance of its Equipment
Notes of any Series, each Noteholder of such Series, hereby agree that no
payment or distribution shall be made on or in respect of the Secured
Obligations owed to such Noteholder of such Series, including any payment or
distribution of cash, property or securities, after the occurrence of any of the
events referred to in Section 4.01(f) or after the commencement of any
proceedings of the type referred to in Sections 4.01(g), (h) or (i), except as
expressly provided in Article III.
(c) By the acceptance of its Equipment Notes of any Series, each
Noteholder of such Series agrees that if such Noteholder, in its capacity as a
Noteholder, shall receive any payment or distribution on any Secured Obligations
in respect of such Series that it is not entitled to receive under this Section
2.13 or Article III hereof, it will hold any amount so received in trust for the
Loan Trustee and forthwith turn over such amount to the Loan Trustee in the form
received to be applied as provided in Article III.
Section 2.14. Certain Payments. The Company agrees to pay to the Loan
Trustee for distribution in accordance with Section 3.04:
(a) an amount or amounts equal to the fees payable to the
Liquidity Provider under Section 2.03 of each Liquidity Facility and
the related Fee Letter (as defined in the Intercreditor Agreement),
multiplied by a fraction, the numerator of which shall be the sum of
the then outstanding aggregate principal amount of the Series A-1
Equipment Notes, Series A-2 Equipment Notes, Series B Equipment Notes
and Series C Equipment Notes and the denominator of which shall be the
sum of the then outstanding aggregate principal amount of all "Series
A-1 Equipment Notes," "Series A-2 Equipment Notes," "Series B Equipment
Notes" and "Series C Equipment Notes" (in each case as defined in the
Intercreditor Agreement);
(b) the amount equal to interest on any Downgrade Advance
(other than any Applied Downgrade Advance) payable under Section 3.07
of each Liquidity Facility minus Investment Earnings from such
Downgrade Advance, multiplied by the fraction specified in the
foregoing clause (a);
(c) the amount equal to interest on any Non-Extension Advance
(other than any Applied Non-Extension Advance) payable under Section
3.07 of each Liquidity Facility minus Investment Earnings from such
Non-Extension Advance, multiplied by the fraction specified in the
foregoing clause (a);
(d) if any payment default shall have occurred and be
continuing with respect to interest on any Series A-1 Equipment Notes,
Series A-2 Equipment Note, Series B Equipment Note or Series C
Equipment Note, (x) the excess, if any, of (1) the amount equal to the
sum of interest on any Unpaid Advance or
18
Applied Provider Advance payable under Section 3.07 of each Liquidity
Facility plus any other amounts payable in respect of such Unpaid
Advance or Applied Provider Advance under Section 3.01, 3.03 or 3.09 of
the Liquidity Facility under which such Unpaid Advance or Applied
Provider Advance was made over (2) the sum of Investment Earnings from
any Final Advance plus any amount of interest at the Past Due Rate
actually payable (whether or not in fact paid) by the Company in
respect of the overdue scheduled interest on the Equipment Notes in
respect of which such Unpaid Advance or Applied Provider Advance was
made, multiplied by (y) a fraction, the numerator of which shall be the
then aggregate overdue amounts of interest on the Series A-1 Equipment
Notes, Series A-2 Equipment Notes, Series B Equipment Notes and Series
C Equipment Notes (other than interest becoming due and payable solely
as a result of acceleration of any such Equipment Notes) and the
denominator of which shall be the then aggregate overdue amounts of
interest on all "Series A-1 Equipment Notes", "Series A-2 Equipment
Notes", "Series B Equipment Notes" and "Series C Equipment Notes" (in
each case as defined in the Intercreditor Agreement) (other than
interest becoming due and payable solely as a result of acceleration of
any such "Equipment Notes");
(e) any amounts owed to the Liquidity Provider by the
Subordination Agent as borrower under Section 3.01 (other than in
respect of an Unpaid Advance or Applied Provider Advance), 3.03 (other
than in respect of an Unpaid Advance or Applied Provider Advance ),
7.05 and 7.07 of each Liquidity Facility (or similar provisions of any
Replacement Liquidity Facility) multiplied by the fraction specified in
the foregoing clause (a); and
(f) an amount or amounts equal to the compensation, including
reasonable expenses and disbursements, payable to the Subordination
Agent under Section 6.07 of the Intercreditor Agreement, multiplied by
the fraction specified in the foregoing clause (a) (but in any event
without duplication of any amount or amounts payable by the Company in
respect of such compensation under any other Operative Document or Pass
Through Document).
For purposes of this paragraph, the terms "Advance", "Applied Downgrade
Advance", "Applied Non-Extension Advance", "Applied Provider Advance", "Cash
Collateral Account", "Downgrade Advance", "Final Advance", "Investment
Earnings", "Non-Extension Advance", "Replacement Liquidity Facility" and "Unpaid
Advance" shall have the meanings specified in each Liquidity Facility or the
Intercreditor Agreement.
Section 2.15. Repayment of Monies for Equipment Note Payments Held by
the Loan Trustee. Any money held by the Loan Trustee in trust for any payment of
the principal of, Make-Whole Amount, if any, or interest or any other amounts
due on, any
19
Equipment Note, including, without limitation, any money deposited pursuant to
Section 2.12(c) or Section 10.01, and remaining unclaimed for two years after
the due date for such payment (or such lesser time as the Loan Trustee shall be
satisfied, after 60 days' notice from the Company, is one month prior to the
escheat period provided under applicable state law) shall be paid to the
Company. The Noteholders of any outstanding Equipment Notes shall thereafter, as
unsecured general creditors, look only to the Company for payment thereof, and
all liability of the Loan Trustee with respect to such trust money shall
thereupon cease; provided that the Loan Trustee, before being required to make
any such repayment, may at the expense of the Company cause to be mailed to each
such Noteholder notice that such money remains unclaimed and that, after a date
specified therein which shall not be less than 30 days from the date of mailing,
any unclaimed balance of such money then remaining will be repaid to the Company
as provided herein.
Section 2.16. Directions by Subordination Agent. So long as the
Subordination Agent is a Noteholder, notwithstanding anything contained herein
or in any other Operative Document to the contrary, in exercising its right to
vote the Equipment Notes held by it, or in giving or taking any direction,
consent, request, demand, instruction, authorization, notice, waiver or other
action provided by this Indenture or in respect of the Equipment Notes to be
given or taken by a Noteholder (each such vote or other action, a "Direction")
in respect of such Equipment Notes, the Subordination Agent may act in
accordance with any votes, directions, consents, requests, demands,
instructions, authorizations, notices, waivers or other actions given or taken
by any applicable Pass Through Trustee or the Controlling Party pursuant to the
Intercreditor Agreement, including without limitation pursuant to Section 2.06,
Article IV or Section 8.01(b) thereof. The Subordination Agent shall be
permitted (x) to give a Direction with respect to less than the entire principal
amount of any single Equipment Note held by it, and (y) to give different
Directions with respect to different portions of the principal amount of any
single Equipment Note held by it. Any Direction given by the Subordination Agent
at any time with respect to more than a majority in aggregate unpaid principal
amount of all of the Equipment Notes issued and then outstanding hereunder shall
be deemed to have been given by a Majority in Interest of Noteholders.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE COLLATERAL
Section 3.01. Basic Distributions. Except as otherwise provided in
Sections 3.02, 3.03 and 3.04, each periodic payment by the Company of regularly
scheduled installments of principal or interest on the Equipment Notes received
by the Loan Trustee shall be promptly distributed in the following order of
priority:
20
first, so much of such payment as shall be required to pay in
full the aggregate amount of the payment or payments of principal
amount and interest (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-1
Equipment Notes and Series A-2 Equipment Notes shall be distributed to
the Noteholders of Series A-1 Equipment Notes and Series A-2 Equipment
Notes 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-1 Equipment Note or Series A-2 Equipment Note bears to
the aggregate amount of the payments then due under all Series A-1
Equipment Notes and Series A-2 Equipment Notes;
second, after giving effect to clause "first" above, so much
of such payment remaining as shall be required to pay in full the
aggregate amount of the payment or payments of principal amount and
interest (as well as any interest on any overdue principal amount and,
to the extent permitted by applicable law, on any overdue interest and
other overdue amounts) then due under all Series B Equipment Notes
shall be distributed to the Noteholders of Series B Equipment Notes
ratably, without priority of one over the other, in the proportion that
the amount of such payment or payments then due under each Series B
Equipment Note bears to the aggregate amount of the payments then due
under all Series B Equipment Notes;
third, after giving effect to clause "second" above, so much
of such payment remaining as shall be required to pay in full the
aggregate amount of the payment or payments of principal amount and
interest (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 Equipment Notes
shall be distributed to the Noteholders of Series C Equipment Notes
ratably, without priority of one over the other, in the proportion that
the amount of such payment or payments then due under each Series C
Equipment Note bears to the aggregate amount of the payments then due
under all Series C Equipment Notes;
fourth, after giving effect to clause "third" above, so much
of such payment remaining as shall be required to pay in full the
aggregate amount of the payment or payments of principal amount and
interest (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 E Equipment Notes
shall be distributed to the Noteholders of Series E Equipment Notes
ratably, without priority of one over the other, in the proportion that
the amount of such payment or payments then due under each Series E
Equipment
21
Note bears to the aggregate amount of the payments then due under all
Series E Equipment Notes; and
fifth, the balance, if any, of such installment remaining
thereafter shall be distributed to the Company.
Section 3.02. Event of Loss; Optional Redemption. Except as otherwise
provided in Sections 3.03 and 3.04 and subject to the following proviso, any
payments received by the Loan Trustee with respect to the Aircraft as the result
of (a) an Event of Loss (including amounts paid by the Company pursuant to
Section 2.10) or (b) an optional redemption of the Equipment Notes pursuant to
Section 2.11 shall be applied to redemption of the Equipment Notes pursuant to
Section 2.10 or Section 2.11, as applicable, and to payment of all other Secured
Obligations by applying such funds in the following order of priority:
first, (i) to reimburse the Loan Trustee and the Noteholders
for any reasonable costs or expenses incurred in connection with such
redemption for which they are entitled to reimbursement, or indemnity
by the Company, under the Operative Documents; and then (ii) to pay any
other amounts then due (except as provided in clause "second" below) to
the Loan Trustee, the Noteholders and the Indenture Indemnitees under
this Indenture, the Participation Agreement or the Equipment Notes;
second, (i) to pay the amounts specified in subclause (i) of
clause "third" of Section 3.03 plus Make-Whole Amount, if any, then due
and payable in respect of the Series A-1 Equipment Notes and the Series
A-2 Equipment Notes; (ii) after giving effect to subclause (i) above,
to pay the amounts specified in subclause (ii) of clause "third" of
Section 3.03 plus Make-Whole Amount, if any, then due and payable in
respect of the Series B Equipment Notes; (iii) after giving effect to
subclause (ii) above, to pay the amounts specified in subclause (iii)
of clause "third" of Section 3.03 plus Make-Whole Amount, if any, then
due and payable in respect of the Series C Equipment Notes; and (iv)
after giving effect to subclause (iii) above, to pay the amounts
specified in subclause (iv) of clause "third" of Section 3.03 plus
Make-Whole Amount, if any, then due and payable in respect of the
Series E Equipment Notes; and
third, the balance, if any, of such payments shall be
distributed to the Company.
provided, however, that any insurance, condemnation or similar proceeds
resulting from an Event of Loss that are received by the Loan Trustee shall be
held or disbursed by the Loan Trustee as provided by Sections 7.05(c) and
7.06(d) (provided that such money held by the Loan Trustee shall be invested as
provided in Section 5.06).
22
No Make-Whole Amount shall be payable on the Equipment Notes in
connection with their redemption as a result of an Event of Loss in respect of
the Airframe.
Section 3.03. Payments after Event of Default. Except as otherwise
provided in Section 3.04, all payments received and amounts held or realized by
the Loan Trustee (including any amounts realized by the Loan Trustee from the
exercise of any remedies pursuant to Article IV) after both an Event of Default
shall have occurred and be continuing and the Equipment Notes shall have become
due and payable pursuant to Section 4.02(a), as well as all payments or amounts
then held by the Loan Trustee as part of the Collateral, shall be promptly
distributed by the Loan Trustee in the following order of priority:
first, so much of such payments or amounts as shall be
required to (i) reimburse the Loan Trustee, to the extent the Loan
Trustee is entitled to be reimbursed or indemnified under the Operative
Documents, for any Tax, expense 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
Collateral and every part thereof pursuant to Section 4.02(a)) incurred
by the Loan Trustee (to the extent not previously reimbursed), the
expenses of any sale, taking or other proceeding, reasonable attorneys'
fees and expenses, court costs and any other expenditures incurred or
expenditures or advances made by the Loan Trustee or the Noteholders in
the protection, exercise or enforcement of any right, power or remedy
or any damages sustained by the Loan Trustee or any Noteholder,
liquidated or otherwise, upon such Event of Default shall be applied by
the Loan Trustee as between itself and the Noteholders in reimbursement
of such expenses and any other expenses for which the Loan Trustee or
the Noteholders are entitled to reimbursement under any Operative
Document, and (ii) to pay all amounts payable (except as provided in
clauses "second" and "third" below) to the other Indenture Indemnitees
hereunder and under the Participation Agreement; and in case the
aggregate amount so to be distributed is insufficient to pay as
aforesaid, then ratably, without priority of one over the other, in
proportion to the amounts owed each hereunder;
second, so much of such payments or amounts remaining as shall
be required to reimburse the then existing or prior Noteholders for
payments made pursuant to Section 5.03 (to the extent not previously
reimbursed) shall be distributed to such then existing or prior
Noteholders ratably, without priority of one over the other, in
accordance with the amount of the payment or payments made by each such
then existing or prior Noteholder pursuant to Section 5.03;
third, (i) so much of such payments or amounts remaining as
shall be required to pay in full the aggregate unpaid principal amount
of all Series A-1 Equipment Notes and Series A-2 Equipment Notes and
the accrued but unpaid
23
interest and all other Secured Obligations in respect of the Series A-1
Equipment Notes and Series A-2 Equipment Notes to the date of
distribution shall be distributed to the Noteholders of Series A-1
Equipment Notes and Series A-2 Equipment Notes ratably, without
priority of one over the other, in the proportion that the aggregate
unpaid principal amount of all Series A-1 Equipment Notes and Series
A-2 Equipment Notes held by each Noteholder plus the accrued but unpaid
interest and other amounts due hereunder or thereunder to the date of
distribution bears to the aggregate unpaid principal amount of all
Series A-1 Equipment Notes and Series A-2 Equipment Notes held by all
such Noteholders plus the accrued but unpaid interest and other amounts
due thereon to the date of distribution; (ii) after giving effect to
subclause (i) above, so much of such payments or amounts remaining as
shall be required to pay in full the aggregate unpaid principal amount
of all Series B Equipment Notes and the accrued but unpaid interest and
all other Secured Obligations in respect of the Series B Equipment
Notes to the date of distribution shall be distributed to the
Noteholders of Series B Equipment Notes ratably, without priority of
one over the other, in the proportion that the aggregate unpaid
principal amount of all Series B Equipment Notes held by each
Noteholder plus the accrued but unpaid interest and other amounts due
hereunder or thereunder to the date of distribution bears to the
aggregate unpaid principal amount of all Series B Equipment Notes held
by all such Noteholders plus the accrued but unpaid interest and other
amounts due thereon to the date of distribution; (iii) after giving
effect to subclause (ii) above, so much of such payments or amounts
remaining as shall be required to pay in full the aggregate unpaid
principal amount of all Series C Equipment Notes and the accrued but
unpaid interest and all other Secured Obligations in respect of the
Series C Equipment Notes to the date of distribution shall be
distributed to the Noteholders of Series C Equipment Notes ratably,
without priority of one over the other, in the proportion that the
aggregate unpaid principal amount of all Series C Equipment Notes held
by each Noteholder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder to the date of distribution bears
to the aggregate unpaid principal amount of all Series C Equipment
Notes held by all such Noteholders plus the accrued but unpaid interest
and other amounts due thereon to the date of distribution; and (iv)
after giving effect to subclause (iii) above, so much of such payments
or amounts remaining as shall be required to pay in full the aggregate
unpaid principal amount of all Series E Equipment Notes and the accrued
but unpaid interest and all other Secured Obligations in respect of the
Series E Equipment Notes to the date of distribution shall be
distributed to the Noteholders of Series E Equipment Notes, ratably,
without priority of one over the other, in the proportion that the
aggregate unpaid principal amount of all Series E Equipment Notes held
by each Noteholder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder to the date of distribution bears
to the aggregate unpaid principal amount of all Series E Equipment
Notes
24
held by all such Noteholders plus the accrued but unpaid interest and
other amounts due thereon to the date of distribution; and
fourth, the balance, if any, of such payments or amounts shall
be distributed to the Company.
No Make-Whole Amount shall be payable on the Equipment Notes as a
consequence of or in connection with an Event of Default or the acceleration of
the Equipment Notes.
Section 3.04. Certain Payments.
(a) Any payments received by the Loan Trustee for which provision as to
the application thereof is made in this Indenture other than in this Article III
shall be applied as provided in those provisions. Without limiting the
foregoing, any payments received by the Loan Trustee which are payable to the
Company pursuant to any of the provisions of this Indenture other than those set
forth in this Article III (including Sections 5.06, 7.05 and 7.06 hereof) shall
be so paid to the Company. Any payments received by the Loan Trustee for which
no provision as to the application thereof is made in this Indenture and for
which such provision is made in any other Operative Document shall be applied
forthwith to the purpose for which such payment was made in accordance with the
terms of such other Operative Document.
(b) The Loan Trustee will distribute promptly upon receipt any
indemnity payment received by it from the Company pursuant to Section 4.02 of
the Participation Agreement in respect of (i) State Street and the Loan Trustee,
(ii) the Subordination Agent, (iii) the Pass Through Trustees and (iv) the
Liquidity Provider, in each case, directly to the Person entitled thereto. Any
payment received by the Loan Trustee from the Company under Section 2.14 shall
be distributed to the Subordination Agent to be distributed in accordance with
Section 2.03(c) of the Intercreditor Agreement.
(c) Any payments received by the Loan Trustee not constituting part of
the Collateral or otherwise for which no provision as to the application thereof
is made in any Operative Document shall be distributed by the Loan Trustee to
the Company. Further, and except as otherwise provided in Sections 3.02, 3.03
and 3.04, all payments received and amounts realized by the Loan Trustee with
respect to the Aircraft, to the extent received or realized at any time after
payment in full of all Secured Obligations or after the conditions set forth in
Section 10.01(a)(ii) for the defeasance of this Indenture have been satisfied,
as well as any amounts remaining as part of the Collateral after the occurrence
of such payment in full or defeasance, shall be distributed by the Loan Trustee
to the Company.
25
Section 3.05. Payments to the Company. Any amounts distributed
hereunder by the Loan Trustee to the Company shall be paid to the Company
(within the time limits contemplated by Section 2.03(a)) by wire transfer of
funds of the type received by the Loan Trustee at such office and to such
account or accounts of such entity or entities as shall be designated by notice
from the Company to the Loan Trustee from time to time.
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES OF LOAN TRUSTEE
Section 4.01. Events of Default. Each of the following events shall
constitute an "Event of Default" whether such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body and each such Event of
Default shall be deemed to exist and continue so long as, but only as long as,
it shall not have been remedied:
(a) the Company shall fail to make any payment within 15 days
after the same shall have become due of principal amount of, Make-Whole
Amount, if any, or interest on, any Equipment Note;
(b) the Company shall fail to make payment when the same shall
become due of any amount (other than amounts referred to in Section
4.01(a)) due hereunder, under any Equipment Note or under any other
Operative Document, and such failure shall continue unremedied for 30
days after the receipt by the Company of written notice thereof from
the Loan Trustee or any Noteholder;
(c) the Company shall fail to carry and maintain insurance or
indemnity on or with respect to the Aircraft in accordance with the
provisions of Section 7.06; provided that no such failure to carry and
maintain insurance shall constitute an Event of Default until the
earlier of (i) the date such failure shall have continued unremedied
for a period of 30 days after receipt by the Loan Trustee of the notice
of cancellation or lapse referred to in Section 7.06 or (ii) the date
such insurance is not in effect as to the Loan Trustee;
(d) the Company shall fail to perform or observe any other
covenant, condition or agreement to be performed or observed by it
under any Operative Document, and such failure shall continue
unremedied for a period of 60 days after receipt by the Company of
written notice thereof from the Loan Trustee or any Noteholder;
provided that, if such failure is capable of being remedied, no such
failure shall constitute an Event of Default for a period of one year
after such
26
notice is received by the Company so long as the Company is diligently
proceeding to remedy such failure;
(e) any representation or warranty made by the Company in any
Operative Document shall prove to have been incorrect in any material
respect at the time made, and such incorrectness shall continue to be
material to the transactions contemplated hereby and continue
unremedied for a period of 60 days after receipt by the Company of
written notice thereof from the Loan Trustee or any Noteholder;
provided that, if such incorrectness is capable of being remedied, no
such incorrectness shall constitute an Event of Default for a period of
one year after such notice is received by the Company so long as the
Company is diligently proceeding to remedy such incorrectness;
(f) the Company shall consent to the appointment of or the
taking of possession by a receiver, trustee or liquidator of itself or
of a substantial part of its property, 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;
(g) the Company shall file a voluntary petition in bankruptcy
or a voluntary petition or an answer seeking reorganization,
liquidation or other relief in a case under any bankruptcy laws or
insolvency laws (as in effect at such time) or an answer admitting the
material allegations of a petition filed against the Company in any
such case, or the Company shall seek relief by voluntary petition,
answer or consent, under the provisions of any other bankruptcy or
other similar law providing for the reorganization or winding-up of
corporations (as in effect at such time), or the Company shall seek an
agreement, composition, extension or adjustment with its creditors
under such laws;
(h) an order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the consent of the
Company, a receiver, trustee or liquidator of the Company or of any
substantial part of its property, or any substantial part of its
property shall be sequestered, or granting any other relief in respect
of the Company as a debtor under any bankruptcy laws or insolvency laws
(as in effect at such time), and any such order, judgment or decree of
appointment or sequestration shall remain in force undismissed,
unstayed or unvacated for a period of 90 days after the date of entry
thereof; or
(i) a petition against the Company in a case under the federal
bankruptcy laws or other insolvency laws (as in effect at such time) is
filed and not withdrawn or dismissed within 90 days thereafter, or if,
under the provisions of any law providing for reorganization or
winding-up of corporations that may apply to the Company, any court of
competent jurisdiction assumes jurisdiction, custody or control of the
Company or of any substantial part of its property and
27
such jurisdiction, custody or control shall remain in force
unrelinquished, unstayed or unterminated for a period of 90 days;
provided, however, that notwithstanding anything to the contrary
contained in this Section 4.01, any failure of the Company to perform or observe
any covenant, condition or agreement shall not constitute an Event of Default if
such failure arises by reason of an event referred to in the definition of
"Event of Loss" so long as the Company is continuing to comply with all of the
terms of Section 7.05.
Section 4.02. Remedies.
(a) If an Event of Default shall have occurred and be continuing and so
long as the same shall continue unremedied, then and in every such case the Loan
Trustee may, and upon the written instructions of a Majority in Interest of
Noteholders, the Loan Trustee shall, do one or more of the following to the
extent permitted by, and subject to compliance with the requirements of,
applicable law then in effect (provided, however, that during any period the
Aircraft is subject to the CRAF Program and is in possession of or being
operated under the direction of the United States government or an agency or
instrumentality of the United States, the Loan Trustee shall not, on account of
any Event of Default, be entitled to exercise or pursue any of the powers,
rights or remedies described in this Section 4.02 in such manner as to limit the
Company's control under this Indenture (or any Permitted Lessee's control under
any Lease) of the Airframe or any Engines installed thereon, unless at least 60
days' (or such lesser period as may then be applicable under the Military
Airlift Command Program of the United States government) prior written notice of
default hereunder shall have been given by the Loan Trustee by registered or
certified mail to the Company (and any such Permitted Lessee) with a copy
addressed to the Contracting Office Representative or other appropriate person
for the Military Airlift Command of the United States Air Force under any
contract with the Company relating to the Aircraft):
(i) declare by written notice to the Company all the Equipment
Notes to be due and payable, whereupon the aggregate unpaid principal
amount of all Equipment Notes then outstanding, together with accrued
but unpaid interest thereon and other amounts due thereunder (but for
the avoidance of doubt, without Make-Whole Amount), shall immediately
become due and payable without presentment, demand, protest or notice,
all of which are hereby waived; provided that if an Event of Default
referred to in Subsections 4.01(f), (g), (h) or (i) shall have occurred
and be continuing, then and in every such case the unpaid principal
amount then outstanding, together with accrued but unpaid interest and
all other amounts due thereunder (but for the avoidance of doubt,
without Make-Whole Amount) shall immediately and without further act
become due and payable without presentment, demand, protest or notice,
all of which are hereby waived; and, following such declaration or
deemed declaration:
28
(ii) (A) cause the Company, upon the written demand of the
Loan Trustee, at the Company's expense, to deliver promptly, and the
Company shall deliver promptly, all or such part of the Airframe or any
Engine as the Loan Trustee may so demand to the Loan Trustee or its
order, or, if the Company shall have failed to so deliver the Airframe
or any Engine after such demand, the Loan Trustee, at its option, may
enter upon the premises where all or any part of the Airframe or any
Engine are located and take immediate possession of and remove the same
together with any engine which is not an Engine but which is installed
on the Airframe, subject to all of the rights of the owner, lessor,
lienor or secured party of such engine; provided that the Airframe with
an engine (which is not an Engine) installed thereon may be flown or
returned only to a location within the continental United States, and
such engine shall be held for the account of any such owner, lessor,
lienor, secured party or, if such engine is owned by the Company, may
at the option of the Company with the consent of the Loan Trustee
(which will not be unreasonably withheld) or at the option of the Loan
Trustee with the consent of the Company (which will not be unreasonably
withheld), be exchanged with the Company for an Engine in accordance
with the provisions of Section 7.05(b); (B) sell all or any part of the
Airframe and any Engine at public or private sale, whether or not the
Loan Trustee shall at the time have possession thereof, as the Loan
Trustee may determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle all or any part of the Airframe or such
Engine as the Loan Trustee, in its sole discretion, may determine, all
free and clear of any rights or claims of the Company, and the proceeds
of such sale or disposition shall be applied as set forth in Section
3.03; or (C) exercise any other remedy of a secured party under the
Uniform Commercial Code of the State of
New York (whether or not in
effect in the jurisdiction in which enforcement is sought).
Upon every such taking of possession of Collateral under this Section
4.02, the Loan Trustee may, from time to time, at the expense of the Collateral,
make all such expenditures for maintenance, insurance, repairs, alterations,
additions and improvements to and of the Collateral as it may deem proper. In
each such case, the Loan Trustee shall have the right to maintain, use, operate,
store, lease, control or manage the Collateral and to exercise all rights and
powers of the Company relating to the Collateral as the Loan Trustee shall
reasonably deem best, including the right to enter into any and all such
agreements with respect to the maintenance, use, operation, storage, leasing,
control, management or disposition of the Collateral or any part thereof as the
Loan Trustee may reasonably determine; and the Loan Trustee shall be entitled to
collect and receive directly all tolls, rents, revenues, issues, income,
products and profits of the Collateral and every part thereof. Such tolls,
rents, 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 Collateral, and of all maintenance, repairs, replacements,
alterations, additions and improvements, and to make all payments that the Loan
Trustee may be required or may elect to make, if any, for Taxes, insurance or
other
29
proper charges assessed against or otherwise imposed upon the Collateral or any
part thereof, and all other payments which the Loan Trustee may be required or
expressly authorized to make under any provision of this Indenture, as well as
just and reasonable compensation for the services of the Loan Trustee, and shall
otherwise be applied in accordance with Article III.
If an Event of Default shall have occurred and be continuing and the
Equipment Notes shall either have been accelerated pursuant to this Section 4.02
or have become due at maturity and the Loan Trustee shall be entitled to
exercise rights hereunder, at the request of the Loan Trustee, the Company shall
promptly execute and deliver to the Loan Trustee such instruments of title and
other documents as the Loan Trustee may reasonably deem necessary or advisable
to enable the Loan Trustee or an agent or representative designated by the Loan
Trustee, at such time or times and place or places as the Loan Trustee may
specify, to obtain possession of all or any part of the Collateral to which the
Loan Trustee shall at the time be entitled hereunder. If the Company shall for
any reason fail to execute and deliver such instruments and documents after such
request by the Loan Trustee, the Loan Trustee may obtain a judgment conferring
on the Loan Trustee the right to immediate possession and requiring the Company
to execute and deliver such instruments and documents to the Loan Trustee, to
the entry of which judgment the Company hereby specifically consents to the
fullest extent it may lawfully do so.
(b) The Loan Trustee shall give the Company at least 30 days' prior
written notice of any public sale or of the date on or after which any private
sale will be held, which notice the Company hereby agrees to the extent
permitted by applicable law is reasonable notice. Any Noteholder or Noteholders
shall be entitled to bid for and become the purchaser of any Collateral offered
for sale pursuant to this Section 4.02 and to credit against the purchase price
bid at such sale by such Noteholders all or any part of the unpaid amounts owing
to such Noteholders under the Operative Documents and secured by the Lien of
this Indenture (but only to the extent that such purchase price would have been
paid to such Noteholders pursuant to Article III if such purchase price were
paid in cash and the foregoing provision of this Section 4.02(b) were not given
effect). The Loan Trustee may exercise such right without possession or
production of the Equipment Notes or proof of ownership thereof, and as a
representative of the Noteholders may exercise such right without notice to the
Noteholders as parties to any suit or proceeding relating to the foreclosure of
any Collateral. The Company shall also be entitled to bid for and become the
purchaser of any Collateral offered for sale pursuant to this Section 4.02.
(c) To the extent permitted by applicable law, the Company irrevocably
appoints, while an Event of Default has occurred and is continuing, the Loan
Trustee the true and lawful attorney-in-fact of the Company (which appointment
is coupled with an interest) in its name and stead and on its behalf, for the
purpose of effectuating any sale,
30
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
may be necessary or appropriate, with full power of substitution, the Company
hereby ratifying and confirming all that such attorney or any substitute shall
do by virtue hereof in accordance with applicable law; provided that if so
requested by the Loan Trustee or any purchaser, the Company shall ratify and
confirm any such sale, assignment or transfer of delivery, by executing and
delivering to the Loan 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.
(d) At any time after the Loan Trustee has declared the unpaid
principal amount of all Equipment Notes then outstanding to be due and payable
and prior to the sale of any part of the Collateral pursuant to this Article IV,
a Majority in Interest of Noteholders, by written notice to the Company and the
Loan Trustee, may rescind and annul such declaration and its consequences if:
(i) there has been paid to or deposited with the Loan Trustee an amount
sufficient to pay all overdue installments of principal amount of, and interest
on, the Equipment Notes, and all other amounts owing under the Operative
Documents, that have become due otherwise than by such declaration of
acceleration and (ii) all other Events of Default, other than nonpayment of
principal amount or interest on the Equipment Notes that have become due solely
because of such acceleration, have been cured or waived.
(e) Notwithstanding anything contained herein, so long as the Pass
Through Trustee under any Pass Through Trust Agreement or the Subordination
Agent on its behalf is a Noteholder, the Loan Trustee will not be authorized or
empowered to acquire title to any Collateral or take any action with respect to
any Collateral so acquired by it if such acquisition or action would cause any
Pass Through Trust to fail to qualify as a "grantor trust" for federal income
tax purposes.
Section 4.03. Remedies Cumulative. To the extent permitted under
applicable law, each and every right, power and remedy specifically given to the
Loan Trustee herein or otherwise 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 Loan Trustee, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Loan Trustee in the exercise of any right,
remedy or power or in the pursuance of any remedy shall, to the extent permitted
by applicable law, impair any such right, power or remedy or be construed to be
a waiver of any default on the part of the Company or to be an acquiescence
therein.
31
Section 4.04. Discontinuance of Proceedings. In case the Loan Trustee
shall have instituted any proceedings to enforce any right, power or remedy
under this Indenture by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Loan Trustee, then and in every such case the
Company and the Loan Trustee shall, subject to any determination in such
proceedings, be restored to their former positions and rights hereunder with
respect to the Collateral, and all rights, remedies and powers of the Loan
Trustee shall continue as if no such proceedings had been undertaken (but
otherwise without prejudice).
Section 4.05. Waiver of Past Defaults. Upon written instruction from a
Majority in Interest of Noteholders, the Loan Trustee shall waive any past
default hereunder and its consequences, and upon any such waiver such default
shall cease to exist and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of the Operative Documents, but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon; provided, however, that in the absence of written
instructions from each of the affected Noteholders, the Loan Trustee shall not
waive any default (i) in the payment of the principal amount, Make-Whole Amount,
if any, or interest due under any Equipment Note then outstanding (other than
with the consent of the holder thereof), or (ii) in respect of a covenant or
provision hereof which, under Article IX, cannot be modified or amended without
the consent of each such affected Noteholder.
Section 4.06. Noteholders May Not Bring Suit Except Under Certain
Conditions. A Noteholder of any Series shall not have the right to institute any
suit, action or proceeding at law or in equity or otherwise with respect to this
Indenture for the appointment of a receiver or for the enforcement of any other
remedy under this Indenture, unless:
(1) such Noteholder previously shall have given written notice
to the Loan Trustee of a continuing Event of Default;
(2) A Majority in Interest of Noteholders shall have requested
the Loan Trustee in writing to institute such action, suit or
proceeding and shall have offered to the Loan Trustee indemnity as
provided in Section 5.03;
(3) the Loan Trustee shall have refused or neglected to
institute any such action, suit or proceeding for 60 days after receipt
of such notice, request and offer of indemnity; and
(4) no direction inconsistent with such written request shall
have been given to the Loan Trustee during such 60-day period by a
Majority in Interest of Noteholders.
32
Except to the extent provided in the Intercreditor Agreement or in any
Indenture Supplement, it is understood and intended that no one or more of the
Noteholders of any Series shall have any right in any manner whatsoever
hereunder or under the Indenture Supplement or under the Equipment Notes of such
Series to (i) surrender, impair, waive, affect, disturb or prejudice any
Collateral, or the Lien of the Indenture on any Collateral, or the rights of the
Noteholders of such Series, (ii) obtain or seek to obtain priority over or
preference with respect to any other such Noteholder of such Series or (iii)
enforce any right under this Indenture, except in the manner provided in this
Indenture and for the equal, ratable and common benefit of all the Noteholders
of such Series subject to the provisions of this Indenture.
ARTICLE V
DUTIES OF THE LOAN TRUSTEE
Section 5.01. Notice of Event of Default. If the Loan Trustee shall
have knowledge of an Event of Default or of a default arising from a failure by
the Company to pay when due any payment of principal amount, interest or
Make-Whole Amount, if any, due and payable under any Equipment Note, the Loan
Trustee shall promptly give notice thereof to the Company and each Noteholder by
telegram, cable, facsimile or telephone (to be promptly confirmed in writing);
provided, however, that except in the case of a default in the payment of the
principal amount, interest or Make-Whole Amount, if any, due and payable under
any Equipment Note, the Loan Trustee shall be protected in withholding the
notice to the Noteholders required in the foregoing part of this sentence if and
so long as the executive committee or trust committee of directors of the Loan
Trustee and/or trust officers thereof in good faith determine that withholding
such notice is in the interest of the Noteholders. Subject to the terms of
Sections 4.02, 4.05, 5.02 and 5.03, the Loan Trustee shall take such action, or
refrain from taking such action, with respect to such Event of Default
(including with respect to the exercise of any rights or remedies hereunder) as
the Loan Trustee shall be instructed in writing by a Majority in Interest of
Noteholders. Subject to the provisions of Section 5.03, if the Loan Trustee
shall not have received instructions as above provided within 20 Business Days
after giving notice of such Event of Default to the Noteholders, the Loan
Trustee may, subject to instructions thereafter received pursuant to the
preceding provisions of this Section 5.01, take such action, or refrain from
taking such action, but shall be under no duty to take or refrain from taking
any action, with respect to such Event of Default as it shall reasonably
determine to be advisable in the best interests of the Noteholders and shall use
the same degree of care and skill in connection therewith as a prudent person
would use under the circumstances in the conduct of his or her own affairs;
provided that the Loan Trustee may not sell the Airframe or any Engine without
the consent of a Majority in Interest of Noteholders.
33
For all purposes of this Indenture, in the absence of actual knowledge,
the Loan Trustee shall not be deemed to have knowledge of a default or an Event
of Default unless notified in writing by the Company or one or more Noteholders;
and "actual knowledge" (as used in the foregoing clause) of the Loan Trustee
shall mean actual knowledge of an officer in the Corporate Trust Division of the
Loan Trustee; provided, however, that the Loan Trustee shall be deemed to have
actual knowledge of (i) the failure of the Company to pay any principal amount
of, or interest on, the Equipment Notes directly to the Loan Trustee when the
same shall become due or (ii) the failure of the Company to maintain insurance
as required under Section 7.06 if the Loan Trustee receives written notice
thereof from an insurer or insurance broker.
Section 5.02. Action upon Instructions; Certain Rights and Limitations.
Subject to the terms of Article IV and this Article V, upon the written
instructions at any time of a Majority in Interest of Noteholders, the Loan
Trustee shall promptly (i) give such notice, direction, consent, waiver or
approval or exercise such right, remedy or power hereunder in respect of all or
any part of the Collateral or (ii) take such other action, as shall be specified
in such instructions.
The Loan Trustee will cooperate with the Company in connection with the
recording, filing, re-recording and refiling of the Indenture and any
supplements to it and any financing statements or other documents as is
necessary to maintain the perfection hereof or otherwise protect the security
interests created hereby. The Loan Trustee shall furnish to the Company upon
request such information and copies of such documents as the Loan Trustee may
have and as are necessary for the Company to perform its duties under Article II
hereof.
Section 5.03. Indemnification. The Loan Trustee shall not be required
to take any action or refrain from taking any action under Sections 5.01 (other
than the first sentence thereof) or 5.02 or Article IV unless it shall have
received indemnification against any risks incurred in connection therewith in
form and substance reasonably satisfactory to it, including, without limitation,
adequate advances against costs that may be incurred by it in connection
therewith. The Loan Trustee shall not be required to take any action under
Section 5.01 (other than the first sentence thereof) or 5.02 or Article IV, nor
shall any other provision of any Operative Document be deemed to impose a duty
on the Loan Trustee to take any action, if the Loan Trustee shall have been
advised by outside counsel that such action is contrary to the terms hereof or
is otherwise contrary to law.
Section 5.04. No Duties Except as Specified in Indenture or
Instructions. The Loan Trustee shall not have any duty or obligation to manage,
control, lease, use, sell, operate, store, dispose of or otherwise deal with the
Aircraft or any other part of the Collateral, or to otherwise take or refrain
from taking any action under, or in connection with, this Indenture, except as
expressly provided by the terms of this Indenture or the
34
Participation Agreement or as expressly provided in written instructions
received pursuant to the terms of Section 5.01 or 5.02; and no implied duties or
obligations shall be read into this Indenture against the Loan Trustee.
Section 5.05. No Action Except under Indenture or Instructions. The
Loan Trustee agrees that it will not manage, control, use, sell, lease, operate,
store, dispose of or otherwise deal with the Aircraft or any other part of the
Collateral except in accordance with the powers granted to, or the authority
conferred upon, the Loan Trustee pursuant to this Indenture and in accordance
with the express terms hereof.
Section 5.06. Investment of Amounts Held by the Loan Trustee. Any
monies (including for the purpose of this Section 5.06 any cash deposited with
the Loan Trustee by the Company, any cash received by the Loan Trustee pursuant
to Sections 7.05(c) or 7.06(d) or otherwise) or Permitted Investments purchased
by the use of such cash pursuant to this Section 5.06 or any cash constituting
the proceeds of the maturity, sale or other disposition of any Permitted
Investments) held by the Loan Trustee hereunder as part of the Collateral, until
paid out by the Loan Trustee as herein provided, (i) subject to clause (ii)
below, may be carried by the Loan Trustee on deposit with itself or on deposit
to its account with any bank, trust company or national banking association
incorporated or doing business under the laws of the United States or one of the
states thereof having combined capital and surplus and retained earnings of a
least $75,000,000, and the Loan Trustee shall not have any liability for
interest upon any such monies except as otherwise agreed in writing with the
Company, or (ii) at any time and from time to time, so long as no Event of
Default shall have occurred and be continuing, at the request of the Company,
shall be invested and reinvested in Permitted Investments as specified in such
request (if such investments are reasonably available for purchase) and sold, in
any case at such prices, including accrued interest or its equivalent, as are
set forth in such request, and such Permitted Investments shall be held by the
Loan Trustee in trust as part of the Collateral until so sold; provided that the
Company shall upon demand pay to the Loan Trustee the amount of any loss
realized upon maturity, sale or other disposition of any such Permitted
Investment and, so long as no Event of Default or Payment Default shall have
occurred and be continuing, the Company shall be entitled to receive from the
Loan Trustee, and the Loan Trustee shall promptly pay to the Company, any
profit, income, interest, dividend or gain realized upon maturity, sale or other
disposition of any Permitted Investment. If an Event of Default or Payment
Default shall have occurred and be continuing, any net income, profit, interest,
dividend or gain realized upon maturity, sale or other disposition of any
Permitted Investment shall be held as part of the Collateral and shall be
applied by the Loan Trustee at the same time, on the same conditions and in the
same manner as the amounts in respect of which such income, profit, interest,
dividend or gain was realized are required to be distributed in accordance with
the provisions hereof pursuant to which such amounts were required to be held.
The Loan Trustee shall not be responsible for any losses on any investments or
sales of Permitted Investments made pursuant to the procedure specified in this
Section 5.06 other
35
than by reason of its willful misconduct or negligence. If any moneys or
investments are held by the Loan Trustee solely because an Event of Default has
occurred and is continuing and such moneys or investments have been held for a
period of 90 consecutive days during which such Event of Default is continuing
without any remedial action being taken by the Loan Trustee in respect of such
Event of Default pursuant to Section 4.02 hereof, and provided that there is no
stay, moratorium or injunction in effect preventing the taking of such action,
then, notwithstanding any other provision of the Operative Documents, all such
moneys and investments held by the Loan Trustee shall be released to the Company
on such 90th day, or as soon thereafter as practicable.
ARTICLE VI
THE LOAN TRUSTEE
Section 6.01. Acceptance of Trusts and Duties. State Street accepts the
trusts and duties hereby created and applicable to it and agrees to perform such
duties, but only upon the terms of this Indenture and agrees to receive, handle
and disburse all monies received by it as Loan Trustee constituting part of the
Collateral in accordance with the terms hereof. State Street shall have no
liability hereunder except (a) for its own willful misconduct or negligence, (b)
as provided in the fourth sentence of Section 2.03(a) and the penultimate
sentence of Section 5.06, (c) for liabilities that may result from the
inaccuracy of any representation or warranty of State Street in the
Participation Agreement or expressly made hereunder and (d) as otherwise
expressly provided in the Operative Documents.
Section 6.02. Absence of Certain Duties. Except in accordance with
written instructions furnished pursuant to Sections 5.01, 5.02 or 6.06, and
except as provided in, and without limiting the generality of, Sections 5.02,
5.03 and 5.04, the Loan Trustee, shall have no duty (a) to see to any
registration of the Aircraft or any recording or filing of this Indenture or any
other document, or to see to the maintenance of any such registration, recording
or filing, (b) to see to any insurance on the Aircraft or to effect or maintain
any such insurance, whether or not the Company shall be in default with respect
thereto, (c) to confirm, verify or inquire into the failure to receive any
financial statements of the Company or (d) to inspect the Aircraft at any time
or ascertain or inquire as to the performance or observance of any of the
Company's covenants hereunder with respect to the Aircraft.
Section 6.03. No Representations or Warranties as to the Documents.
Except as provided in Article V of the Participation Agreement, the Loan Trustee
shall not be deemed to have made any representation or warranty as to the
validity, legality or enforceability of any Operative Document or any other
document or instrument, or as to the correctness of any statement (other than a
statement by the Loan Trustee) contained
36
herein or therein, except that the Loan Trustee hereby represents and warrants
that each of said specified documents to which it is a party has been or will be
duly executed and delivered by one of its officers who is and will be duly
authorized to execute and deliver such document on its behalf.
Section 6.04. No Segregation of Monies; No Interest. Subject to Section
5.06 hereof, all moneys received by the Loan 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, and neither the Loan Trustee nor any
agent of the Loan Trustee shall be under any liability for interest on any
moneys received by it hereunder; provided, however, that any payments received,
or applied hereunder, by the Loan Trustee shall be accounted for by the Loan
Trustee so that any portion thereof paid or applied pursuant hereto shall be
identifiable as to the source thereof.
Section 6.05. Reliance; Agents; Advice of Counsel. The Loan Trustee
shall not incur any liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper reasonably believed by it to be genuine
and reasonably believed by it to be signed by the proper party or parties. The
Loan Trustee may accept a copy of a resolution of the Board of Directors of any
party to the Participation Agreement, certified by the Secretary or an Assistant
Secretary of such party as duly adopted and in full force and effect, as
conclusive evidence that such resolution has been duly adopted and that the same
is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Loan Trustee
may for all purposes hereof rely on a certificate, signed by a duly authorized
officer of the Company, as to such fact or matter, and such certificate shall
constitute full protection to the Loan Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon. In the administration of
the trusts hereunder, the Loan Trustee may, with the consent of the Company
(such consent not to be unreasonably withheld), (a) execute any of the trusts or
powers hereof and perform its powers and duties hereunder directly or through
agents (including paying agents or registrars) or attorneys, and (b) at the
expense of the Collateral, consult with counsel, accountants and other skilled
Persons to be selected and retained by it. The Loan Trustee shall not be liable
for anything done, suffered or omitted in good faith by it in accordance with
the advice or opinion of any such counsel, accountants or other skilled Persons
acting within such counsel's, accountants' or Person's area of competence (so
long as the Loan Trustee shall have exercised reasonable care and judgment in
selecting such Persons).
Section 6.06. Instructions from Noteholders. In the administration of
the trusts created hereunder, the Loan Trustee shall have the right to seek
instructions from a Majority in Interest of Noteholders should any provision of
this Indenture appear to conflict with any other provision herein or any other
Operative Document or Pass
37
Through Document or should the Loan Trustee's duties or obligations hereunder be
unclear, and the Loan Trustee shall incur no liability in refraining from acting
until it receives such instructions. The Loan Trustee shall be fully protected
for acting in accordance with any instructions received under this Section 6.06.
ARTICLE VII
OPERATING COVENANTS OF THE COMPANY
Section 7.01. Liens. The Company will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, its title thereto or any of its interest therein, except:
(a) the respective rights of the Loan Trustee and the Company
as provided in the Operative Documents, the Lien of this Indenture, the
rights of any Permitted Lessee under a Lease permitted hereunder and
the rights of any Person existing pursuant to the Operative Documents
or the Pass Through Documents;
(b) the rights of others under agreements or arrangements to
the extent expressly permitted by this Indenture;
(c) Loan Trustee Liens, Noteholder Liens and Other Party
Liens;
(d) Liens for Taxes either not yet due or payable or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve any material risk of the sale, forfeiture or
loss of the Airframe or any Engine or the Loan Trustee's interest
therein or materially impair the Lien of this Indenture;
(e) materialmen's, mechanics', workers', repairmen's,
employees' or other like Liens arising in the ordinary course of
business (including those arising under maintenance agreements entered
into in the ordinary course of business) securing obligations that
either are not yet overdue for a period of more than 60 days or are
being contested in good faith by appropriate proceedings so long as
such proceedings do not involve any material risk of the sale,
forfeiture or loss of the Airframe or any Engine or the Loan Trustee's
interest therein or materially impair the Lien of this Indenture;
(f) Liens arising out of any judgment or award, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged, vacated or reversed, or execution thereof stayed pending
appeal or other judicial review or shall have been discharged, vacated
or reversed within 60 days after the expiration of such stay;
38
(g) any other Lien with respect to which the Company shall
have provided a bond, cash collateral or other security adequate in the
reasonable opinion of the Loan Trustee;
(h) salvage or similar rights of insurers under insurance
policies maintained by the Company; and
(i) Liens approved in writing by the Loan Trustee with the
consent of a Majority in Interest of the Noteholders.
Liens described in clauses (a) through (i) above are referred to herein as
"Permitted Liens". The Company shall promptly, at its own expense, take (or
cause to be taken) such action as may be necessary duly to discharge (by bonding
or otherwise) any Lien other than a Permitted Lien arising at any time with
respect to the Aircraft, its title thereto or any of its interest therein.
Section 7.02. Possession, Operation and Use, Maintenance and
Registration.
(a) Possession. The Company shall not, without the prior written
consent of the Loan Trustee, lease or otherwise in any manner deliver, transfer
or relinquish possession of 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 the Company shall comply with the provisions of
Section 7.06, the Company may without the prior written consent of the Loan
Trustee:
(i) subject the Airframe to interchange agreements or subject
any Engine to interchange or pooling agreements or arrangements, in
each case customary in the airline industry and entered into by the
Company in the ordinary course of its business; provided that (A) no
such agreement or arrangement contemplates or requires the transfer of
title to the Airframe and (B) if the Company's title to any such Engine
shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be an Event of Loss with respect to such
Engine, and the Company shall comply with Section 7.05(b) in respect
thereof;
(ii) deliver possession of the Airframe or any Engine to any
Person for testing, service, repair, maintenance, overhaul work or
other similar purposes or for alterations, modifications or additions
to the Airframe or such Engine to the extent required or permitted by
the terms hereof;
(iii) transfer or permit the transfer of possession of the
Airframe or any Engine to any Government pursuant to a lease, contract
or other instrument;
39
(iv) subject the Airframe or any Engine to the CRAF Program or
transfer possession of the Airframe or any Engine to the United States
government in accordance with applicable laws, rulings, regulations or
orders (including, without limitation, any transfer of possession
pursuant to the CRAF Program); provided, that the Company (A) shall
promptly notify the Loan Trustee upon transferring possession of the
Airframe or any Engine pursuant to this clause (iv) and (B) in the case
of a transfer of possession pursuant to the CRAF Program, shall notify
the Loan Trustee of the name and address of the responsible Contracting
Office Representative for the Military Airlift Command of the United
States Air Force or other appropriate Person to whom notices must be
given and to whom requests or claims must be made to the extent
applicable under the CRAF Program;
(v) install an Engine on an airframe owned by the Company (or
any Permitted Lessee) free and clear of all Liens, except (A) Permitted
Liens and Liens that apply only to the engines (other than Engines),
appliances, parts, instruments, appurtenances, accessories, furnishings
and other equipment (other than Parts) installed on such airframe (but
not to the airframe as an entirety) and (B) the rights of third parties
under interchange agreements or pooling or similar arrangements that
would be permitted under clause (i) above;
(vi) install an Engine on an airframe leased to the Company
(or any Permitted Lessee) or purchased or owned by the Company (or any
Permitted Lessee) subject to a conditional sale or other security
agreement; provided that (A) such airframe is free and clear of all
Liens except (1) the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe, or their
successors and assigns, and (2) Liens of the type permitted by clause
(v) of this Section 7.02(a) and (B) either (1) the Company shall have
obtained from the lessor or secured party of such airframe a written
agreement (which may be the lease, conditional sale or other security
agreement covering such airframe), in form and substance satisfactory
to the Loan Trustee (it being understood that an agreement from such
lessor or secured party substantially in the form of the final sentence
of the penultimate paragraph of this Section 7.02(a) shall be deemed to
be satisfactory to the Loan Trustee), whereby such lessor 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
while such Engine is subject to the Lien of this Indenture or (2) such
lease, conditional sale or other security agreement provides that such
Engine shall not become subject to the Lien of such lease, conditional
sale or other security agreement at any time while such Engine is
subject to the Lien of this Indenture, notwithstanding the installation
thereof on such airframe;
40
(vii) install an Engine on an airframe owned by the Company
(or any Permitted Lessee), leased to the Company (or any Permitted
Lessee) or purchased by the Company (or any Permitted Lessee) subject
to a conditional sale or other security agreement under circumstances
where neither clause (v) nor clause (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 Company shall comply with
Section 7.05(b) in respect thereof, if such installation shall
adversely affect the Loan Trustee's security interest in such Engine,
the Loan Trustee not intending hereby to waive any right or interest it
may have to or in such Engine under applicable law until compliance by
the Company with Section 7.05(b);
(viii) lease any Engine or the Airframe and Engines to any
United States air carrier as to which there is in force a certificate
issued pursuant to the Transportation Code (49 U.S.C.
Sections 41101-41112) or successor provision that gives like authority;
and
(ix) lease any Engine or the Airframe and Engines to (A) any
foreign air carrier other than those set forth in clause (B), (B) any
foreign air carrier that is at the inception of the lease based in and
a domiciliary of a country listed in Exhibit B hereto and (C) any
foreign air carrier consented to in writing by the Loan Trustee with
the consent of a Majority in Interest of Noteholders; provided that (x)
in the case of a lease to a foreign air carrier under clause (A) above,
the Loan Trustee receives at the time of such lease (1) written
confirmation from each of the Rating Agencies that such lease would not
result in 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 a withdrawal or suspension of the rating of any
class of Pass Through Certificates and (2) an opinion of counsel to the
Company (such counsel to be reasonably satisfactory to the Loan
Trustee) to the effect that there exist no possessory rights in favor
of the lessee under the laws of such lessee's country which would, upon
bankruptcy or insolvency of or other default by the Company and
assuming at such time such lessee is not insolvent or bankrupt, prevent
the taking of possession of any such Engine or the Airframe and any
such Engine by the Loan Trustee in accordance with and when permitted
by the terms of Section 4.02 upon the exercise by the Loan Trustee of
its remedies under Section 4.02, (y) in the case of a lease to any
foreign air carrier (other than a foreign air carrier principally based
in Taiwan), the United States maintains diplomatic relations with the
country in which such foreign air carrier is based at the time such
lease is entered into and (z) in the case of any lease to a foreign air
carrier, such carrier is not then subject to any bankruptcy,
insolvency, liquidation, reorganization, dissolution or similar
proceeding and shall not have substantially all of its property in the
possession of any liquidator, trustee, receiver or similar person;
41
provided that the rights of any lessee or other transferee who receives
possession of the Aircraft, the Airframe or any Engine by reason of a transfer
permitted by this Section 7.02(a) (other than the transfer of an Engine which is
deemed an Event of Loss) shall be subject and subordinate to, and any permitted
lease shall be made expressly subject and subordinate to, all the terms of this
Indenture, including the Loan Trustee's rights to repossess pursuant to Section
4.02 and to avoid such lease upon such repossession, and the Company shall
remain primarily liable hereunder for the performance and observance of all of
the terms and conditions of this Indenture to the same extent as if such lease
or transfer had not occurred, any such lease shall include appropriate
provisions for the maintenance and insurance of the Aircraft, the Airframe or
such Engine, and no lease or transfer or possession otherwise in compliance with
this Section shall (x) result in any registration or re-registration of the
Aircraft except to the extent permitted in Section 7.02(e) or the maintenance,
operation or use thereof that does not comply with Section 7.02(b) and (c) or
(y) permit any action not permitted to be taken by the Company with respect to
the Aircraft hereunder. The Company shall promptly notify the Loan Trustee and
the Rating Agencies of the existence of any such lease with a term in excess of
one year.
The Loan Trustee, and each Noteholder by acceptance of an Equipment
Note, agrees, for the benefit of the lessor or secured party of any airframe or
engine leased to the Company (or any Permitted Lessee) or purchased or owned by
the Company (or any Permitted Lessee) subject to a conditional sale or other
security agreement, that the Loan Trustee and the Noteholders will not acquire
or claim, as against such lessor or secured party, any right, title or interest
in (A) any engine or engines owned by the lessor under such lease or subject to
a security interest in favor of the secured party under such conditional sale or
other security agreement as the result of such engine or engines being installed
on the Airframe at any time while such engine or engines are subject to such
lease or conditional sale or other security agreement or (B) any airframe owned
by the lessor under such lease or subject to a security interest in favor of the
secured party under such conditional sale or other security agreement as the
result of any Engine being installed on such airframe at any time while such
airframe is subject to such lease or conditional sale or other security
agreement.
The Loan Trustee acknowledges that any "wet lease" or other similar
arrangement under which the Company maintains operational control of the
Aircraft shall not constitute a delivery, transfer or relinquishment of
possession for purposes of this Section 7.02(a).
(b) Operation and Use. The Company agrees that the Aircraft will not be
maintained, used or operated in violation of any law, rule or regulation of any
government of any country having jurisdiction over the Aircraft or in violation
of any airworthiness certificate, license or registration relating to the
Aircraft issued by any such government, except to the extent the Company is
contesting in good faith the validity or
42
application of any such law, rule or regulation in any manner that does not
involve any material risk of sale, forfeiture or loss of the Aircraft or
materially impair the Lien of this Indenture; and provided, that the Company
shall not be in default under, or required to take any action set forth in, this
sentence if it is not possible for it to comply with the laws of a jurisdiction
other than the United States (or other than any jurisdiction in which the
Aircraft is then registered) because of a conflict with the applicable laws of
the United States (or such jurisdiction in which the Aircraft is then
registered). The Company will not operate the Aircraft, or permit the Aircraft
to be operated or located, (i) in any area excluded from coverage by any
insurance required by the terms of Section 7.06 or (ii) in any war zone or
recognized or, in the Company's judgment, threatened areas of hostilities unless
covered by war risk insurance in accordance with Section 7.06, unless in the
case of either clause (i) or (ii), (x) indemnification complying with Section
7.06(a) and (b) has been provided or (y) the Aircraft is only temporarily
located in such area as a result of an isolated occurrence or isolated series of
occurrences attributable to a hijacking, medical emergency, equipment
malfunction, weather conditions, navigational error or other similar unforeseen
circumstances and the Company is using its good faith efforts to remove the
Aircraft from such area as promptly as practicable.
(c) Maintenance. The Company shall maintain, service, repair and
overhaul the Aircraft (or cause the same to be done) so as to keep the Aircraft
in good operating condition, ordinary wear and tear excepted, and in such
condition as may be necessary to enable the airworthiness certification of the
Aircraft to be maintained in good standing at all times (other than during
temporary periods of storage, during maintenance or modification permitted
hereunder, or during periods of grounding by applicable governmental
authorities) under the Transportation Code, during such periods in which the
Aircraft is registered under the laws of the United States, or, if the Aircraft
is registered under the laws of any other jurisdiction, the applicable laws of
such jurisdiction. In any case the Aircraft will be maintained in accordance
with the maintenance standards required by or substantially equivalent to those
required by the FAA or the central aviation authority of Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland or the United
Kingdom. The Company shall maintain or cause to be maintained all records, logs
and other documents required to be maintained in respect of the Aircraft by
appropriate authorities in the jurisdiction in which the Aircraft is registered.
(d) Identification of Loan Trustee's Interest. The Company agrees to
affix as promptly as practicable after the Closing Date and thereafter to
maintain in the cockpit of the Aircraft, in a clearly visible location, and (if
not prevented by applicable law or regulations or by any government) on each
Engine, a nameplate bearing the inscription "MORTGAGED TO STATE STREET BANK AND
TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS LOAN TRUSTEE" (such
43
nameplate to be replaced, if necessary, with a nameplate reflecting the name of
any successor Loan Trustee).
(e) Registration. The Company shall cause the Aircraft to remain duly
registered, under the laws of the United States, in the name of the Company
except as otherwise required by the Transportation Code; provided that the Loan
Trustee shall, at the Company's expense, execute and deliver all such documents
as the Company may reasonably request for the purpose of continuing such
registration. Notwithstanding the preceding sentence, the Company, at its own
expense, may cause or allow the Aircraft to be duly registered under the laws of
any foreign jurisdiction in which a Permitted Lessee could be principally based,
in the name of the Company or of any nominee of the Company, or, if required by
applicable law, in the name of any other Person (and, following any such foreign
registration, may cause the Aircraft to be re-registered under the laws of the
United States); provided, that in the case of jurisdictions other than those
approved by the Loan Trustee with the consent of a Majority in Interest of the
Noteholders (i) if such jurisdiction is at the time of registration listed on
Exhibit B, the Loan Trustee shall have received at the time of such registration
an opinion of counsel to the Company to the effect that (A) this Indenture and
the Loan Trustee's right to repossession thereunder is valid and enforceable
under the laws of such country, (B) after giving effect to such change in
registration, the Lien of this Indenture shall continue as a valid Lien and
shall be duly perfected in the new jurisdiction of registration and that all
filing, recording or other action necessary to perfect and protect the Lien of
this Indenture has been accomplished (or if such opinion cannot be given at such
time, (x) the opinion shall detail what filing, recording or other action is
necessary and (y) the Loan Trustee shall have received a certificate from a
Responsible Officer of the Company that all possible preparations to accomplish
such filing, recording and other action shall have been done, and such filing,
recording and other action shall be accomplished and a supplemental opinion to
that effect shall be promptly delivered to the Loan Trustee subsequent to the
effective date of such change in registration), (C) the obligations of the
Company under this Indenture shall remain valid, binding and (subject to
customary bankruptcy and equitable remedies exceptions and to other exceptions
customary in foreign opinions generally) enforceable under the laws of such
jurisdiction (or the laws of the jurisdiction to which the laws of such
jurisdiction would refer as the applicable governing law) and (D) all approvals
or consents of any government in such jurisdiction having jurisdiction required
for such change in registration shall have been duly obtained and shall be in
full force and effect, and (ii) if such jurisdiction is at the time of
registration not listed on Exhibit B, the Loan Trustee shall have received (in
addition to the opinions set forth in clause (i) above) at the time of such
registration an opinion of counsel to the Company to the effect that (A) the
terms of this Indenture are legal, valid, binding and enforceable in such
jurisdiction (subject to exceptions customary in such jurisdiction, provided,
that, subject to bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally, and to general principles of
equity, any applicable laws limiting the remedies provided in Section 4.02
44
do not in the opinion of such counsel make the remedies provided in Section 4.02
inadequate for the practical realization of the rights and benefits provided
thereby), (B) that it is not necessary for the Loan Trustee to register or
qualify to do business in such jurisdiction, (C) that there is no tort liability
of the lender of an aircraft not in possession thereof under the laws of such
jurisdiction other than tort liability that might have been imposed on such
lender under the laws of the United States or any state thereof (it being
understood that such opinion shall be waived if insurance reasonably
satisfactory to the Loan Trustee is provided, at the Company's expense, to cover
such risk) and (D) (unless the Company shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under the
laws of such jurisdiction) that the laws of such jurisdiction require fair
compensation by the government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use or title of the Aircraft in the
event of requisition by such government of such use or title. The Loan Trustee
will cooperate with the Company in effecting such foreign registration.
Notwithstanding the foregoing, prior to any such change in the country of
registry of the Aircraft, the following conditions shall be met (or waived as
provided in Section 6.01(b) of the Participation Agreement):
(i) no Event of Default shall have occurred and be continuing
at the effective date of the change in registration; provided, that it
shall not be necessary to comply with this condition if the change in
registration results in the registration of the Aircraft under the laws
of the United States or if a Majority in Interest of Noteholders
consents to such change in registration;
(ii) the Loan Trustee shall have received evidence of
compliance with the insurance provisions contained herein after giving
effect to such change in registration; and
(iii) the Company shall have paid or made provision reasonably
satisfactory to the Loan Trustee for the payment of all reasonable
expenses (including reasonable attorneys' fees) of the Loan Trustee and
the Noteholders in connection with such change in registration.
Section 7.03. Inspection; Financial Information.
(a) Inspection. At all reasonable times, but upon at least 15 Business
Days' prior written notice to the Company, the Loan Trustee or its authorized
representative may, subject to the other conditions of this Section 7.03(a),
inspect the Aircraft and may inspect the books and records of the Company
required to be maintained by the FAA or the government of another jurisdiction
in which the Aircraft is then registered relating to the maintenance of the
Aircraft; provided that (i) such Loan Trustee or its representative, as the case
may be, shall be fully insured at no cost to the Company in a manner
45
satisfactory to the Company with respect to any risks incurred in connection
with any such inspection or shall provide to the Company a written release
satisfactory to the Company with respect to such risks, (ii) any such inspection
shall be subject to the safety, security and workplace rules applicable at the
location where such inspection is conducted and any applicable governmental
rules or regulations, (iii) 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 panels, bays or the like without the Company's
express consent, which consent the Company may in its sole discretion withhold,
and (iv) no exercise of such inspection right shall interfere with the use,
operation or maintenance of the Aircraft by, or the business of, the Company and
the Company shall not be required to undertake or incur any additional
liabilities in connection therewith. All information obtained in connection with
any such inspection of the Aircraft and of such books and records shall be
Confidential Information and shall be treated by the Loan Trustee and its
representatives in accordance with the provisions of Section 10.16. Any
inspection pursuant to this Section 7.03(a) shall be at the sole risk
(including, without limitation, any risk of personal injury or death) and
expense of the Loan Trustee (or its representative) making such inspection.
Except during the continuance of an Event of Default, all inspections by the
Loan Trustee and its representatives provided for under this Section 7.03(a)
shall be limited to one inspection of any kind contemplated by this Section
7.03(a) during any calendar year.
(b) Financial Information. So long as any of the Equipment Notes remain
unpaid, the Company agrees to furnish to the Loan Trustee and the Liquidity
Provider: (i) within 60 days after the end of each of the first three quarterly
periods in each fiscal year of the Company, either (x) a consolidated balance
sheet of the Company and its consolidated subsidiaries prepared by it as of the
close of such period, together with the related consolidated statements of
income for such period or (y) a report of the Company on Form 10-Q in respect of
such period in the form filed with the Securities and Exchange Commission and
(ii) within 120 days after the close of each fiscal year of the Company, either
(x) a consolidated balance sheet of the Company and its consolidated
subsidiaries as of the close of such fiscal year, together with the related
consolidated statements of income for such fiscal year, certified by independent
public accountants, or (y) a report of the Company on Form 10-K in respect of
such year in the form filed with the Securities and Exchange Commission.
(c) Annual Opinion. The Company will furnish to the Loan Trustee
annually (but not later than March 15th of each year) after the execution hereof
until such time as the principal of, and interest on, and all other amounts with
respect to, the Equipment Notes shall have been paid in full, commencing with
the year 2002, an opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., or other counsel reasonably
acceptable to the Loan Trustee, stating either (i) that in the opinion of such
counsel such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture and any supplements thereto,
including any financing or continuation statements, and such other filings and
46
recordings as are necessary to maintain, for the 15-month period succeeding the
date of such opinion, the perfection of the security interests created thereby
and reciting the details of such action or (ii) that in the opinion of such
counsel no such action is necessary to maintain, for the 15-month period
succeeding the date of such opinion, the perfection of such security interests.
Section 7.04. Replacement and Pooling of Parts; Alterations,
Modifications and Additions; Substitution of Engines.
(a) Replacement of Parts. The Company shall promptly replace all Parts
that may from time to time be incorporated or installed in or attached to the
Airframe or any Engine and that may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or rendered
permanently unfit for use for any reason whatsoever, except as otherwise
provided in Section 7.04(c) or if the Airframe or an Engine to which a Part
relates has suffered an Event of Loss. In addition, the Company may remove 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 rendered permanently unfit for use; provided that the
Company, except as otherwise provided in Section 7.04(c), will replace such
Parts as promptly as practicable. All replacement Parts shall be free and clear
of all Liens (except for Permitted Liens and except in the case of replacement
property temporarily installed on an emergency basis) and shall have a value and
utility at least equal to the Parts replaced, assuming such replaced Parts were
in the condition and repair required to be maintained by the terms hereof.
Except as otherwise provided in Section 7.04(c), all Parts at any time removed
from the Airframe or any Engine shall remain subject to the Lien of this
Indenture no matter where located until such time as such Parts shall be
replaced by parts that have been incorporated or installed in or attached to the
Airframe or such Engine and that meet the requirements for replacement Parts
specified above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Airframe or any Engine as above provided (except
in the case of replacement property temporarily installed on an emergency
basis), without further act, (i) the replaced Part shall thereupon be free and
clear of all rights of the Loan Trustee and of the Lien of this Indenture and
shall no longer be deemed a Part hereunder and (ii) such replacement Part shall
become subject to the Lien of this Indenture and be deemed a 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. Upon request of the Company from time to time, the Loan Trustee shall
execute and deliver to the Company an appropriate instrument confirming the
release of any such replaced Part from the Lien of this Indenture.
(b) Pooling of Parts. Any Part removed from the Airframe or any Engine
as provided in Section 7.04(a) may be subjected by the Company or a Person
permitted to be in possession of the Aircraft to a pooling arrangement customary
in the airline industry
47
entered into in the ordinary course of the Company's or such Person'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 7.04(a) 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 may be owned by any third party subject
to such a pooling arrangement; provided that the Company, at its expense, as
promptly thereafter as practicable, either (i) causes title to such replacement
Part to vest in the Company free and clear of all Liens (except Permitted
Liens), or (ii) replaces such replacement Part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement Part in the
manner contemplated by Section 7.04(a).
(c) Alterations, Modifications and Additions. The Company will make
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the applicable requirements
of the FAA or any applicable government of any other jurisdiction in which the
Aircraft may then be registered; provided, however, that the Company may, in
good faith, contest the validity or application of any such requirement in any
manner that does not involve any material risk of sale, loss or forfeiture of
the Aircraft and does not materially adversely affect the Loan Trustee's
interest in the Aircraft. In addition, the Company, at its own expense, may from
time to time add further parts or accessories and make or cause to be made such
alterations and modifications in and additions to the Airframe or any Engine as
the Company may deem desirable in the proper conduct of its business, including,
without limitation, removal (without replacement) of Parts, provided that no
such alteration, modification or addition shall materially diminish the value or
utility of the Airframe or such Engine below its value or utility, immediately
prior to such alteration, modification or addition, assuming that the Airframe
or such Engine was then in the condition required to be maintained by the terms
of this Indenture, except that the value (but not the utility) of the Airframe
or any Engine may be reduced by the value of any such Parts that shall have been
removed that the Company deems obsolete or no longer suitable or appropriate for
use on the Airframe or any Engine. All Parts incorporated or installed in or
attached or added to the Airframe or any Engine as the result of such
alteration, modification or addition shall, without further act, be subject to
the Lien of this Indenture. Notwithstanding the foregoing, the Company may, at
any time, remove any Part from the Airframe or any Engine if such Part: (i) is
in addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to the Airframe or such
Engine at the time of delivery thereof to the Company or any Part in replacement
of, or substitution for, any such Part, (ii) is not required to be incorporated
or installed in or attached or added to the Airframe or such Engine pursuant to
the first sentence of this Section 7.04(c) or (iii) can be removed from the
Airframe or such Engine without materially diminishing the value or utility
required to be maintained by the terms of this Indenture that the Airframe or
such Engine would have had at such time had such removal not occurred. Upon the
removal by the Company of any Part as permitted by
48
this Section 7.04(c), such removed Part shall, without further act, be free and
clear of all rights and interests of the Loan Trustee and the Lien of this
Indenture and shall no longer be deemed a Part hereunder. Upon request of the
Company from time to time, the Loan Trustee shall execute and deliver to the
Company an appropriate instrument confirming the release of any such removed
Part from the Lien of this Indenture.
(d) Substitution of Engines. The Company shall have the right at its
option at any time, on at least 30 days' prior written notice to the Loan
Trustee, to substitute a Replacement Engine for any Engine. In such event, and
prior to the date of such substitution, the Company shall replace such Engine
hereunder by complying with the terms of Section 7.05(b) to the same extent as
if an Event of Loss had occurred with respect to such Engine.
Section 7.05. Loss, Destruction or Requisition.
(a) Event of Loss with Respect to the Airframe. Upon the occurrence of
an Event of Loss with respect to the Airframe or the Airframe and the Engines
then installed thereon, the Company shall forthwith (and, in any event, within
15 days after such occurrence) give the Loan Trustee written notice of such
Event of Loss, and, within 90 days after such Event of Loss, the Company shall
give the Loan Trustee written notice of its election to perform one of the
following options (it being agreed that if the Company shall not have given such
notice of election within such 90-day period, the Company shall be deemed to
have elected to perform the option set forth in the following clause (ii)). The
Company may elect either to:
(i) on or before the Loss Payment Date (as defined below)
substitute, as replacement for the Airframe or Airframe and Engines
with respect to which an Event of Loss has occurred, a Replacement
Airframe (together with a number of Replacement Engines equal to the
number of Engines, if any, with respect to which the Event of Loss
occurred), such Replacement Airframe and Replacement Engines to be
owned by the Company free and clear of all Liens (other than Permitted
Liens); provided that if the Company shall not perform its obligation
to effect such substitution under this clause (i) on or prior to the
Loss Payment Date, then the Company shall on the Loss Payment Date
prepay the Equipment Notes in full in accordance with Section 2.10; or
(ii) on or before the Loss Payment Date, redeem the Equipment
Notes in full in accordance with Section 2.10. The Company shall give
the Loan Trustee 20 days prior written notice if it elects to redeem
the Equipment Notes on any day prior to the Loss Payment Date.
49
The "Loss Payment Date" with respect to an Event of Loss means the
Business Day next succeeding the 120th day following the date of occurrence of
such Event of Loss.
If the Company elects to substitute a Replacement Airframe (or a
Replacement Airframe and one or more Replacement Engines, as the case may be)
the Company shall, at its sole expense, not later than the Loss Payment Date,
(A) cause an Indenture Supplement for such Replacement Airframe and Replacement
Engines, if any, to be delivered to the Loan Trustee for execution and, upon
such execution, to be filed for recordation pursuant to the Transportation Code
or the applicable laws of such other jurisdiction in which the Aircraft may then
be registered, (B) cause a financing statement or statements with respect to the
Replacement Airframe and Replacement Engines, if any, or other requisite
documents or instruments to be filed in such place or places as necessary in
order to perfect the Loan Trustee's interest therein in the United States, or in
any other jurisdiction in which the Aircraft may then be registered, (C) furnish
the Loan Trustee with an opinion of the Company's counsel (which may be the
Company's General Counsel or such other internal counsel of the Company as shall
be reasonably satisfactory to the Loan Trustee) addressed to the Loan Trustee to
the effect that upon such replacement, such Replacement Airframe and Replacement
Engines, if any, will be subject to the Lien of this Indenture and addressing
the matters set forth in clauses (A) and (B), (D) furnish the Loan Trustee with
a certificate of an independent aircraft engineer or appraiser, certifying that
the Replacement Airframe and Replacement Engines, if any, have a value and
utility at least equal to the Airframe and Engines, if any, so replaced,
assuming the Airframe and such Engines were in the condition and repair required
by the terms hereof immediately prior to the occurrence of such Event of Loss,
(E) furnish the Loan Trustee with evidence of compliance with the insurance
provisions of Section 7.06 with respect to such Replacement Airframe and
Replacement Engines, if any, and (F) furnish the Loan Trustee with an opinion of
the Company's counsel (which may be the Company's General Counsel or such other
internal counsel of the Company as shall be reasonably satisfactory to the Loan
Trustee) to the effect that the Loan Trustee will be entitled to the benefits of
Section 1110 with respect to the Replacement Airframe, provided that (i) such
opinion need not be delivered to the extent that the benefits of Section 1110
were not, by reason of a change in law or governmental or judicial
interpretation thereof, available to the Loan Trustee with respect to the
Aircraft immediately prior to such substitution and (ii) such opinion may
contain qualifications and assumptions of the tenor contained in the opinion of
the Company's counsel delivered pursuant to Section 3.01 of the Participation
Agreement on the Closing Date and such other qualifications and assumptions as
shall at the time be customary in opinions rendered in comparable circumstances.
In the case of each Replacement Airframe or Replacement Airframe and
one or more Replacement Engines subjected to the Lien of this Indenture under
this Section 7.05(a), promptly upon the recordation of the Indenture Supplement
covering such
50
Replacement Airframe and Replacement Engines, if any, pursuant to the
Transportation Code (or pursuant to the applicable law of such other
jurisdiction in which such Replacement Airframe and Replacement Engines, if any,
are registered), the Company will cause to be delivered to the Loan Trustee a
favorable opinion of the Company's counsel (which may be the Company's General
Counsel or such other internal counsel to the Company as shall be reasonably
satisfactory to the Loan Trustee) addressed to the Loan Trustee as to the due
registration of such Replacement Aircraft and the due recordation of such
Indenture Supplement or such other requisite documents or instruments and the
validity and perfection of the security interest in the Replacement Aircraft
granted to the Loan Trustee under this Indenture.
For all purposes hereof, upon the attachment of the Lien of this
Indenture thereto, the Replacement Aircraft and Replacement Engines, if any,
shall become part of the Collateral, the Replacement Airframe shall be deemed an
"Airframe" as defined herein, and each such Replacement Engine shall be deemed
an "Engine" as defined herein. Upon compliance with clauses (A) through (F) of
the second preceding paragraph, the Loan Trustee shall execute and deliver to
the Company an appropriate instrument releasing such replaced Airframe and
Engines (if any) installed thereon at the time such Event of Loss occurred, all
proceeds (including, without limitation, insurance proceeds), the Warranty
Rights in respect of such replaced Airframe and Engines (if any) and all rights
relating to the foregoing, from the Lien of this Indenture and assigning to the
Company all claims against third Persons for damage to or loss of the Airframe
and Engines arising from the Event of Loss.
In the event that, after an Event of Loss, the Company performs the
option set forth in clause (ii) of the first paragraph of this Section 7.05(a),
the Loan Trustee shall execute and deliver to the Company an appropriate
instrument releasing the Aircraft, all proceeds (including, without limitation,
insurance proceeds), the Warranty Rights in respect of the Aircraft and all
rights relating to the foregoing from the Lien of this Indenture and assigning
to the Company all claims against third Persons for damage to or loss of the
Aircraft arising from the Event of Loss.
(b) Event of Loss with Respect to an Engine. 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 Company shall
give the Loan Trustee prompt written notice thereof and shall, within 120 days
after the occurrence of such Event of Loss, cause to be subjected to the Lien of
this Indenture, as replacement for the Engine with respect to which such Event
of Loss occurred, a Replacement Engine free and clear of all Liens (other than
Permitted Liens).
Prior to or at the time of any replacement under this Section 7.05(b),
the Company will (i) cause an Indenture Supplement covering such Replacement
Engine to be delivered to the Loan Trustee for execution and, upon such
execution, to be filed for
51
recordation pursuant to the Transportation Code or the applicable laws of any
other jurisdiction in which the Aircraft may be registered, (ii) cause a
financing statement or statements with respect to such Replacement Engine or
other requisite documents or instruments to be filed in such place or places as
necessary in order to perfect the Loan Trustee's interest therein in the United
States, or in such other jurisdiction in which the Engine may then be
registered, (iii) furnish the Loan Trustee with an opinion of the Company's
counsel (which may be the Company's General Counsel or such other internal
counsel to the Company as shall be reasonably satisfactory to the Loan Trustee)
addressed to the Loan Trustee to the effect that, upon such replacement, the
Replacement Engine will be subject to the Lien of this Indenture, (iv) furnish
the Loan Trustee with a certificate of an aircraft engineer or appraiser (who
may be an employee of the Company) certifying that such Replacement Engine has a
value and utility at least equal to the Engine so replaced assuming such Engine
was in the condition and repair required by the terms hereof immediately prior
to the occurrence of such Event of Loss and (v) furnish the Loan Trustee with
evidence of compliance with the insurance provisions of Section 7.06 with
respect to such Replacement Engine. In the case of each Replacement Engine
subjected to the Lien of this Indenture under this Section 7.05(b), promptly
upon the recordation of the Indenture Supplement covering such Replacement
Engine pursuant to the Transportation Code (or pursuant to the applicable law of
such other jurisdiction in which the Aircraft is registered), the Company will
cause to be delivered to the Loan Trustee an opinion of counsel to the Company
(which may be the Company's General Counsel or such other internal counsel of
the Company as shall be reasonably satisfactory to the Loan Trustee) addressed
to the Loan Trustee as to the due recordation of such Indenture Supplement or
such other requisite documents or instruments and the validity and perfection of
the security interest in the Replacement Engine granted to the Loan Trustee
under this Indenture. For all purposes hereof, upon the attachment of the Lien
of this Indenture thereto, the Replacement Engine shall become part of the
Collateral and shall be deemed an "Engine" as defined herein. Upon compliance
with clauses (i) through (v) of this paragraph, the Loan Trustee shall execute
and deliver to the Company an appropriate instrument releasing such replaced
Engine, any proceeds (including, without limitation, insurance proceeds), the
Warranty Rights in respect of such replaced Engine and all rights relating to
any of the foregoing from the Lien of this Indenture and assigning to the
Company all claims against third Persons for damage to or loss of such Engine
arising from the Event of Loss.
(c) Application of Payments for Event of Loss from Requisition of Title
or Use. Any payments (other than insurance proceeds the application of which is
provided for in Section 7.06) received at any time by the Company or by the Loan
Trustee from any government or other Person with respect to an Event of Loss to
the Airframe or any Engine, will be applied as follows:
(i) if such payments are received with respect to the Airframe
or the Airframe and the Engines installed on the Airframe that has been
or is being
52
replaced by the Company pursuant to Section 7.05(a), such payments
shall be paid over to, or retained by, the Loan Trustee and upon
completion of such replacement shall be paid over to, or retained by,
the Company;
(ii) if such payments are received with respect to the
Airframe or the Airframe and the Engines installed on the Airframe that
has not been and will not be replaced pursuant to Section 7.05(a), so
much of such payments remaining after reimbursement of the Loan Trustee
for costs and expenses that shall not exceed the amounts required to be
paid to the Noteholders pursuant to Section 2.10 shall be applied in
reduction of the Company's obligation to pay such amounts, if not
already paid by the Company, or, if already paid by the Company, shall
be applied to reimburse the Company for its payment of such amount and
the balance, if any, of such payment remaining thereafter will be paid
over to, or retained by, the Company; and
(iii) if such payments are received with respect to an Engine
with regard to which an Event of Loss has occurred as contemplated by
Section 7.05(b), so much of such payments remaining after reimbursement
of the Loan Trustee for costs and expenses shall be paid over to, or
retained by, the Company; provided that the Company shall have fully
performed the terms of Section 7.05(b) with respect to the Event of
Loss for which such payments are made.
(d) Requisition for Use by the Government of the Airframe and the
Engines Installed Thereon. In the event of the requisition for use by any
government, including, without limitation, pursuant to the CRAF Program, of the
Airframe and the Engines or engines installed on the Airframe that does not
constitute an Event of Loss, all of the Company's rights and obligations under
this Indenture with respect to the Airframe and such Engines shall continue to
the same extent as if such requisition had not occurred; provided that,
notwithstanding the foregoing, the Company's obligations other than payment
obligations shall only continue to the extent feasible. All payments received by
the Company or the Loan Trustee from such government for such use of the
Airframe and Engines or engines shall be paid over to, or retained by, the
Company.
(e) Requisition for Use by the Government of an Engine not Installed on
the Airframe. In the event of the requisition for use by any government of any
Engine not then installed on the Airframe, the Company will replace such Engine
by complying with the terms of Section 7.05(b) to the same extent as if an Event
of Loss had occurred with respect to such Engine. Upon such replacement, any
payments received by the Company or the Loan Trustee from such government with
respect to such requisition shall be paid over to, or retained by, the Company.
(f) Application of Payments During Existence of Event of Default. Any
amount referred to in Section 7.05 that is payable to or retainable by the
Company shall
53
not be paid to or retained by the Company if at the time of such payment or
retention an Event of Default or Payment Default shall have occurred and be
continuing, but shall be held by or paid over to the Loan Trustee as security
for the obligations of the Company under this Indenture. At such time as there
shall not be continuing any such Event of Default or Payment Default, such
amount shall be paid to the Company.
Section 7.06. Insurance.
(a) Aircraft Liability Insurance.
(i) Except as provided in clause (ii) of this subsection (a), and
subject to the rights of the Company to establish and maintain self-insurance in
the manner and to the extent specified in Section 7.06(c), the Company will
carry, or cause to be carried, at no expense to the Loan Trustee, aircraft
liability insurance (including, but not limited to, bodily injury, personal
injury and property damage liability, exclusive of manufacturer's product
liability insurance) and contractual liability insurance with respect to the
Aircraft (A) in amounts that are not less than the aircraft liability insurance
applicable to similar aircraft and engines in the Company's fleet on which the
Company carries insurance; provided that such liability insurance shall not be
less than the amount certified in the insurance report delivered to the Loan
Trustee on the Closing Date, (B) of the type usually carried by corporations
engaged in the same or similar business, similarly situated with the Company and
owning or operating similar aircraft and engines and covering risks of the kind
customarily insured against by the Company, and (C) that is maintained in effect
with insurers of recognized responsibility. Any policies of insurance carried in
accordance with this Section 7.06(a) and any policies taken out in substitution
or replacement for any of such policies shall (A) name the Loan Trustee, the
Subordination Agent, each Pass Through Trustee and the Liquidity Provider as
their Interests (as defined below in this Section 7.06) may appear, as
additional insured (the "Additional Insureds"), (B) subject to the condition of
clause (C) below, provide that, in respect of the interest of the Additional
Insureds in such policies, the insurance shall not be invalidated by any action
or inaction of the Company and shall insure the Additional Insureds' Interests
as they appear, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Company, (C) provide
that, if such insurance is canceled for any reason whatever, or if any change is
made in the policy that materially reduces the amount of insurance or the
coverage certified in the insurance report delivered on the Closing Date to the
Loan Trustee and the Liquidity Provider, 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 30 days (seven days, or such other
period as is customarily available in the industry, in the case of any war risk
or allied perils coverage) after receipt by such Additional Insured of written
notice from such insurers of such cancellation, change or lapse, (D) provide
that the Additional Insureds shall have no obligation or liability for premiums,
commissions, assessments or calls in connection with such insurance, (E) provide
that the insurers shall
54
waive any rights of (1) set-off, counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of the Additional Insureds
to the extent of any moneys due to the Additional Insureds and (2) subrogation
against the Additional Insureds to the extent that the Company has waived its
rights by its agreements to indemnify the Additional Insureds pursuant to the
Operative Documents, (F) be primary without right of contribution from any other
insurance that may be carried by each Additional Insured with respect to its
interests as such in the Aircraft and (G) expressly provide that all of the
provisions thereof, except the limits of liability, shall operate in the same
manner as if there were a separate policy covering each insured. "Interests" as
used in this Section 7.06(a) and in Section 7.06(b) with respect to any Person
means the interests of such Person in the transactions contemplated by the
Operative Documents. In the case of a lease or contract with any government in
respect of the Aircraft or any Engine, or in the case of any requisition for use
of the Aircraft or any Engine by any government, a valid agreement by such
government to indemnify the Company, or an insurance policy issued by such
government, against any of the risks that the Company is required hereunder to
insure against shall be considered adequate insurance for purposes of this
Section 7.06(a) to the extent of the risks (and in the amounts) that are the
subject of such indemnification or insurance.
(ii) During any period that the Airframe or an Engine, as the case may
be, is on the ground and not in operation, the Company may carry or cause to be
carried as to such non-operating Airframe or Engine, in lieu of the insurance
required by clause (i) above, and subject to self-insurance to the extent
permitted by Subsection 7.06(c), insurance otherwise conforming with the
provisions of said clause (i) except that: (A) the amounts of coverage shall not
be required to exceed the amounts of airline liability insurance from time to
time applicable to airframes or engines owned or leased by the Company of the
same type as such non-operating Airframe or Engine and that are on the ground
and not in operation and (B) the scope of the risks covered and the type of
insurance shall be the same as from time to time shall be applicable to
airframes or engines owned or leased by the Company of the same type as such
non-operating Airframe or Engine and that are on the ground and not in
operation.
(b) Insurance Against Loss or Damage to Aircraft.
(i) Except as provided in clause (ii) of this subsection (b), and
subject to the rights of the Company to establish and maintain self-insurance in
the manner and to the extent specified in Section 7.06(c), the Company shall
maintain, or cause to be maintained, in effect with insurers of recognized
responsibility, at no expense to the Loan Trustee, all-risk aircraft hull
insurance covering the Aircraft and all-risk coverage with respect to any
Engines or Parts while removed from the Aircraft (including, without limitation,
war risk insurance if and to the extent the same is maintained by the Company or
any Permitted Lessee with respect to other aircraft owned or operated by the
Company or such Permitted Lessee, as the case may be, on the same routes) that
is of the type and
55
in substantially the amount usually carried by corporations engaged in the same
or similar business and similarly situated with the Company; provided that (A)
such insurance (including the permitted self-insurance) shall at all times while
the Aircraft is subject to this Indenture be for an amount not less than 110% of
the aggregate outstanding principal amount of the Equipment Notes from time to
time, (B) such insurance need not cover an Engine while attached to an airframe
not owned, leased or operated by the Company and (C) such insurance covering
Engines and Parts removed from an Airframe or an airframe or (in the case of
Parts) an Engine need be obtained only to the extent available at reasonable
cost (as reasonably determined by the Company). Any policies carried in
accordance with this Section 7.06(b) and any policies taken out in substitution
or replacement for any such policies shall (A) provide that any insurance
proceeds up to an amount equal to the outstanding principal amount of the
Equipment Notes, together with accrued but unpaid interest thereon, plus an
amount equal to the interest that would accrue on the outstanding principal
amount of the Equipment Notes at the Debt Rate in effect on the date of payment
of such insurance proceeds to the Loan Trustee (as provided for in this
sentence) during the period commencing on the day following the date of such
payment to the Loan Trustee and ending on the Loss Payment Date (the "Loan
Amount"), payable for any loss or damage constituting an Event of Loss with
respect to the Aircraft and any insurance proceeds in excess of the amount set
forth on Exhibit C up to the amount of the Loan Amount for any loss or damage to
the Aircraft (or Engines) not constituting an Event of Loss with respect to the
Aircraft (or Engines), shall be paid to the Loan Trustee as long as the
Indenture shall not have been discharged, and that all other amounts shall be
payable to the Company, unless the insurer shall have received notice that an
Event of Default exists, in which case all insurance proceeds for any loss or
damage to the Aircraft (or Engines) up to the Loan Amount shall be payable to
the Loan Trustee, (B) subject to the conditions of clause (C) below, provide
that, in respect of the interests of the Additional Insureds in such policies,
the insurance shall not be invalidated by any action or inaction of the Company
and shall insure the Additional Insureds' Interests as they appear, regardless
of any breach or violation of any warranty, declaration or condition contained
in such policies by the Company, (C) provide that if such insurance is canceled
for any reason whatsoever, or if any change is made in the policy that
materially reduces the amount of insurance or the coverage certified in the
insurance report delivered on the Closing Date to the Loan Trustee and the
Liquidity Provider or if such insurance is allowed to lapse for nonpayment of
premium, such cancellation, change or lapse shall not be effective as to the
Additional Insureds for 30 days (seven days, or such other period as is
customarily available in the industry, in the case of war risk or allied perils
coverage) after receipt by the Additional Insureds of written notice from such
insurers of such cancellation, change or lapse, (D) provide that the Additional
Insureds shall have no obligation or liability for premiums, commissions,
assessments or calls in connection with such insurance, (E) provide that the
insurers shall waive rights of (1) setoff, counterclaim or any other deduction,
whether by attachment or otherwise, in respect of any liability of the
Additional Insureds to the extent of any moneys due to the Additional Insureds
and (2) subrogation against the Additional
56
Insureds to the extent the Company has waived its rights by its agreement to
indemnify the Additional Insureds pursuant to the Operative Documents and (F) be
primary without right of contribution from any other insurance that may be
carried by any Additional Insured with respect to its Interests as such in the
Aircraft. In the case of a lease or contract with any government in respect of
the Aircraft or any Engine, or in the case of any requisition for use of the
Aircraft or any Engine by any government, a valid agreement by such government
to indemnify the Company, or an insurance policy issued by such government,
against any risks which the Company is required hereunder to insure against
shall be considered adequate insurance for purposes of this Section 7.06(b) to
the extent of the risks (and in the amounts) that are the subject of such
indemnification or insurance.
(ii) During any period that the Airframe or an Engine is on the ground
and not in operation, the Company may carry or cause to be carried as to such
non-operating Airframe or Engine, in lieu of the insurance required by clause
(i) above, and subject to self-insurance to the extent permitted by Subsection
7.06(c), insurance otherwise conforming with the provisions of said clause (i)
except that the scope of the risks covered and the type of insurance shall be
the same as from time to time applicable to airframes and engines owned or
leased by the Company (or, if a lease is then in effect, by the Permitted
Lessee) of the same type as such non-operating Airframe or Engine and that are
on the ground and not in operation; provided that, subject to self-insurance to
the extent permitted by Subsection 7.06(c), the Company shall maintain insurance
against risk of loss or damage to such non-operating Airframe or Engine in an
amount at least equal to 110% of the aggregate outstanding principal amount of
the Equipment Notes during such period that such Airframe or Engine is on the
ground and not in operation.
(c) Self-Insurance. The Company may from time-to-time self-insure, by
way of deductible, self-insured retention, premium adjustment or franchise or
otherwise (including, with respect to insurance maintained pursuant to
Subsections 7.06(a) or 7.06(b), insuring for a maximum amount that is less than
the amounts set forth in Sections 7.06(a) and 7.06(b)), the risks required to be
insured against pursuant to Sections 7.06(a) and 7.06(b), but in no case shall
the self-insurance with respect to all of the aircraft and engines in the
Company's fleet (including, without limitation, the Aircraft) exceed for any
12-month policy year 1% of the average aggregate insurable value (for the
preceding policy year) of all aircraft (including, without limitation, the
Aircraft) on which the Company carries insurance, unless an insurance broker of
national standing shall certify that the standard among all other major United
States airlines is a higher level of self-insurance, in which case the Company
may self-insure the Aircraft to such higher level. In addition to the foregoing
right to self-insure, the Company may self-insure to the extent of (1) any
deductible per occurrence that, in the case of the Aircraft, is not in excess of
the amount customarily allowed as a deductible in the industry or is required to
facilitate claims handling or (2) any applicable mandatory minimum per aircraft
(or if
57
applicable per annum or other period) hull or liability insurance deductibles
imposed by the aircraft or hull liability insurers.
(d) Application of Insurance Payments. All losses will be adjusted by
the Company with the insurers. As between the Loan Trustee and the Company it is
agreed that all insurance payments received under policies required to be
maintained by the Company hereunder, exclusive of any payments received in
excess of the Loan Amount for the Aircraft from such policies, 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 payments are received with respect to the Airframe
or the Airframe and any Engines installed on the Airframe that has been
or is being replaced by the Company pursuant to Section 7.05(a), such
payments shall be paid over to, or retained by, the Loan Trustee and
upon completion of such replacement shall be paid over to, or retained
by, the Company.
(ii) if such payments are received with respect to the
Airframe or the Airframe and any Engines installed on the Airframe that
has not been and will not be replaced as contemplated by Section
7.05(a), so much of such payments remaining after reimbursement of the
Loan Trustee for its costs and expenses as shall not exceed the amounts
required to be paid by the Company pursuant to Section 2.10 shall be
applied in reduction of the Company's obligation to pay such amounts,
if not already paid by the Company, or, if already paid by the Company,
shall be applied to reimburse the Company for its payment of such
amounts and the balance, if any, of such payment remaining thereafter
will be paid over to, or retained by, the Company; and
(iii) if such payments are received with respect to an Engine
with regard to which an Event of Loss contemplated by Section 7.05(b)
has occurred, so much of such payments remaining after reimbursement of
the Loan Trustee for its costs and expenses shall be paid over to, or
retained by, the Company; provided that the Company shall have fully
performed the terms of Section 7.05(b) with respect to the Event of
Loss for which such payments are made.
In all events, the insurance payment of any property damage loss
received under policies maintained by the Company in excess of the Loan Amount
for the Aircraft shall be paid to the Company.
The insurance payments for any loss or damage to the Airframe or an
Engine not constituting an Event of Loss with respect to the Airframe or such
Engine will be applied in payment (or to reimburse the Company) for repairs or
for replacement property in accordance with the terms of Sections 7.02 and 7.04,
and any balance remaining after compliance with such Sections with respect to
such loss or damage shall be paid to the
58
Company. Any amount referred to in the preceding sentence or in clause (i), (ii)
or (iii) of the second preceding paragraph that is payable to the Company shall
not be paid to the Company (or, if it has been previously paid directly to the
Company, shall not be retained by the Company) if at the time of such payment an
Event of Default or Payment Default shall have occurred and be continuing, but
shall be paid to and held by the Loan Trustee as security for the obligations of
the Company under this Indenture, and at such time as there shall not be
continuing any such Event of Default or Payment Default, such amount shall, to
the extent not theretofore applied as provided herein, be paid to the Company.
(e) Reports, Etc. On or before the Closing Date and annually upon
renewal of the Company's insurance coverage, the Company will furnish to the
Loan Trustee and the Liquidity Provider a report signed by a firm of independent
aircraft insurance brokers appointed by the Company (which brokers may be in the
regular employ of the Company), stating the opinion of such firm that the
insurance then carried and maintained on the Aircraft complies with the terms
hereof; provided that all information contained in such report shall be
Confidential Information and shall be treated by the Loan Trustee and the
Liquidity Provider and each of their affiliates and officers, directors, agents
and employees in accordance with the provisions of Section 10.16. The Company
will cause such firm to advise the Loan Trustee and the Liquidity Provider in
writing of any act or omission on the part of the Company of which such firm has
knowledge that might invalidate or render unenforceable, in whole or in part,
any insurance on the Aircraft. The Company will also cause such firm to advise
the Loan Trustee and the Liquidity Provider in writing as promptly as
practicable after such firm acquires knowledge that an interruption of any
insurance carried and maintained on the Aircraft pursuant to this Section 7.06
will occur. Such information may only be provided to other Persons in accordance
with Section 10.16.
(f) Salvage Rights; Other. All salvage rights to the Airframe and each
Engine shall remain with the Company's insurers at all times, and any insurance
policies of the Loan Trustee insuring the Airframe or any Engine shall provide
for a release to the Company of any and all salvage rights in and to the
Airframe or any Engine. Neither the Loan Trustee nor any Noteholder may,
directly or indirectly, obtain insurance for its own account with respect to the
Airframe or any Engine if such insurance would limit or otherwise adversely
affect the coverage or amounts payable under, or increase the premiums for, any
insurance required to be maintained pursuant to this Section 7.06 or any other
insurance maintained with respect to the Aircraft of any other aircraft in the
Company's fleet.
59
ARTICLE VIII
SUCCESSOR AND ADDITIONAL TRUSTEES
Section 8.01. Resignation or Removal; Appointment of Successor.
(a) The resignation or removal of the Loan Trustee and the appointment
of a successor Loan Trustee shall become effective only upon the successor Loan
Trustee's acceptance of appointment as provided in this Section 8.01. The Loan
Trustee or any successor thereto must resign if at any time it ceases to be
eligible in accordance with the provisions of Section 8.01(c) and may resign at
any time without cause by giving at least 60 days' prior written notice to the
Company and each Noteholder. In addition, either the Company (so long as no
Event of Default or Payment Default shall have occurred and be continuing) or a
Majority in Interest of Noteholders (but only with the consent of the Company so
long as no Event of Default or Payment Default shall have occurred and be
continuing), may at any time remove the Loan Trustee without cause by an
instrument in writing delivered to the Loan Trustee and each Noteholder, and, in
case of a removal by a Majority in Interest of Noteholders, to the Company.
In the case of the resignation or removal of the Loan Trustee, the
Company shall promptly appoint a successor Loan Trustee. If a successor Loan
Trustee shall not have been appointed within 60 days after such notice of
resignation or removal, the Loan Trustee, the Company or any Noteholder may
apply to any court of competent jurisdiction to appoint a successor Loan Trustee
to act until such time, if any, as a successor shall have been appointed as
above provided. The successor Loan Trustee so appointed by such court shall
immediately and without further act be superseded by any successor Loan Trustee
appointed as above provided.
(b) Any successor Loan Trustee, however appointed, shall execute and
deliver to the predecessor Loan Trustee and the Company an instrument accepting
such appointment and assuming the obligations of the Loan Trustee arising from
and after the time of such appointment, and thereupon such successor Loan
Trustee, without further act, shall become vested with all the estates,
properties, rights, powers and duties of the predecessor Loan Trustee hereunder
in the trust hereunder applicable to it with like effect as if originally named
the Loan Trustee herein; but nevertheless upon the written request of such
successor Loan Trustee, such predecessor Loan Trustee shall execute and deliver
an instrument transferring to such successor Loan Trustee all the estates,
properties, rights and powers of such predecessor Loan Trustee, and such
predecessor Loan Trustee shall duly assign, transfer, deliver and pay over to
such successor Loan Trustee all monies or other property and all other books and
records, or true, correct and complete copies thereof, then held by such
predecessor Loan Trustee hereunder.
60
(c) This Indenture shall at all times have a Loan Trustee, however
appointed, that is a Citizen of the United States (without the use of a voting
trust) and a bank or trust company having a combined capital and surplus of at
least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and
the obligations of which, whether now in existence or hereafter incurred, are
fully and unconditionally guaranteed by a corporation organized and doing
business under the laws of the United States or any state or territory thereof
or the District of Columbia and having a combined capital and surplus of at
least $75,000,000) or a corporation with a net worth of at least $75,000,000, if
there be such an institution willing, able and legally qualified to perform the
duties of the Loan Trustee hereunder upon reasonable or customary terms. If such
bank, trust company or corporation publishes reports of conditions at least
annually, pursuant to law or to the requirements of federal, state, territorial
or District of Columbia supervising or examining authority, then for the
purposes of this Section 8.01(c) the combined capital and surplus of such bank,
trust company or corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of conditions so published. In
case at any time the Loan Trustee shall cease to be eligible in accordance with
the provisions of this Section 8.01(c), the Loan Trustee shall resign
immediately in the manner and with the effect specified in Section 8.01(a).
(d) Any corporation into which the Loan 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 Loan Trustee shall be
a party, or any corporation to which substantially all the corporate trust
business of the Loan Trustee may be transferred, shall, subject to the terms of
Section 8.01(c), be a successor Loan Trustee under this Indenture without
further act.
Section 8.02. Appointment of Additional and Separate Trustees.
(a) Whenever (i) the Loan Trustee shall deem it necessary or desirable
in order to conform to any law of any jurisdiction in which all or any part of
the Collateral shall be situated or to make any claim or bring any suit with
respect to or in connection with the Collateral, any Operative Document or any
of the transactions contemplated by the Operative Documents, (ii) the Loan
Trustee shall be advised by counsel satisfactory to it that it is necessary or
prudent in the interests of the Noteholders (and the Loan Trustee shall so
advise the Company) or (iii) the Loan Trustee shall have been requested to do so
by a Majority in Interest of Noteholders, then in any such case, the Loan
Trustee and, upon the written request of the Loan Trustee, the Company, shall
execute and deliver an indenture supplemental hereto and such other instruments
as may from time to time be necessary or advisable either (1) to constitute one
or more banks or trust companies or corporations meeting the requirements of
Section 8.01(c) and approved by the Loan Trustee, either to act jointly with the
Loan Trustee as additional trustee or trustees of all or any part of the
Collateral or to act as separate trustee or trustees of all or any part of the
Collateral, in each case with such rights, powers, duties and obligations
61
consistent with this Indenture as may be provided in such supplemental indenture
or other instruments as the Loan Trustee or a Majority in Interest of
Noteholders may deem necessary or advisable, or (2) to clarify, add to or
subtract from the rights, powers, duties and obligations theretofore granted any
such additional or separate trustee, subject in each case to the remaining
provisions of this Section 8.02. If no Event of Default has occurred and is
continuing, no additional or supplemental trustee shall be appointed without the
Company's consent. If an Event of Default shall have occurred and be continuing,
the Loan Trustee may act under the foregoing provisions of this Section 8.02(a)
without the concurrence of the Company, and the Company hereby irrevocably
appoints (which appointment is coupled with an interest) the Loan Trustee as its
agent and attorney-in-fact to act for it under the foregoing provisions of this
Section 8.02(a). The Loan Trustee may, in such capacity, execute, deliver and
perform any such supplemental indenture, or any such instrument, as may be
required for the appointment of any such additional or separate trustee or for
the clarification of, addition to or subtraction from the rights, powers, duties
or obligations theretofore granted to any such additional or separate trustee,
subject in each case to the remaining provisions of this Section 8.02. In case
any additional or separate trustee appointed under this Section 8.02(a) shall
become incapable of acting, resign or be removed, all the assets, property,
rights, powers, trusts, duties and obligations of such additional or separate
trustee shall revert to the Loan Trustee until a successor additional or
separate trustee is appointed as provided in this Section 8.02(a).
(b) No additional or separate trustee shall be entitled to exercise any
of the rights, powers, duties and obligations conferred upon the Loan Trustee in
respect of the custody, investment and payment of monies and all monies received
by any such additional or separate trustee from or constituting part of the
Collateral or otherwise payable under any Operative Documents to the Loan
Trustee shall be promptly paid over by it to the Loan Trustee. All other rights,
powers, duties and obligations conferred or imposed upon any additional or
separate trustee shall be exercised or performed by the Loan Trustee and such
additional or separate trustee jointly except to the extent that applicable law
of any jurisdiction in which any particular act is to be performed renders the
Loan Trustee incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations (including the holding of title to all or
part of the Collateral in any such jurisdiction) shall be exercised and
performed by such additional or separate trustee. No additional or separate
trustee shall take any discretionary action except on the instructions of the
Loan Trustee or a Majority in Interest of Noteholders. No trustee hereunder
shall be personally liable by reason of any act or omission of any other trustee
hereunder, except that the Loan Trustee shall be liable for the consequences of
its lack of reasonable care in selecting, and the Loan Trustee's own actions in
acting with, any additional or separate trustee. Each additional or separate
trustee appointed pursuant to this Section 8.02 shall be subject to, and shall
have the benefit of Articles IV, V, VI, VIII, IX and X hereof insofar as they
apply to the Loan Trustee. The powers of
62
any additional or separate trustee appointed pursuant to this Section 8.02 shall
not in any case exceed those of the Loan Trustee hereunder.
(c) If at any time the Loan Trustee shall deem it no longer necessary
or desirable or in the event that the Loan Trustee shall have been requested to
do so in writing by a Majority in Interest of Noteholders, the Loan Trustee and,
upon the written request of the Loan Trustee, the Company, shall execute and
deliver an indenture supplemental hereto and all other instruments and
agreements necessary or proper to remove any additional or separate trustee. The
Loan Trustee may act on behalf of the Company under this Section 8.02(c) when
and to the extent it could so act under Section 8.02(a) hereof. In any case, the
Company may remove an additional or separate trustee in the manner set forth in
Section 8.01.
ARTICLE IX
AMENDMENTS AND WAIVERS
Section 9.01. Amendments to this Indenture without Consent of Holders.
At any time after the date hereof, the Company and the Loan Trustee may enter
into one or more agreements supplemental hereto without notice to or consent of
any Noteholder for any of the following purposes: (i) to evidence the succession
of another Person to the Company and the assumption by any such successor of the
covenants of the Company contained in any Operative Documents pursuant to
Section 6.02(e) of the Participation Agreement; (ii) to cure any defect or
inconsistency herein or in the Equipment Notes; (iii) to cure any ambiguity or
correct any mistake; (iv) to evidence the succession of a new trustee hereunder
pursuant hereto or the removal of the trustee hereunder or to provide for or
facilitate the appointment of an additional or separate trustee pursuant to
Section 8.02 hereof; (v) to convey, transfer, assign, mortgage or pledge any
property to or with the Loan Trustee; (vi) to make any other provisions or
amendments with respect to matters or questions arising hereunder or under the
Equipment Notes, or to amend, modify or supplement any provision hereof or
thereof, so long as such action shall not adversely affect the interests of the
Noteholders or the Liquidity Provider; (vii) 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 Loan Trustee any property
subject or required to be subject to the Lien of this Indenture or to subject to
the Lien of this Indenture the Airframe or Engines or any Replacement Airframe
or Replacement Engine; (viii) to add to the covenants of the Company for the
benefit of the Noteholders, or to surrender any rights or power herein conferred
upon the Company; (ix) to add to the rights of the Noteholders; (x) to include
on the Equipment Notes any legend as may be required by law or as may otherwise
be necessary or advisable; (xi) to comply with any applicable requirements of
the Trust Indenture Act of 1939, as amended, or any other requirements of
applicable law or of any regulatory body and (xii) to provide for the
63
issuance of Series E Equipment Notes and/or Pass Through Certificates issued by
the Class E Pass Through Trust and to make changes relating thereto, provided
that (A) the Company shall have obtained written confirmation from each Rating
Agency that the issuance of the Series E Equipment Notes would not result in 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 a withdrawal
or suspension of the rating of any class of Pass Through Certificates and (B)
(1) if the Series E Equipment Notes are issued to a Class E Pass Through Trust,
the Pass Through Trustee thereof shall become a party to the Intercreditor
Agreement or (2) if Series E Equipment Notes are issued to any person other than
a Class E Pass Through Trust, the Series E Equipment Notes will be subject to
the provisions of the Intercreditor Agreement that allow the "Controlling Party"
(as defined in the Intercreditor Agreement), during the continuance of an
"Indenture Event of Default" (as defined in the Intercreditor Agreement) to
direct the Loan Trustee in taking action under this Indenture.
Section 9.02. Amendments to this Indenture with Consent of Holders.
(a) With the written consent of a Majority in Interest of Noteholders,
the Company may, and the Loan Trustee shall, subject to Section 9.06, at any
time and from time to time, enter into such supplemental agreements to add any
provisions to or to change or eliminate any provisions of this Indenture or of
any such supplemental agreements or to modify in any manner the rights and
obligations of the Company, the Loan Trustee and of the Noteholders under this
Indenture; provided, however, that without the consent of each Noteholder
affected thereby, an amendment under this Section 9.02 may not:
(1) reduce the principal amount of, Make-Whole Amount, if any,
or interest on, any Equipment Note;
(2) change the date on which any principal amount of,
Make-Whole Amount, if any, or interest on any Equipment Note, is due or
payable;
(3) create any Lien with respect to the Collateral prior to or
pari passu with the Lien thereon under this Indenture except such as
are permitted by this Indenture, or deprive any Noteholder of the
benefit of the Lien on the Collateral created by this Indenture;
(4) reduce the percentage of the outstanding principal amount
of the Equipment Notes the consent of whose holders is required for any
such supplemental agreement, or the consent of whose holders is
required for any waiver of compliance with certain provisions of this
Indenture or of certain defaults hereunder or their consequences
provided for in this Indenture; or
64
(5) make any change in Section 4.05 or this Section 9.02,
except to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of each Noteholder
affected thereby.
(b) It is not necessary under this Section 9.02 for the Noteholders to
consent to the particular form of any proposed supplemental agreement, but it is
sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Company and the Loan Trustee of
any supplemental agreement pursuant to the provisions of this Section 9.02, the
Loan Trustee shall transmit by first-class mail a notice, setting forth in
general terms the substance of such supplemental agreement, to all Noteholders,
as the names and addresses of such Noteholders appear on the Equipment Note
Register. Any failure of the Loan Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental agreement.
Section 9.03. Amendments, Waivers, Etc. of the Participation Agreement.
Without the consent of a Majority in Interest of Noteholders, the respective
parties to the Participation Agreement may not modify, amend or supplement such
agreement, 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, without
the consent of the Loan Trustee or any Noteholder, the Participation Agreement
may be modified, amended or supplemented in order (i) to cure any defect or
inconsistency therein or to cure any ambiguity or correct any mistake, (ii) to
amend, modify or supplement any provision thereof or make any other provision
with respect to matters or questions arising thereunder or under this Indenture,
provided that the making of any such other provision shall not materially
adversely affect the interests of the Noteholders or (iii) to make any other
change, or reflect any other matter, of the kind referred to in clauses (i)
through (xi) of Section 9.01. Notwithstanding the foregoing, without the consent
of the Liquidity Provider, the Company shall not enter into any amendment,
waiver or modification of or supplement or consent to the Participation
Agreement which shall reduce, modify or amend any indemnities in favor of the
Liquidity Provider contained therein.
Section 9.04. Revocation and Effect of Consents. Until an amendment or
waiver becomes effective, a consent to it by a Noteholder is a continuing
consent by the Noteholder and every subsequent Noteholder, even if notation of
the consent is not made on any Equipment Note.
Section 9.05. Notation on or Exchange of Equipment Notes. The Loan
Trustee may place an appropriate notation about an amendment or waiver on any
Equipment
65
Note thereafter executed. The Loan Trustee in exchange for such Equipment Notes
may execute new Equipment Notes that reflect the amendment or waiver.
Section 9.06. Trustee Protected. If, in the reasonable opinion of the
institution acting as Loan Trustee hereunder, any document required to be
executed by it pursuant to the terms of Section 9.01 or 9.02 adversely affects
any right, duty, immunity or indemnity with respect to such institution under
this Indenture, such institution may in its discretion decline to execute such
document.
ARTICLE X
MISCELLANEOUS
Section 10.01. Termination of Indenture.
(a) Upon (or at any time after):
(i) payment in full of the principal amount, Make-Whole
Amount, if any, and interest on and all other amounts due under all
Equipment Notes and provided that there shall then be no other Secured
Obligations due to the Noteholders, the Indenture Indemnitees and the
Loan Trustee hereunder or under the Participation Agreement;
(ii) the 91st day after there has been irrevocably deposited
(except as provided in Section 2.15 or 10.01(d)) with the Loan Trustee
as funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Noteholders, (A) money in an amount, (B)
U.S. Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide (not later than one Business Day before the due date of any
payment referred to below in this paragraph) money in an amount, or (C)
a combination of money and U.S. Government Obligations referred to in
the foregoing clause (B), sufficient, in the opinion of a nationally
recognized firm of independent certified public accountants expressed
in a written certification thereof delivered to the Loan Trustee, to
pay in full the outstanding principal amount of and interest on all the
Equipment Notes on the dates such amounts are due; provided, however,
that
(1) if any Equipment Note will become due more than
one year after the deposit of such funds, (x) the Company has
delivered to the Loan Trustee an officer's certificate and an
opinion of counsel to the effect that there has been a change
in tax law since May 18, 2001 or has been published by the
Internal Revenue Service a ruling to the effect that
Noteholders and the holders of the Pass Through Certificates
will not
66
recognize income, gain or loss for United States Federal
income tax purposes as a result of the exercise by the Company
of its option under this subsection (ii) and will be subject
to United States Federal income tax on the same amounts and in
the same manner and at the same times, as would have been the
case if such option had not been exercised and (y) the Company
shall have obtained written confirmation from each Rating
Agency that the exercise by the Company of its option under
this subsection (ii) would not result in 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 a withdrawal or suspension of the rating of
any class of Pass Through Certificates;
(2) all other amounts then due and payable hereunder
have been paid;
(3) the Company has delivered to the Loan Trustee an
officer's certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to the
satisfaction and discharge of this Indenture contemplated by
this Section 10.01 have been complied with;
(4) such deposit will not result in a breach or
violation of, or constitute an Event of Default under, this
Indenture or a default or event of default under any other
agreement or instrument to which the Company is a party or by
which it is bound; and
(5) no Event of Default set forth in Sections
4.01(f), (g), (h) or (i) shall have occurred and be continuing
on the date of such deposit or at any time during the period
ending on the 91st day after the date of such deposit;
the Company and the Loan Trustee shall be deemed to have been released and
discharged from their respective obligations hereunder and under the Equipment
Notes, and the Loan Trustee shall, upon the written request of the Company,
execute and deliver to, or as directed in writing by, the Company an appropriate
instrument (in due form for recording) releasing the Aircraft and the balance of
the Collateral from the Lien of this Indenture, and, in such event, this
Indenture and the trusts created hereby shall terminate and this Indenture shall
be of no further force or effect; provided, however, that this Indenture and the
trusts created hereby shall earlier terminate and this Indenture shall be of no
further force or effect upon any sale or other final disposition by the Loan
Trustee of all property constituting part of the Collateral and the final
distribution by the Loan Trustee of all monies or other property or proceeds
constituting part of the Collateral in accordance with the terms hereof. Except
as otherwise provided above, this Indenture and the trusts created hereby shall
continue in full force and effect in accordance with the
67
terms hereof. Upon making of the deposit of the defeasance funds as described
above, the right of the Company to cause redemption of the Equipment Notes shall
cease.
(b) Notwithstanding the provisions of Section 10.01(a)(ii), the
obligations of the Loan Trustee contained in Sections 2.01, 2.02, 2.03, 2.04,
2.05, 2.07, 2.08, 2.09, 2.13, 2.15, 2.16, 3.01, 10.01(c) and 10.01(d) of this
Section 10.01, and the other rights, duties, immunities and privileges hereunder
of the Loan Trustee, shall survive.
(c) All monies and U.S. Government Obligations deposited with the Loan
Trustee pursuant to Section 10.01(a)(ii) shall be held in trust and applied by
it, in accordance with the provisions of the Equipment Notes and this Indenture,
to the payment to the Noteholders of all sums due and to become due thereon for
principal and interest, but such money need not be segregated from other funds
except to the extent required by law.
(d) The Loan Trustee shall promptly pay or return to the Company upon
request of the Company any money or U.S. Government Obligations held by it at
any time that are not required for the payment of the amounts described above in
Section 10.01(c) on the Equipment Notes for which money or U.S. Government
Obligations have been deposited pursuant to Section 10.01(a)(ii).
Section 10.02. No Legal Title to Collateral in Noteholders. No
Noteholder shall have legal title to any part of the Collateral. No transfer, by
operation of law or otherwise, of any Equipment Note or other right, title and
interest of any Noteholder in and to the Collateral or hereunder shall operate
to terminate this Indenture or entitle such Noteholder or any successor or
transferee of such holder to an accounting or to the transfer to it of any legal
title to any part of the Collateral.
Section 10.03. Sale of Aircraft by Loan Trustee is Binding. Any sale or
other conveyance of the Aircraft, the Airframe, any Engine or any interest
therein by the Loan Trustee made pursuant to the terms of this Indenture shall
bind the Noteholders and the Company and shall be effective to transfer or
convey all right, title and interest of the Loan Trustee, the Company and such
Noteholders in and to such Aircraft, Airframe, Engine or interest therein. 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
Noteholders.
Section 10.04. Indenture for Benefit of the Company, Loan Trustee and
Noteholders. Nothing in this Indenture, whether express or implied, shall be
construed to give any Person other than the Company, the Loan Trustee, the
Noteholders or the other Indenture Indemnitees any legal or equitable right,
remedy or claim under or in respect of this Indenture.
68
Section 10.05. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents required or permitted under the terms
and provisions of this Indenture shall be in English and in writing, and may be
given by United States mail, courier service or any other customary means of
communication, and any notices shall be effective when delivered (or, if mailed,
three Business Days after deposit, postage prepaid in the first class United
States mail and, if delivered by facsimile, upon completion of transmission and
confirmation by the sender (by a telephone call to a representative of the
recipient or by machine confirmation) that such transmission was received)
addressed as follows:
(i) if to the Company, addressed to:
American Airlines, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
Maildrop 5662
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Loan Trustee, to:
State Street Bank And Trust Company of Connecticut,
National Association
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Square
Hartford, Connecticut 06103
Attention: Corporate Trust Division
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or if to any Noteholder, addressed to such Noteholder at its address set forth
in the Equipment Note Register maintained pursuant to Section 2.07 hereof.
Any party, by notice to the other parties hereto, may designate
additional or different addresses for subsequent notices or communications.
Section 10.06. Severability. Any provision of this Indenture 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.
69
Section 10.07. No Oral Modification or Continuing Waivers. No terms or
provisions of this Indenture or of the Equipment Notes may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Company and the Loan Trustee, in compliance with Article IX. Any waiver of
the terms hereof or of any Equipment Note shall be effective only in the
specific instance and for the specific purpose given.
Section 10.08. Successors and Assigns. All covenants and agreements
contained herein shall bind and inure to the benefit of, and be enforceable by,
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 Noteholder shall bind the successors and permitted
assigns of such Noteholder. Each Noteholder by its acceptance of an Equipment
Note agrees to be bound by this Indenture and all provisions of the
Participation Agreement applicable to a Noteholder.
Section 10.09. 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 10.10. Normal Commercial Relations. Anything contained in this
Indenture to the contrary notwithstanding, the Loan Trustee, any Noteholder or
any other party to any of the Operative Documents or the Pass Through Documents
or any of their affiliates may conduct any banking or other financial
transactions, and have banking or other commercial relationships, with the
Company, 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 Company for any purpose whatsoever, whether related to any of the
transactions contemplated hereby or otherwise.
Section 10.11. Voting by Noteholders. All votes of the Noteholders
shall be governed by a vote of a Majority in Interest of Noteholders, except as
otherwise provided herein.
Section 10.12. Section 1110. It is the intention of the parties hereto
that the security interest created hereby, to the fullest extent available under
applicable law, entitles the Loan Trustee, on behalf of the Noteholders, to all
of the benefits of Section 1110 with respect to the Aircraft.
Section 10.13. The Company's Performance and Rights. Any obligation
imposed on the Company herein shall require only that the Company perform or
cause to be performed such obligation, even if stated as a direct obligation,
and the performance of any such obligation by any permitted assignee, lessee or
transferee under an assignment, lease or transfer agreement then in effect and
in accordance with the provisions of the Operative Documents shall constitute
performance by the Company and, to the extent of
70
such performance, discharge such obligation by the Company. Except as otherwise
expressly provided herein, any right granted to the Company in this Indenture
shall grant the Company the right to permit such right to be exercised by any
such assignee, lessee or transferee. The inclusion of specific references to
obligations or rights of any such assignee, lessee or transferee in certain
provisions of this Indenture shall not in any way prevent or diminish the
application of the provisions of the two sentences immediately preceding with
respect to obligations or rights in respect of which specific reference to any
such assignee, lessee or transferee has not been made in this Indenture.
Section 10.14. Counterparts. This Indenture may be executed in any
number of counterparts (and each of the parties hereto shall not be required to
execute the same counterpart). Each counterpart of this Indenture including a
signature page or pages executed by each of the parties hereto shall be an
original counterpart of this Indenture, but all of such counterparts together
shall constitute one instrument.
Section 10.15. Governing Law. THIS INDENTURE HAS BEEN DELIVERED IN THE
STATE OF
NEW YORK AND THIS INDENTURE, ANY INDENTURE SUPPLEMENT AND THE EQUIPMENT
NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE
OF
NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.16. Confidential Information. The term "Confidential
Information" means: (a) the existence and terms of any lease of the Airframe or
Engines pursuant to Section 7.02(a) and the identity of the Permitted Lessee
thereunder; (b) all information obtained in connection with any inspection
conducted by the Loan Trustee or its representative pursuant to Section 7.03(a);
(c) each certification furnished to the Loan Trustee pursuant to Sections
7.06(a) and 7.06(b); (d) all information contained in each report furnished to
the Loan Trustee pursuant to Section 7.06(e); and (e) all information regarding
the Warranty Rights. All Confidential Information shall be held confidential by
the Loan Trustee and each Noteholder and each affiliate, agent, officer,
director, or employee of any thereof and shall not be furnished or disclosed by
any of them to anyone other than (i) the Loan Trustee or any Noteholder and (ii)
their respective bank examiners, auditors, accountants, agents and legal
counsel, and except as may be required by an order of any court or
administrative agency or by any statute, rule, regulation or order of any
governmental authority.
Section 10.17. Submission to Jurisdiction. Each of the parties hereto,
and by acceptance of Equipment Notes, each Noteholder, to the extent it may do
so under applicable law, for purposes hereof and of all other Operative
Agreements hereby (a) irrevocably submits itself to the non-exclusive
jurisdiction of the courts of the State of
71
New York sitting in the City of
New York and to the non-exclusive jurisdiction
of the United States District Court for the Southern District of New York, for
the purposes of any suit, action or other proceeding arising out of this
Indenture, the subject matter hereof or any of the transactions contemplated
hereby brought by any party or parties hereto or thereto, or their successors or
permitted assigns and (b) waives, and agrees not to assert, by way of motion, as
a defense, or otherwise, in any such suit, action or proceeding, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Indenture or the Equipment
Notes or the subject matter hereof or any of the transactions contemplated
hereby may not be enforced in or by such courts.
72
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereof duly authorized, as of the
date first above written.
AMERICAN AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director - Corporate
Finance and Banking
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
as Loan Trustee
By: /s/ Alison Della Bella
------------------------------------
Name: Alison Della Bella
Title: Assistant Vice President
73
EXHIBIT A to
INDENTURE AND SECURITY AGREEMENT
INDENTURE SUPPLEMENT NO. __
INDENTURE SUPPLEMENT NO. __ , dated _____________, ____ ("Indenture
Supplement"), between AMERICAN AIRLINES, INC. (the "Company") and STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Loan Trustee under the Indenture (each as
hereinafter defined).
WITNESSETH:
WHEREAS, the
Indenture and Security Agreement, dated as of _________,
2001 (the "Indenture"; capitalized terms used herein without definition shall
have the meanings specified therefor in Annex A to the Indenture), between the
Company and State Street Bank and Trust Company of Connecticut, National
Association, as Loan Trustee (the "Loan Trustee"), provides for the execution
and delivery of supplements thereto substantially in the form hereof which shall
particularly describe the Aircraft, and shall specifically grant a security
interest in the Aircraft to the Loan Trustee; and
[WHEREAS, the Indenture relates to the Airframe and Engines described
in Annex A attached hereto and made a part hereof, and a counterpart of the
Indenture is attached to and made a part of this Indenture Supplement;](11)
[WHEREAS, the Company has, as provided in the Indenture, heretofore
executed and delivered to the Loan Trustee Indenture Supplement(s) for the
purpose of specifically subjecting to the Lien of the Indenture certain
airframes and/or engines therein described, which Indenture Supplement(s) is/are
dated and has/have been duly recorded with the FAA as set forth below, to wit:
Date Recordation Date FAA Document Number](12)
---- ---------------- -------------------
NOW, THEREFORE, to secure the prompt and complete payment (whether at
stated maturity, by acceleration or otherwise) of principal of, Make-Whole
Amount, if any, and interest on, the Equipment Notes and all other amounts
payable by the Company under the Operative Documents and the performance and
observance by the Company of all the agreements and covenants to be performed or
observed by the Company for the
----------
(11) Use for Indenture Supplement No. 1 only.
(12) Use for all Indenture Supplements other than Indenture Supplement
No. 1.
benefit of the Noteholders and the Indenture Indemnitees contained in the
Operative Documents, and in consideration of the premises and of the covenants
contained in the Operative Documents, and for other good and valuable
consideration given by the Loan Trustee, the Noteholders and the Indenture
Indemnitees to the Company at or before the Closing Date, the receipt of which
is hereby acknowledged, the Company does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge and confirm unto the Loan Trustee and its
successors in trust and permitted assigns, for the security and benefit of the
Loan Trustee, the Noteholders and the Indenture Indemnitees, a first priority
security interest in, and mortgage lien on, all estate, right, title and
interest of the Company in, to and under the Aircraft, including the Airframe
and Engines described in Annex A attached hereto, whether or not any such Engine
may from time to time be installed on the Airframe or any other airframe or any
other aircraft, and any and all Parts relating thereto, and, to the extent
provided in the Indenture, all substitutions and replacements of, and additions,
improvements, accessions and accumulations to, the Aircraft, including the
Airframe, the Engines and any and all Parts (in each case other than any
substitutions, replacements, additions, improvements, accessions and
accumulations that constitute items excluded from the definition of Parts by
clauses (b), (c) and (d) thereof) relating thereto;
To have and to hold all and singular the aforesaid property unto the
Loan Trustee, and its successors and assigns, in trust for the ratable benefit
and security of the Noteholders and the Indenture Indemnitees, except as
otherwise provided in the Indenture, including Section 2.13 and Article III of
the Indenture, without any preference, distinction or priority of any one
Equipment Note over any other by reason of priority of time of issue, sale,
negotiation, date of maturity thereof or otherwise for any reason whatsoever,
and for the uses and purposes and subject to the terms and provisions set forth
in the Indenture.
This Indenture 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 INDENTURE SUPPLEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND 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,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the undersigned have caused this Indenture
Supplement No. __ to be duly executed by their respective duly authorized
officers, on the date first above written.
AMERICAN AIRLINES, INC.
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
as Loan Trustee
By:
------------------------------------
Name:
Title:
Annex A to
Indenture Supplement No. __
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
Manufacturer's
Manufacturer Model FAA Registration No. Serial No.
------------ ----------- -------------------- --------------
ENGINES
Manufacturer Model Manufacturer's Serial No.
------------ ----------- -------------------------
Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.
EXHIBIT B to
INDENTURE AND SECURITY AGREEMENT
LIST OF PERMITTED COUNTRIES
Argentina Kuwait
Australia Liechtenstein
Austria Luxembourg
Bahamas Malaysia
Barbados Malta
Belgium Mexico
Bermuda Islands Monaco
Brazil Morocco
British Virgin Islands the Netherlands
Canada Netherlands Antilles
Cayman Islands New Zealand
Chile Norway
Czech Republic Paraguay
Denmark Peoples' Republic of China
Ecuador Philippines
Egypt Poland
Finland Portugal
France Republic of China (Taiwan)
Germany Singapore
Greece South Africa
Grenada South Korea
Guatemala Spain
Hong Kong Sweden
Hungary Switzerland
Iceland Thailand
India Trinidad and Tobago
Indonesia United Kingdom
Ireland Uruguay
Italy Venezuela
Jamaica
Japan
EXHIBIT C to
INDENTURE AND SECURITY AGREEMENT
AIRCRAFT TYPE VALUES FOR SECTION 7.06(b)
SCHEDULE I to
INDENTURE AND SECURITY AGREEMENT
DESCRIPTION OF EQUIPMENT NOTES
Original Principal
Amount Interest Rate Maturity Date
------------------ ------------- -----------------
Series A-1 Equipment Notes: 12,936,238.69 6.977% November 23, 2010
Series A-2 Equipment Notes: 42,043,187.27 6.817% May 23, 2011
Series B 22,790,186.21 7.377% May 23, 2011
Equipment Notes:
Series C 12,414,909.34 7.379% November 23, 2010
Equipment Notes:
N788AN
EQUIPMENT NOTES AMORTIZATION
SERIES A-1 EQUIPMENT NOTES
PAYMENT DATE PRINCIPAL AMOUNT PAYABLE
------------ ------------------------
November 23, 2001 3,148,482.68
May 23, 2002 459,768.73
November 23, 2002 469,948.11
May 23, 2003 480,127.49
November 23, 2003 490,306.87
May 23, 2004 500,486.25
November 23, 2004 510,665.64
May 23, 2005 520,845.02
November 23, 2005 531,024.40
May 23, 2006 541,203.78
November 23, 2006 551,383.16
May 23, 2007 561,562.54
November 23, 2007 571,741.92
May 23, 2008 581,921.31
November 23, 2008 592,100.69
May 23, 2009 849,978.35
November 23, 2009 607,369.76
May 23, 2010 187,667.44
November 23, 2010 779,654.55
2
N788AN
EQUIPMENT NOTES AMORTIZATION
SERIES B EQUIPMENT NOTES
PAYMENT DATE PRINCIPAL AMOUNT PAYABLE
------------ ------------------------
November 23, 2001 0.00
May 23, 2002 1,900,000.00
November 23, 2002 680,639.57
May 23, 2003 976,082.33
November 23, 2003 197,632.00
May 23, 2004 624,335.40
November 23, 2004 484,127.02
May 23, 2005 1,310,837.24
November 23, 2005 458,098.55
May 23, 2006 1,255,430.66
November 23, 2006 432,070.08
May 23, 2007 813,212.23
November 23, 2007 792,853.46
May 23, 2008 1,144,617.49
November 23, 2008 380,013.15
May 23, 2009 1,322,570.30
November 23, 2009 0.00
May 23, 2010 604,047.74
November 23, 2010 666,578.83
May 23, 2011 8,747,040.16
3
N788AN
EQUIPMENT NOTES AMORTIZATION
SERIES C EQUIPMENT NOTES
PAYMENT DATE PRINCIPAL AMOUNT PAYABLE
------------ ------------------------
November 23, 2001 0.00
May 23, 2002 1,800,000.00
November 23, 2002 0.00
May 23, 2003 900,000.00
November 23, 2003 0.00
May 23, 2004 1,800,000.00
November 23, 2004 968,194.90
May 23, 2005 0.00
November 23, 2005 0.00
May 23, 2006 2,543,148.80
November 23, 2006 0.00
May 23, 2007 0.00
November 23, 2007 0.00
May 23, 2008 14,501.72
November 23, 2008 0.00
May 23, 2009 0.00
November 23, 2009 0.00
May 23, 2010 0.00
November 23, 2010 4,389,063.92
4
SCHEDULE II to
INDENTURE AND SECURITY AGREEMENT
PASS THROUGH TRUST AGREEMENT AND
PASS THROUGH TRUST SUPPLEMENTS
Pass Through Trust Agreement, dated as of May 24, 2001, between
American Airlines, Inc. and State Street Bank and Trust Company of Connecticut,
National Association, as trustee, as supplemented by Trust Supplement No.
2001-1A-1, dated as of May 24, 2001, Trust Supplement No. 2001-1A-2, dated as of
May 24, 2001, Trust Supplement No. 2001-1B, dated as of May 24, 2001, and Trust
Supplement No. 2001-1C, dated as of May 24, 2001.