EXHIBIT 4.9
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TRUST INDENTURE AND MORTGAGE [N700GS]
Dated as of October , 2001
Between
SOUTHWEST AIRLINES CO.,
Owner
and
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly stated herein,
but solely as Mortgagee,
Mortgagee
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EQUIPMENT NOTES COVERING
ONE BOEING 737-7H4 AIRCRAFT
BEARING U.S. REGISTRATION ▇▇▇▇ [N700GS]
AND MANUFACTURER'S SERIAL NO. [27835]
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TABLE OF CONTENTS
Page
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GRANTING CLAUSE.......................................................................................1
ARTICLE I DEFINITIONS................................................................................4
ARTICLE II THE EQUIPMENT NOTES.......................................................................4
SECTION 2.01. Form of Equipment Notes.......................................................4
SECTION 2.02. Issuance and Terms of Equipment Notes........................................10
SECTION 2.03. [Intentionally Omitted]......................................................12
SECTION 2.04. Method of Payment............................................................12
SECTION 2.05. Application of Payments......................................................14
SECTION 2.06. Termination of Interest in Collateral........................................14
SECTION 2.07. Registration Transfer and Exchange of Equipment Notes........................14
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes.........................16
SECTION 2.09. Payment of Expenses on Transfer; Cancellation................................16
SECTION 2.10. Mandatory Redemptions of Equipment Notes.....................................16
SECTION 2.11. Voluntary Redemptions of Equipment Notes.....................................17
SECTION 2.12. Redemptions; Notice of Redemption............................................17
SECTION 2.13. Subordination................................................................18
ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF PAYMENTS.......................................18
SECTION 3.01. Basic Distributions..........................................................18
SECTION 3.02. Event of Loss; Replacement; Optional Redemption..............................19
SECTION 3.03. Payments After Event of Default..............................................20
SECTION 3.04. Certain Payments.............................................................22
SECTION 3.05. Other Payments...............................................................22
ARTICLE IV COVENANTS OF THE OWNER...................................................................22
SECTION 4.01. Liens........................................................................22
SECTION 4.02. Possession, Operation and Use, Maintenance, Registration and Markings........23
SECTION 4.03. Inspection...................................................................27
SECTION 4.04. Replacement and Pooling of Parts, Alterations, Modifications and
Additions; Substitution of Engines....................................28
SECTION 4.05. Loss, Destruction or Requisition.............................................31
SECTION 4.06. Insurance....................................................................35
SECTION 4.07. Merger of Owner..............................................................36
ARTICLE V EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE..................................................37
SECTION 5.01. Event of Default.............................................................37
SECTION 5.02. Remedies.....................................................................38
SECTION 5.03. Return of Aircraft, Etc......................................................40
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SECTION 5.04. Remedies Cumulative..........................................................41
SECTION 5.05. Discontinuance of Proceedings................................................41
SECTION 5.06. Waiver of Past Defaults......................................................41
SECTION 5.07. Appointment of Receiver......................................................41
SECTION 5.08. Mortgagee Authorized to Execute Bills of Sale, Etc...........................42
SECTION 5.09. Rights of Note Holders to Receive Payment....................................42
ARTICLE VI DUTIES OF THE MORTGAGEE..................................................................42
SECTION 6.01. Notice of Event of Default...................................................42
SECTION 6.02. Action Upon Instructions; Certain Rights and Limitations.....................43
SECTION 6.03. Indemnification..............................................................43
SECTION 6.04. No Duties Except as Specified in Trust Indenture or Instructions.............44
SECTION 6.05. No Action Except Under Trust Indenture or Instructions.......................44
SECTION 6.06. Investment of Amounts Held by Mortgagee......................................44
ARTICLE VII THE MORTGAGEE...........................................................................45
SECTION 7.01. Acceptance of Trusts and Duties..............................................45
SECTION 7.02. Absence of Duties............................................................45
SECTION 7.03. No Representations or Warranties as to Aircraft or Documents.................45
SECTION 7.04. No Segregation of Monies; No Interest........................................46
SECTION 7.05. Reliance; Agreements; Advice of Counsel......................................46
SECTION 7.06. Compensation.................................................................46
SECTION 7.07. Instructions from Note Holders...............................................47
ARTICLE VIII INDEMNIFICATION........................................................................47
SECTION 8.01. Scope of Indemnification.....................................................47
ARTICLE IX SUCCESSOR AND SEPARATE TRUSTEES..........................................................47
SECTION 9.01. Resignation of Mortgagee; Appointment of Successor...........................47
SECTION 9.02. Appointment of Additional and Separate Trustees..............................48
ARTICLE X SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS....................50
SECTION 10.01. Instructions of Majority; Limitations.......................................50
SECTION 10.02. Mortgagee Protected.........................................................51
SECTION 10.03. Documents Mailed to Note Holders............................................51
SECTION 10.04. No Request Necessary for Trust Indenture Supplement.........................51
ARTICLE XI MISCELLANEOUS............................................................................52
SECTION 11.01. Termination of Trust Indenture..............................................52
SECTION 11.02. No Legal Title to Collateral in Note Holders................................53
SECTION 11.03. Sale of Aircraft by Mortgagee Is Binding....................................53
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SECTION 11.04. Trust Indenture for Benefit of Owner, Mortgagee, Note Holders and the
other Indenture Indemnitees...........................................53
SECTION 11.05. Notices.....................................................................53
SECTION 11.06. Severability................................................................54
SECTION 11.07. No Oral Modification or Continuing Waivers..................................54
SECTION 11.08. Successors and Assigns......................................................54
SECTION 11.09. Headings....................................................................54
SECTION 11.10. Normal Commercial Relations.................................................54
SECTION 11.11. Governing Law; Counterpart Form.............................................54
SECTION 11.12. Voting By Note Holders......................................................55
SECTION 11.13. Bankruptcy..................................................................55
ANNEX A Definitions
ANNEX B Insurance
EXHIBIT A Form of
Trust Indenture and Mortgage Supplement
SCHEDULE I Equipment Notes Amortization and Interest Rates
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TRUST INDENTURE AND MORTGAGE [N700GS]
TRUST INDENTURE AND MORTGAGE [N700GS], dated as of October ,
2001 ("Trust Indenture"), between
SOUTHWEST AIRLINES CO., a Texas corporation
("Owner"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in
its individual capacity, except as expressly stated herein, but solely as
Mortgagee hereunder (together with its successors hereunder, the "Mortgagee").
WITNESSETH
WHEREAS, all capitalized terms used herein shall have the
respective meanings set forth or referred to in Article I hereof;
WHEREAS, an AC Form 8050-2 ▇▇▇▇ of Sale dated December 17,
1997, from Airframe Manufacturer in favor of Owner covering the Aircraft was
recorded by the FAA on March 9, 1998 as Conveyance Number P14762;
WHEREAS, the parties hereto desire by this Trust Indenture,
among other things, (i) to provide for the issuance by the Owner of the Series
of Equipment Notes specified on Schedule I hereto (it being understood that not
all Series may be issued, in which case references in this Trust Indenture to
Series not issued shall be disregarded) and (ii) to provide for the assignment,
mortgage and pledge by the Owner to the Mortgagee, as part of the Collateral
hereunder, among other things, of all of the Owner's right, title and interest
in and to the Aircraft and, except as hereinafter expressly provided, all
payments and other amounts received hereunder in accordance with the terms
hereof, as security for, among other things, the Owner's obligations to the Note
Holders and the Indenture Indemnitees;
WHEREAS, all things have been done to make the Equipment
Notes, when executed by the Owner and authenticated and delivered by the
Mortgagee hereunder, the valid, binding and enforceable obligations of the
Owner; and
WHEREAS, all things necessary to make this Trust Indenture the
valid, binding and legal obligation of the Owner for the uses and purposes
herein set forth, in accordance with its terms, have been done and performed and
have happened.
GRANTING CLAUSE
NOW, THEREFORE, THIS
TRUST INDENTURE AND MORTGAGE WITNESSETH,
that, to secure the prompt payment of the Original Amount of, interest on,
Make-Whole Amount, if any, and all other amounts due with respect to, all
Equipment Notes from time to time outstanding hereunder according to their tenor
and effect and to secure the performance and observance by the Owner of all the
agreements, covenants and provisions contained herein and in the Participation
Agreement and in the Equipment Notes, for the benefit of the Note Holders and
each of the Indenture Indemnitees, and in consideration of the premises and of
the covenants herein contained, and of the acceptance of the Equipment Notes by
the holders thereof, and for other good and valuable consideration the receipt
and adequacy whereof are hereby acknowledged, the Owner has granted, bargained,
sold, assigned, transferred,
conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain,
sell, assign, transfer, convey, mortgage, pledge and confirm, unto the
Mortgagee, its successors in trust and assigns, for the security and benefit of,
the Note Holders and each of the Indenture Indemnitees, a first priority
security interest in and mortgage lien on all right, title and interest of the
Owner in, to and under the following described property, rights and privileges,
whether now or hereafter acquired (which, collectively, together with all
property hereafter specifically subject to the Lien of this Trust Indenture by
the terms hereof or any supplement hereto, are included within, and are referred
to as, the "Collateral"), to wit:
(1) The Airframe which is one Boeing 737-7H4 aircraft with the
FAA Registration number of N700GS and the manufacturer's serial number of 27835
and two Engines with the manufacturer's serial numbers 874108 and 874109, each
of which Engines is a CFM International, Inc. CFM56-7B22 engine and is of 750 or
more rated takeoff horsepower or the equivalent of such horsepower (such
Airframe and Engines more particularly described in the Trust Indenture
Supplement executed and delivered as provided herein) as the same is now and
will hereafter be constituted, whether now owned by the Owner or hereafter
acquired, and in the case of such Engines, whether or not any such Engine shall
be installed in or attached to the Airframe or any other airframe, together with
(a) all Parts of whatever nature, which are from time to time included within
the definitions of "Airframe" or "Engines", whether now owned or hereafter
acquired, including all substitutions, renewals and replacements of and
additions, improvements, accessions and accumulations to the Airframe and
Engines (other than additions, improvements, accessions and accumulations which
constitute appliances, parts, instruments, appurtenances, accessories,
furnishings or other equipment excluded from the definition of Parts) and (b)
all Aircraft Documents;
(2) The Purchase Agreement and the Bills of Sale to the extent
the same relate to continuing rights of the Owner in respect of any warranty,
indemnity or agreement, express or implied, as to title, materials, workmanship,
design or patent infringement or related matters with respect to the Airframe or
the Engines (reserving to the Owner, however, all of the Owner's other rights
and interest in and to the Purchase Agreement) together with all rights, powers,
privileges, options and other benefits of the Owner thereunder (subject to such
reservation) with respect to the Airframe or the Engines, including, without
limitation, the right to make all waivers and agreements, to give and receive
all notices and other instruments or communications, to take such action upon
the occurrence of a default thereunder, including the commencement, conduct and
consummation of legal, administrative or other proceedings, as shall be
permitted thereby or by law, and to do any and all other things which the Owner
is or may be entitled to do thereunder (subject to such reservation), subject,
with respect to the Purchase Agreement, to the terms and conditions of the
Consent and Agreement and the Engine Consent and Agreement;
(3) All proceeds with respect to the requisition of title to
or use of the Aircraft or any Engine by any Government Entity or from the sale
or other disposition of the Aircraft, the Airframe, any Engine or other property
described in any of these Granting Clauses by the Mortgagee pursuant to the
terms of this Trust Indenture, and all insurance proceeds with respect to the
Aircraft, the Airframe, any Engine or any part thereof, but excluding any
insurance maintained by the Owner and not required under Section 4.06;
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(4) All rents, revenues and other proceeds collected by the
Mortgagee pursuant to Section 5.03(b) and all monies and securities from time to
time deposited or required to be deposited with the Mortgagee by or for the
account of the Owner pursuant to any terms of this Trust Indenture held or
required to be held by the Mortgagee hereunder; 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, (a) the Mortgagee shall not take or cause to be taken any action
contrary to the Owner's right hereunder to quiet enjoyment of the Airframe and
Engines, and to possess, use, retain and control the Airframe and Engines and
all revenues, income and profits derived therefrom, and (b) the Owner shall have
the right, to the exclusion of the Mortgagee, with respect to the Purchase
Agreement, to exercise in the Owner's name all rights and powers of the buyer
under the Purchase Agreement (other than to amend, modify or waive any of the
warranties or indemnities contained therein, except in the exercise of the
Owner's reasonable business judgment) and to retain any recovery or benefit
resulting from the enforcement of any warranty or indemnity under the Purchase
Agreement; and provided further that, notwithstanding the occurrence or
continuation of an Event of Default, the Mortgagee shall not enter into any
amendment of the Purchase Agreement which would increase the obligations of the
Owner thereunder.
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Mortgagee, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the Note Holders and the Indenture
Indemnitees, except as provided in Section 2.13 and Article III hereof, 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 clauses (1) through (5)
inclusive above, subject to the terms and provisions set forth in this Trust
Indenture.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner shall remain liable under the Indenture
Agreements to perform all of the obligations assumed by it thereunder, except to
the extent prohibited or excluded from doing so pursuant to the terms and
provisions thereof, and the Mortgagee, the Note Holders and the Indenture
Indemnitees shall have no obligation or liability under the Indenture Agreements
by reason of or arising out of the assignment hereunder, nor shall the
Mortgagee, the Note Holders or the Indenture Indemnitees be required or
obligated in any manner to perform or fulfill any obligations of the Owner under
or pursuant to the Indenture Agreements, or, except as herein expressly
provided, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or present or file any claim, or take
any action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
The Owner does hereby constitute the Mortgagee the true and
lawful attorney of the Owner, irrevocably, granted for good and valuable
consideration and coupled with an interest and with full power of substitution,
and with full power (in the name of the Owner or otherwise) to ask for, require,
demand, receive, compound and give acquittance for any and all monies and
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claims for monies (in each case including insurance and requisition proceeds)
due and to become due under or arising out of the Indenture Agreements, 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
Mortgagee may deem to be necessary or advisable in the premises; provided that
the Mortgagee shall not exercise any such rights except upon the occurrence and
during the continuance of an Event of Default hereunder.
The Owner agrees that at any time and from time to time, upon
the written request of the Mortgagee, the Owner will promptly and duly execute
and deliver or cause to be duly executed and delivered any and all such further
instruments and documents (including without limitation UCC continuation
statements) as the Mortgagee 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 Mortgagee the full benefits of the
assignment hereunder and of the rights and powers herein granted.
IT IS HEREBY COVENANTED AND AGREED by and between the parties
hereto as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed in the manner described, in Annex A hereto.
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. ACCORDINGLY, THIS EQUIPMENT NOTE MAY
NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS
AVAILABLE.
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SOUTHWEST AIRLINES CO.
SERIES [_____] EQUIPMENT NOTE DUE [____] ISSUED IN CONNECTION WITH THE
BOEING MODEL ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ REGISTRATION
NUMBER N700GS
No. ____ Date: October 30, 2001
INTEREST RATE MATURITY DATE
[___________] [___________]
SOUTHWEST AIRLINES CO., a Texas corporation ("Owner"), hereby
promises to pay to Wilmington Trust Company, as Subordination Agent under the
Intercreditor Agreement, or the registered assignee thereof, the principal sum
of $____________ (the "Original Amount"), together with interest on the amount
of the Original 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 at a rate per annum equal to the Debt Rate. The
Original Amount of this Equipment Note shall be [payable in installments on the
dates set forth in Schedule I hereto equal to the corresponding percentage of
the Original Amount of this Equipment Note set forth in Schedule I hereto.](1)
[paid in full on ____.](2) Accrued but unpaid interest shall be due and payable
in semiannual installments commencing on May 1, 2002, and thereafter on May 1
and November 1 of each year, to and including [_______________.] Notwithstanding
the foregoing, the final payment made on this Equipment Note shall be in an
amount sufficient to discharge in full the unpaid Original Amount and all
accrued and unpaid interest on, and any other amounts due under, this Equipment
Note. 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 and if such payment is made on
such next succeeding Business Day, no interest shall accrue on the amount of
such payment during such extension.
For purposes hereof, the term "Trust Indenture" means the
Trust Indenture and Mortgage [N700GS], dated as of October 30, 2001, between the
Owner and Wilmington Trust Company (the "Mortgagee"), as the same may be amended
or supplemented from time to time. All other capitalized terms used in this
Equipment Note and not defined herein shall have the respective meanings
assigned in the Trust Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Payment Due Rate (calculated on the basis of a year of 360 days comprised of
twelve 30-day months) on any overdue Original Amount, any overdue Make-Whole
Amount, if any, and (to the extent permitted by applicable Law) any overdue
interest and any other amounts payable hereunder which are overdue, in each case
for the period the same is overdue. Amounts shall be overdue if not paid when
due (whether at stated maturity, by acceleration or otherwise).
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(1) Not included in Series A-2 and Series B Equipment Notes.
(2) To be inserted in the case of a Series A-2 and Series B Equipment
Notes.
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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 Mortgagee or at the office of any successor in the
manner provided in Section 2.07 of the Trust Indenture.
The Original Amount and interest and other amounts due
hereunder shall be payable in Dollars in immediately available funds at the
Corporate Trust Office of the Mortgagee, or as otherwise provided in the Trust
Indenture. 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 promptly thereafter to the Mortgagee for cancellation.
The holder hereof, by its acceptance of this Equipment Note,
agrees that, except as provided in the Trust Indenture, each payment of the
Original 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 Original Amount, any
overdue Make-Whole Amount, if any, or, to the extent permitted by Law, any
overdue interest and other amounts hereunder) to the date of such payment,
second, to the payment of the Original Amount of this Equipment Note then due,
third, to the payment of Make-Whole Amount, if any, and any other amount due
hereunder or under the Trust Indenture, and fourth, the balance, if any,
remaining thereafter, to the payment of installments of the Original Amount of
this Equipment Note remaining unpaid in the inverse order of their maturity.
This Equipment Note is one of the Equipment Notes referred to
in the Trust Indenture which have been or are to be issued by the Owner pursuant
to the terms of the Trust Indenture. The Collateral is held by the Mortgagee as
security, in part, for the Equipment Notes. The provisions of this Equipment
Note are subject to the Trust Indenture. Reference is hereby made to the Trust
Indenture 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 Trust
Indenture, as well as for a statement of the terms and conditions of the Trust
created by the Trust Indenture, to all of which terms and conditions in the
Trust Indenture each holder hereof agrees by its acceptance of this Equipment
Note.
As provided in the Trust Indenture and subject to certain
limitations therein set forth, this Equipment Note is exchangeable for a like
aggregate Original Amount of Equipment Notes of different authorized
denominations, as requested by the holder surrendering the same.
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner and the Mortgagee shall treat the person in whose name
this Equipment Note is registered as the owner hereof for all purposes, whether
or not this Equipment Note be overdue, and neither the Owner nor the Mortgagee
shall be affected by notice to the contrary.
This Equipment Note is subject to redemption as provided in
Sections 2.10, 2.11 and 2.12 of the Trust Indenture but not otherwise. In
addition, this Equipment Note may be accelerated as provided in Section 5.02 of
the Trust Indenture.
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[The indebtedness evidenced by this Equipment Note is, to the
extent and in the manner provided in the Trust Indenture, subordinate and
subject in right of payment to the prior payment in full of the Secured
Obligations (as defined in the Trust Indenture) in respect of [Series A-1 and
Series A-2 Equipment Notes](3) [Series A-1, Series A-2 and Series B Equipment
Notes](4) and this Equipment Note is issued subject to such provisions. The Note
Holder of this Equipment Note, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Mortgagee on his behalf
to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Trust Indenture and (c) appoints the Mortgagee
his attorney-in-fact for such purpose.](5)
Unless the certificate of authentication hereon has been
executed by or on behalf of the Mortgagee by manual signature, this Equipment
Note shall not be entitled to any benefit under the Trust Indenture or be valid
or obligatory for any purpose.
THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
* * *
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(3) To be inserted in the case of a Series B Equipment Note.
(4) To be inserted in the case of a Series C Equipment Note, if issued.
(5) To be inserted for each Equipment Note other than any Series A-1 and
Series A-2 Equipment Note.
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IN WITNESS WHEREOF, the Owner has caused this Equipment Note
to be executed in its corporate name by its officer thereunto duly authorized on
the date hereof.
SOUTHWEST AIRLINES CO.
By:
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President-Finance
and Treasurer
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MORTGAGEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the
within-mentioned Trust Indenture.
WILMINGTON TRUST COMPANY, as Mortgagee
By:
-----------------------------------
Name:
Title:
SCHEDULE I(6)
EQUIPMENT NOTE AMORTIZATION
Payment Date Percentage of Original Amount to Be Paid
[SEE SCHEDULE I TO TRUST INDENTURE
WHICH IS INSERTED UPON ISSUANCE]
* * *
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(6) Not included in Series A-2 and Series B Equipment Notes.
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SECTION 2.02. ISSUANCE AND TERMS OF EQUIPMENT NOTES
The Equipment Notes shall be dated the date of issuance
thereof, shall be issued in up to four separate series consisting of Series ▇-▇,
▇▇▇▇▇▇ ▇-▇, Series B and Series C and in the maturities and principal amounts
and shall bear interest as specified in Schedule I hereto (or, in the case of
the Series C if issued after the Closing Date, as specified in an amendment to
this Trust Indenture). On the date thereof, each Series specified in Schedule I
shall be issued to the Subordination Agent on behalf of the Applicable Pass
Through Trustee under the Applicable Pass Through Trust Agreement. Owner shall
have the option to issue the Series C Equipment Notes at or after the Closing.
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
applicable Debt Rate (calculated on the basis of a year of 360 days comprised of
twelve 30-day months) on the unpaid Original Amount thereof from time to time
outstanding, payable in arrears on May 1, 2002, and on each May 1 and November 1
thereafter until maturity. The Original Amount of each Equipment Note (i) in the
case of Equipment Notes other than Series A-2 and Series B Equipment Notes,
shall be payable on the dates and in the installments equal to the corresponding
percentage of the Original Amount as set forth in Schedule I hereto which shall
be attached as Schedule I to such Equipment Notes (or, in the case of the Series
C Equipment Notes if issued after the Closing Date, as set forth in an amendment
to this Trust Indenture, which payment schedule shall be attached as Schedule I
to the Series C Equipment Notes) and (ii) in the case of the Series A-2 and
Series B Equipment Notes, shall be paid in full on November 1, 2006.
Notwithstanding the foregoing, the final payment made under each Equipment Note
shall be in an amount sufficient to discharge in full the unpaid Original Amount
and all accrued and unpaid interest on, and any other amounts due under, such
Equipment Note. Each Equipment Note shall bear interest at the Payment Due Rate
(calculated on the basis of a year of 360 days comprised of twelve 30-day
months) on any part of the Original Amount, Make-Whole Amount, if any, and, to
the extent permitted by applicable Law, 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 if not paid when due (whether at stated maturity, by acceleration or
otherwise). Notwithstanding anything to the contrary contained herein, if any
date on which a payment 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 and if such payment is made on
such next succeeding Business Day, no interest shall accrue on the amount of
such payment during such extension.
The Owner agrees to pay to the Mortgagee for distribution in
accordance with Section 3.04 hereof: (i) an amount 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 then outstanding aggregate
principal amount of the Series A-1 Equipment Notes and Series A-2 Equipment
Notes and the denominator of which shall be the then outstanding aggregate
principal amount of all "Series A-1 Equipment Notes" and "Series A-2 Equipment
Notes" (each as defined in the Intercreditor Agreement); (ii) (x) the amount
equal to interest on any Downgrade Advance (other
10
than any Applied Downgrade Advance) payable under Section 3.07 of each Liquidity
Facility minus Investment Earnings from such Downgrade Advance multiplied by (y)
the fraction specified in the foregoing clause (i); (iii) (x) 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 (y) the fraction
specified in the foregoing clause (i); (iv) if any payment default shall have
occurred and be continuing with respect to interest on any Series A-1 Equipment
Notes or Series A-2 Equipment Notes, (x) the excess, if any, of (1) an amount
equal to interest on any Unpaid Advance, Applied Downgrade Advance or Applied
Non-Extension Advance payable under Section 3.07 of each Liquidity Facility over
(2) the sum of Investment Earnings from any Final Advance plus any amount of
interest at the Payment Due Rate actually payable (whether or not in fact paid)
by Owner on the overdue scheduled interest on the Equipment Notes in respect of
which such Unpaid Advance, Applied Downgrade Advance or Applied Non-Extension
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
and Series A-2 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" and "Series A-2 Equipment Notes" (each as
defined in the Intercreditor Agreement) (other than interest becoming due and
payable solely as a result of acceleration of any such "Equipment Notes"); (v)
Owner's pro rata share of any other amounts owed to the Liquidity Provider by
the Subordination Agent as borrower under each Liquidity Facility other than
amounts due as repayment of advances thereunder or as interest on such advances,
except to the extent payable pursuant to clause (ii), (iii) or (iv) above; (vi)
Owner's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Owner under the Pass Through Trust
Agreements; and (vii) Owner's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Owner's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes (excluding the Series C Equipment
Notes, if issued) and the denominator of which is the aggregate principal
balance then outstanding of all "Equipment Notes" (excluding the "Series C
Equipment Notes", if issued) (as each such term is defined in each of the
Operative Indentures). For purposes of this paragraph, the terms "Applied
Downgrade Advance", "Applied Non-Extension Advance", "Cash Collateral Account",
"Downgrade Advance", "Final Advance", "Investment Earnings", "Non-Extension
Advance" and "Unpaid Advance" shall have the meanings specified in each
Liquidity Facility.
The Equipment Notes shall be executed on behalf of the Owner
by one of its authorized officers. Equipment Notes bearing the signatures of
individuals who were at any time the proper officers of the Owner shall bind the
Owner, 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. The
Owner may from time to time execute and deliver Equipment Notes with respect to
the Aircraft to the Mortgagee for authentication upon original issue and such
Equipment Notes shall thereupon be authenticated and delivered by the Mortgagee
upon the written request of the Owner signed by an authorized officer of the
Owner. No Equipment Note shall be secured by or
11
entitled to any benefit under this Trust Indenture or be valid or obligatory for
any purposes, unless there appears on such Equipment Note a certificate of
authentication in the form provided for herein executed by the Mortgagee by the
manual signature of one of its authorized officers and such certificate upon any
Equipment Notes be conclusive evidence, and the only evidence, that such
Equipment Note has been duly authenticated and delivered hereunder.
The aggregate Original Amount of the Equipment Notes issued
hereunder shall not exceed the amount set forth as the maximum therefor on
Schedule I hereto.
SECTION 2.03. [INTENTIONALLY OMITTED]
SECTION 2.04. METHOD OF PAYMENT
(a) The Original Amount of, interest on, Make-Whole
Amount, if any, and other amounts due under each Equipment Note or hereunder
will be payable in Dollars by wire transfer of immediately available funds not
later than 12:30 PM, New York time, on the due date of payment to the Mortgagee
at the Corporate Trust Office for distribution among the Note Holders in the
manner provided herein. The Owner shall not have any responsibility for the
distribution of such payment to any Note Holder. Notwithstanding the foregoing
or any provision in any Equipment Note to the contrary, the Mortgagee will use
reasonable efforts to pay or cause to be paid, if so directed in writing by any
Note Holder (with a copy to the Owner), all amounts paid by the Owner hereunder
and under such holder's Equipment Note or Equipment Notes to such holder or a
nominee therefor (including all amounts distributed pursuant to Article III of
this Trust Indenture) by transferring, or causing to be transferred, by wire
transfer of immediately available funds in Dollars, prior to 2:00 p.m., New York
City time, on the due date of payment, to an account maintained by such holder
with a bank located in the continental United States the amount to be
distributed to such holder, for credit to the account of such holder maintained
at such bank. If the Mortgagee shall fail to make any such payment as provided
in the immediately foregoing sentence after its receipt of funds at the place
and prior to the time specified above, the Mortgagee, in its individual capacity
and not as trustee, agrees to compensate such holders for loss of use of funds
at the Debt Rate until such payment is made and the Mortgagee 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 Mortgagee for
cancellation promptly after such payment. Notwithstanding any other provision of
this Trust Indenture to the contrary, the Mortgagee 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 Mortgagee 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 12:30 PM, New York time, at the place of payment.
Prior to the due presentment for registration of transfer of any Equipment Note,
the Owner and the Mortgagee shall deem and treat the Person in whose name any
Equipment Note is registered on the Equipment Note Register as the absolute
owner and holder 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 none of the Owner or the Mortgagee shall be affected by any notice
to the contrary. So long as any signatory to the Participation Agreement or
nominee thereof shall be a registered Note Holder, all payments to it shall be
made to the account of such Note Holder specified in Schedule I thereto and
otherwise
12
in the manner provided in or pursuant to the Participation Agreement unless it
shall have specified some other account or manner of payment by notice to the
Mortgagee consistent with this Section 2.04.
(b) The Mortgagee, as agent for the Owner, shall
exclude and withhold at the appropriate rate from each payment of Original
Amount of, interest on, Make-Whole Amount, if any, and other amounts due
hereunder or under each Equipment Note (and such exclusion and withholding shall
constitute payment in respect of such Equipment Note) any and all United States
withholding taxes applicable thereto as required by Law. The Mortgagee agrees to
act as such withholding agent and, in connection therewith, whenever any present
or future United States 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 and timely pay the same to the appropriate
authority in the name of and on behalf of the Note Holders, that it will file
any necessary United States withholding tax returns or statements when due, and
that as promptly as possible after the payment thereof it will deliver to each
Note Holder (with a copy to the Owner) appropriate receipts showing the payment
thereof, together with such additional documentary evidence as any such Note
Holder may reasonably request from time to time.
If a Note Holder which is a Non-U.S. Person has furnished to
the Mortgagee a properly completed, accurate and currently effective U.S.
Internal Revenue Service Form ▇-▇ ▇▇▇, ▇-▇ IMY, W-8 ECI or W-8 EXP (or such
successor form or forms as may be required by the United States Treasury
Department) during the calendar year in which the payment hereunder or under the
Equipment Note(s) held by such holder is made (but prior to the making of such
payment), or in either of the two preceding calendar years, and has not notified
the Mortgagee of the withdrawal or inaccuracy of such form prior to the date of
such payment (and the Mortgagee has no reason to believe that any information
set forth in such form is inaccurate), the Mortgagee shall withhold only the
amount, if any, required by Law (after taking into account any applicable
exemptions properly claimed by the Note Holder) to be withheld from payments
hereunder or under the Equipment Notes held by such holder in respect of United
States federal income tax. If a Note Holder (x) which is a Non-U.S. Person has
furnished to the Mortgagee a properly completed, accurate and currently
effective U.S. Internal Revenue Service Form W-8ECI in duplicate (or such
successor certificate, form or forms as may be required by the United States
Treasury Department as necessary in order to properly avoid withholding of
United States federal income tax), for each calendar year in which a payment is
made (but prior to the making of any payment for such year), and has not
notified the Mortgagee of the withdrawal or inaccuracy of such certificate or
form prior to the date of such payment (and the Mortgagee has no reason to
believe that any information set forth in such form is inaccurate) or (y) which
is a U.S. Person has furnished to the Mortgagee a properly completed, accurate
and currently effective U.S. Internal Revenue Service Form W-9, if applicable,
prior to a payment hereunder or under the Equipment Notes held by such holder,
no amount shall be withheld from payments in respect of United States federal
income tax. If any Note Holder has notified the Mortgagee that any of the
foregoing forms or certificates is withdrawn or inaccurate, or if such holder
has not filed a form claiming an exemption from United States withholding tax or
if the Code or the regulations thereunder or the administrative interpretation
thereof is at any time after the date hereof amended to require such withholding
of United States federal income taxes from payments under the Equipment Notes
held by such holder, the Mortgagee agrees to withhold
13
from each payment due to the relevant Note Holder withholding taxes at the
appropriate rate under Law and will, on a timely basis as more fully provided
above, deposit such amounts with an authorized depository and make such returns,
statements, receipts and other documentary evidence in connection therewith as
required by Law.
Owner shall not have any liability for the failure of the
Mortgagee to withhold taxes in the manner provided for herein or for any false,
inaccurate or untrue evidence provided by any Note Holder hereunder.
SECTION 2.05. APPLICATION OF PAYMENTS
In the case of each Equipment Note, each payment of Original
Amount, Make-Whole Amount, if any, and interest due thereon shall be applied:
First: to the payment of accrued interest on such Equipment
Note (as well as any interest on any overdue Original Amount, any
overdue Make-Whole Amount, if any, and to the extent permitted by Law,
any overdue interest and any other overdue amounts thereunder) to the
date of such payment;
Second: to the payment of the Original Amount of such
Equipment Note (or a portion thereof) then due thereunder;
Third: to the payment of Make-Whole Amount, if any, and any
other amount due hereunder or under such Equipment Note; and
Fourth: the balance, if any, remaining thereafter, to the
payment of the Original Amount of such Equipment Note remaining unpaid
(provided that such Equipment Note shall not be subject to redemption
except as provided in Sections 2.10, 2.11 and 2.12 hereof).
The amounts paid pursuant to clause "Fourth" above shall be applied to the
installments of Original Amount of such Equipment Note in the inverse order of
their maturity.
SECTION 2.06. TERMINATION OF INTEREST IN COLLATERAL
No Note Holder nor any other Indenture Indemnitee shall, as
such, have any further interest in, or other right with respect to, the
Collateral when and if the Original Amount of, Make-Whole Amount, if any, and
interest on and other amounts due under all Equipment Notes held by such Note
Holder and all other sums then due and payable to such Note Holder, such
Indenture Indemnitee or the Mortgagee hereunder (including, without limitation,
under the second paragraph of Section 2.02 hereof) and under the other Operative
Agreements by the Owner (collectively, the "Secured Obligations") shall have
been paid in full.
SECTION 2.07. REGISTRATION, TRANSFER AND EXCHANGE OF EQUIPMENT
NOTES
The Mortgagee shall keep a register (the "Equipment Note
Register") in which the Mortgagee 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
14
hereunder shall have occurred. The Equipment Note Register shall be kept at the
Corporate Trust Office of the Mortgagee. The Mortgagee 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 such Equipment Note shall surrender such Equipment Note to
the Mortgagee at the Corporate Trust Office, together with a written request
from the registered holder thereof for the issuance of a new Equipment Note,
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, the Owner shall execute, and the Mortgagee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Equipment Notes of a like aggregate Original Amount and of the same
Series. At the option of the Note Holder, Equipment Notes may be exchanged for
other Equipment Notes of any authorized denominations of a like aggregate
Original Amount and of the same Series, upon surrender of the Equipment Notes to
be exchanged to the Mortgagee at the Corporate Trust Office. Whenever any
Equipment Notes are so surrendered for exchange, the Owner shall execute, and
the Mortgagee shall authenticate and deliver, the Equipment Notes which the Note
Holder 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 hereof or otherwise under this Trust
Indenture) shall be the valid obligations of the Owner evidencing the same
respective obligations, and entitled to the same security and benefits under
this Trust Indenture, as the Equipment Notes surrendered upon such registration
of transfer or exchange. Every Equipment Note presented or surrendered for
registration of transfer, shall (if so required by the Mortgagee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Mortgagee duly executed by the Note Holder or such holder's
attorney duly authorized in writing, and the Mortgagee shall require evidence
satisfactory to it as to the compliance of any such transfer with the Securities
Act, and the securities Laws of any applicable state. The Mortgagee shall make a
notation on each new Equipment Note of the amount of all payments of Original
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 has been paid. Interest shall be
deemed to have been paid on such new Equipment Note to the date on which
interest shall have been paid on such old Equipment Note, and all payments of
the Original Amount marked on such new Equipment Note, as provided above, shall
be deemed to have been made thereon. The Owner shall not be required to exchange
any surrendered Equipment Notes as provided above during the ten-day period
preceding the due date of any payment on such Equipment Note. The Owner shall in
all cases deem the Person in whose name any Equipment Note shall have been
issued and registered as the absolute owner and holder of such Equipment Note
for the purpose of receiving payment of all amounts payable by the Owner with
respect to such Equipment Note and for all other purposes until a notice stating
otherwise is received from the Mortgagee and such change is reflected on the
Equipment Note Register. The Mortgagee will promptly notify the Owner 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 this Trust Indenture and the Participation Agreement applicable to Note
Holders, including Sections 6.3, 6.4 and 9.1 thereof and shall be deemed to have
covenanted to the parties to the Participation Agreement as to the matters
covenanted by the original Note Holder in the Participation Agreement. Subject
to compliance by the Note Holder and its transferee (if any) of the requirements
set forth in this
15
Section 2.07, Mortgagee and Owner shall use all reasonable efforts to issue new
Equipment Notes upon registration of transfer or exchange within 10 Business
Days of the date an Equipment Note is surrendered for registration of transfer
or exchange.
SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN EQUIPMENT
NOTES
If any Equipment Note shall become mutilated, destroyed, lost
or stolen, the Owner shall, upon the written request of the holder of such
Equipment Note, execute and the Mortgagee shall authenticate and deliver in
replacement thereof a new Equipment Note, payable in the same Original 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 Mortgagee and a photocopy thereof shall be furnished
to the Owner. If the Equipment Note being replaced has been destroyed, lost or
stolen, the holder of such Equipment Note shall furnish to the Owner and the
Mortgagee such security or indemnity as may be required by them to save the
Owner and the Mortgagee harmless and evidence satisfactory to the Owner and the
Mortgagee of the destruction, loss or theft of such Equipment Note and of the
ownership thereof. If a "qualified institutional buyer" of the type referred to
in paragraph (a)(1)(i)(A), (B), (D) or (E) of Rule 144A under the Securities Act
(a "QIB") is the holder of any such destroyed, lost or stolen Equipment Note,
then the written indemnity of such QIB, signed by an authorized officer thereof,
in favor of, delivered to and in form reasonably satisfactory to, the Owner
shall be accepted as satisfactory indemnity and security and no further
indemnity or security shall be required as a condition to the execution and
delivery of such new Equipment Note. Subject to compliance by the Note Holder
with the requirements set forth in this Section 2.08, Mortgagee and Owner shall
use all reasonable efforts to issue new Equipment Notes within 10 Business Days
of the date of the written request therefor from the Note Holder.
SECTION 2.09. PAYMENT OF EXPENSES ON TRANSFER; CANCELLATION
(a) No service charge shall be made to a Note Holder
for any registration of transfer or exchange of Equipment Notes, but the
Mortgagee, as Equipment Note Registrar, may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Equipment Notes.
(b) The Mortgagee 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 REDEMPTIONS OF EQUIPMENT NOTES
On the date on which the Owner is required pursuant to Section
4.05 hereof to make payment for an Event of Loss with respect to the Airframe,
all of the Equipment Notes shall be redeemed in whole at a redemption price
equal to 100% of the unpaid Original Amount thereof, together with all accrued
interest thereon to the date of redemption and all other Secured Obligations
owed or then due and payable to the Note Holders but without Make-Whole Amount.
16
SECTION 2.11. VOLUNTARY REDEMPTIONS OF EQUIPMENT NOTES
All (but not less than all) of the Equipment Notes may be
redeemed by the Owner upon at least 30 days' revocable prior written notice to
the Mortgagee and the Note Holders, and such Equipment Notes shall be redeemed
in whole at a redemption price equal to 100% of the unpaid Original Amount
thereof, together with accrued interest thereon to the date of redemption and
all other Secured Obligations owed or then due and payable to the Note Holders
plus Make-Whole Amount, if any.
SECTION 2.12. REDEMPTIONS; NOTICE OF REDEMPTION
(a) No redemption of any Equipment Note may be made
except to the extent and in the manner expressly permitted by this Trust
Indenture. No purchase of any Equipment Note may be made by the Mortgagee.
(b) Notice of redemption with respect to the
Equipment Notes shall be given by the Mortgagee by first-class mail, postage
prepaid, mailed not less than 20 nor more than 60 days prior to the applicable
redemption date, to each Note Holder of such Equipment Notes to be redeemed, at
such Note Holder's address appearing in the Equipment Note Register; provided
that such notice shall be revocable by written notice from the Owner to
Mortgagee given not later than three days prior to the redemption date. 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.
(c) On or before the redemption date, the Owner (or
any person on behalf of the Owner) 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 by the Mortgagee, deposit or cause to be deposited with
the Mortgagee by 12:30 PM New York 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, the Equipment Notes to be redeemed shall, on the redemption date,
become due and payable at the Corporate Trust Office of the Mortgagee or at any
office or agency maintained for such purposes pursuant to Section 2.07, and from
and after such redemption date (unless there shall be a default in the payment
of the redemption price) 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. If any Equipment Note called for redemption shall not be so
paid upon surrender thereof for redemption, the principal amount thereof shall,
until paid, continue to bear interest from the applicable redemption date at the
interest rate in effect for such Equipment Note as of such redemption date.
17
SECTION 2.13. SUBORDINATION
(a) The Owner and, by acceptance of its Equipment
Notes of any Series, each Note Holder of such Series, hereby agree that no
payment or distribution shall be made on or in respect of the Secured
Obligations owed to such Note Holder of such Series, including any payment or
distribution of cash, property or securities after the commencement of a
proceeding of the type referred to in Section 5.01(v), (vi) or (vii) hereof,
except as expressly provided in Article III hereof.
(b) By the acceptance of its Equipment Notes of any
Series (other than Series A-1 or Series A-2), each Note Holder of such Series
agrees that in the event that such Note Holder, in its capacity as a Note
Holder, shall receive any payment or distribution on any Secured Obligations in
respect of such Series which 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
Senior Holder (as defined in Section 2.13(c) hereof) and will forthwith turn
over such payment to the Mortgagee in the form received to be applied as
provided in Article III hereof.
(c) As used in this Section 2.13, the term "Senior
Holder" shall mean, (i) the Note Holders of Series A-1 or Series A-2 until the
Secured Obligations in respect of Series A-1 or Series A-2 Equipment Notes have
been paid in full and (ii) after the Secured Obligations in respect of Series
A-1 or Series A-2 Equipment Notes have been paid in full, the Note Holders of
Series B Equipment Notes until the Secured Obligations in respect of Series B
Equipment Notes have been paid in full, and thereafter there shall be no "Senior
Holder".
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF PAYMENTS
SECTION 3.01. BASIC DISTRIBUTIONS
Except as otherwise provided in Sections 3.02 and 3.03 hereof,
each periodic payment of principal or interest on the Equipment Notes received
by the Mortgagee shall be promptly distributed in the following order of
priority:
(i) so much of such payment as shall be required to pay in full
the aggregate amount of the payment or payments of Original
Amount and interest (as well as any interest on any overdue
Original Amount and, to the extent permitted by Law, on any
overdue interest) then due under all Series A-1 and Series A-2
Equipment Notes shall be distributed to the Note Holders of
Series A-1 and Series A-2 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 and Series
A-2 Equipment Note bears to the aggregate amount of the
payments then due under all Series A-1 and Series A-2
Equipment Notes;
(ii) after giving effect to paragraph (i) above, so much of such
payment remaining as shall be required to pay in full the
aggregate amount of the payment or payments of Original Amount
and interest (as well as any interest on any overdue Original
18
Amount and, to the extent permitted by Law, on any overdue
interest) then due under all Series B Equipment Notes shall be
distributed to the Note Holders of Series B 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; and
(iii) after giving effect to paragraph (ii) above, so much of such
payment remaining as shall be required to pay in full the
aggregate amount of the payment or payments of Original Amount
and interest (as well as any interest on any overdue Original
Amount and, to the extent permitted by Law, on any overdue
interest) then due under all Series C Equipment Notes shall be
distributed to the Note Holders of Series C 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.
SECTION 3.02. EVENT OF LOSS; REPLACEMENT; OPTIONAL REDEMPTION
Except as otherwise provided in Section 3.03 hereof, any
payments received by the Mortgagee (i) with respect to the Airframe or the
Airframe and one or more Engines as the result of an Event of Loss or (ii)
pursuant to an optional redemption of the Equipment Notes pursuant to Section
2.11 hereof shall be applied to redemption of the Equipment Notes and to all
other Secured Obligations by applying such funds in the following order of
priority:
First, (a) to reimburse the Mortgagee and the Note Holders for any
reasonable costs or expenses incurred in connection with such
redemption for which they are entitled to reimbursement, or
indemnity by Owner, under the Operative Agreements and then
(b) to pay any other Secured Obligations then due (except as
provided in clause "Second" below) to the Mortgagee, the Note
Holders and the other Indenture Indemnitees under this Trust
Indenture, the Participation Agreement or the Equipment Notes
(other than amounts specified in clause Second below);
Second, (i) to pay the amounts specified in paragraph (i) of clause
"Third" of Section 3.03 hereof plus Make-Whole Amount, if any,
then due and payable in respect of the Series A-1 and Series
A-2 Equipment Notes;
(ii) after giving effect to paragraph (i) above, to pay the amounts
specified in paragraph (ii) of clause "Third" of Section 3.03
hereof plus Make-Whole Amount, if any, then due and payable in
respect of the Series B Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, to pay the
amounts specified in paragraph (iii) of clause "Third" of
Section 3.03 hereof plus Make-Whole Amount, if any, then due
and payable in respect of the Series C Equipment Notes; and
Third, as provided in clause "Fourth" of Section 3.03 hereof;
19
provided, however, that if a Replacement Airframe or Replacement Engine shall be
substituted for the Airframe or Engine subject to such Event of Loss as provided
in Section 4.05 hereof, any insurance, condemnation or similar proceeds which
result from such Event of Loss and are paid over to the Mortgagee shall be held
by the Mortgagee as permitted by Section 7.04 hereof (provided that such moneys
shall be invested as provided in Section 6.06 hereof) as additional security for
the obligations of Owner under Operative Agreements and such proceeds (and such
investment earnings), to the extent not theretofore applied as provided herein,
shall be released to the Owner at the Owner's written request upon the release
of such Airframe or Engine and the replacement thereof as provided herein.
SECTION 3.03. PAYMENTS AFTER EVENT OF DEFAULT
Except as otherwise provided in Section 3.04 hereof, all
payments received and amounts held or realized by the Mortgagee (including any
amounts realized by the Mortgagee from the exercise of any remedies pursuant to
Article V hereof) after an Event of Default shall have occurred and be
continuing and after the declaration specified in Section 5.02(b) hereof, as
well as all payments or amounts then held by the Mortgagee as part of the
Collateral, shall be promptly distributed by the Mortgagee in the following
order of priority:
First, so much of such payments or amounts as shall be required to
(i) reimburse the Mortgagee or WTC for any tax (except to the
extent resulting from a failure of the Mortgagee to withhold
taxes pursuant to Section 2.04(b) hereof), expense or other
loss (including, without limitation, all amounts to be
expended at the expense of, or charged upon the rents,
revenues, issues, products and profits of, the property
included in the Collateral (all such property being herein
called the "Mortgaged Property") pursuant to Section 5.03(b)
hereof) incurred by the Mortgagee or WTC (to the extent not
previously reimbursed), the expenses of any sale, or other
proceeding, reasonable attorneys' fees and expenses, court
costs, and any other expenditures incurred or expenditures or
advances made by the Mortgagee, WTC or the Note Holders in the
protection, exercise or enforcement of any right, power or
remedy or any damages sustained by the Mortgagee, WTC or any
Note Holder, liquidated or otherwise, upon such Event of
Default shall be applied by the Mortgagee as between itself,
WTC and the Note Holders in reimbursement of such expenses and
any other expenses for which the Mortgagee, WTC or the Note
Holders are entitled to reimbursement under any Operative
Agreement and (ii) pay all Secured Obligations payable to the
other Indenture Indemnitees hereunder and under the
Participation Agreement (other than amounts specified in
clauses Second and Third below); and in the case the aggregate
amount to be so distributed is insufficient to pay as
aforesaid in clauses (i) and (ii), 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 Note Holders
for payments made pursuant to Section 6.03 hereof (to the
extent not previously reimbursed) shall be distributed to such
then existing or prior Note Holders ratably, without priority
of one over
20
the other, in accordance with the amount of the payment or
payments made by each such then existing or prior Note Holder
pursuant to said Section 6.03 hereof;
Third, (i) so much of such payments or amounts remaining as shall be
required to pay in full the aggregate unpaid Original Amount
of all Series A-1 and Series A-2 Equipment Notes, and the
accrued but unpaid interest and other amounts due thereon
(other than Make-Whole Amount which shall not be due and
payable) and all other Secured Obligations in respect of the
Series A-1 and Series A-2 Equipment Notes (other than
Make-Whole Amount) to the date of distribution, shall be
distributed to the Note Holders of Series A-1 and Series A-2,
and in case the aggregate amount so to be distributed shall be
insufficient to pay in full as aforesaid, then ratably,
without priority of one over the other, in the proportion that
the aggregate unpaid Original Amount of all Series A-1 and
Series A-2 Equipment Notes held by each holder plus the
accrued but unpaid interest and other amounts due hereunder or
thereunder (other than Make-Whole Amount, if any) to the date
of distribution, bears to the aggregate unpaid Original Amount
of all Series A-1 and Series A-2 Equipment Notes held by all
such holders plus the accrued but unpaid interest and other
amounts due thereon (other than Make-Whole Amount, if any) to
the date of distribution;
(ii) after giving effect to paragraph (i) above, so much of such
payments or amounts remaining as shall be required to pay in
full the aggregate unpaid Original Amount of all Series B
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon (other than Make-Whole Amount which shall
not be due and payable) and all other Secured Obligations in
respect of the Series B Equipment Notes (other than Make-Whole
Amount) to the date of distribution, shall be distributed to
the Note Holders of Series B, and in case the aggregate amount
so to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the
other, in the proportion that the aggregate unpaid Original
Amount of all Series B Equipment Notes held by each holder
plus the accrued but unpaid interest and other amounts due
hereunder or thereunder (other than the Make-Whole Amount, if
any) to the date of distribution, bears to the aggregate
unpaid Original Amount of all Series B Equipment Notes held by
all such holders plus the accrued but unpaid interest and
other amounts due thereon (other than the Make-Whole Amount,
if any) to the date of distribution;
(iii) after giving effect to paragraph (ii) above, so much of such
payments or amounts remaining as shall be required to pay in
full the aggregate unpaid Original Amount of all Series C
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon (other than Make-Whole Amount which shall
not be due and payable) and all other Secured Obligations in
respect of the Series C Equipment Notes (other than Make-Whole
Amount) to the date of distribution, shall be distributed to
the Note Holders of Series C, and in case the aggregate amount
so to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the
other, in the proportion that the aggregate unpaid Original
Amount of all Series C Equipment Notes held by each holder
21
plus the accrued but unpaid interest and other amounts due
hereunder or thereunder (other than the Make-Whole Amount, if
any) to the date of distribution, bears to the aggregate
unpaid Original Amount of all Series C Equipment Notes held by
all such holders plus the accrued but unpaid interest and
other amounts due thereon (other than the Make-Whole Amount,
if any) to the date of distribution; and
Fourth, the balance, if any, of such payments or amounts remaining
thereafter shall be distributed to the Owner.
No Make-Whole Amount shall be due and payable on the Equipment
Notes as a consequence of the acceleration of the Equipment Notes as a result of
an Event of Default.
SECTION 3.04. CERTAIN PAYMENTS
(a) Any payments received by the Mortgagee for which
no provision as to the application thereof is made in this Trust Indenture and
for which such provision is made in any other Operative Agreement shall be
applied forthwith to the purpose for which such payment was made in accordance
with the terms of such other Operative Agreement, as the case may be.
(b) Notwithstanding anything to the contrary
contained in this Article III, the Mortgagee will distribute promptly upon
receipt any indemnity payment received by it from the Owner in respect of the
Mortgagee in its individual capacity, any Note Holder or any other Indenture
Indemnitee, in each case whether or not pursuant to Section 8 of the
Participation Agreement, directly to the Person entitled thereto. Any payment
received by the Mortgagee under the third paragraph of Section 2.02 shall be
distributed to the Subordination Agent in its capacity as Note Holder to be
distributed in accordance with the terms of the Intercreditor Agreement.
SECTION 3.05. OTHER PAYMENTS
Any payments received by the Mortgagee for which no provision
as to the application thereof is made elsewhere in this Trust Indenture or in
any other Operative Agreement shall be distributed by the Mortgagee to the
extent received or realized at any time, in the order of priority specified in
Section 3.01 hereof, and after payment in full of all amounts then due in
accordance with Section 3.01 in the manner provided in clause "Fourth" of
Section 3.03 hereof.
ARTICLE IV
COVENANTS OF THE OWNER
SECTION 4.01. LIENS
The Owner will not directly or indirectly create, incur,
assume or suffer to exist any Lien or with respect to the Airframe or any
Engine, title to any of the foregoing or any
22
interest of Owner therein, except Permitted Liens. The Owner shall promptly, at
its own expense, take such action as may be necessary to duly discharge (by
bonding or otherwise) any Lien other than a Permitted Lien arising at any time.
SECTION 4.02. POSSESSION, OPERATION AND USE, MAINTENANCE,
REGISTRATION AND MARKINGS
(a) General. Except as otherwise expressly provided
herein, the Owner shall be entitled to operate, use, locate, employ or otherwise
utilize or not utilize the Airframe, any Engine or any Parts in any lawful
manner or place in accordance with the Owner's business judgment.
(b) Possession. The Owner, without the prior consent
of Mortgagee, shall not lease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install any
Engine, or permit any Engine to be installed, on any airframe other than the
Airframe; except that the Owner may, without such prior written consent of
Mortgagee:
(i) Subject or permit any Permitted Lessee
to subject (i) the Airframe to normal interchange agreements or (ii) any Engine
to normal interchange agreements or pooling agreements or arrangements, in each
case customary in the commercial airline industry and entered into by Owner or
such Permitted Lessee, as the case may be, in the ordinary course of business;
provided, however, that if Owner's title to any such Engine is divested under
any such agreement or arrangement, then such Engine shall be deemed to have
suffered an Event of Loss as of the date of such divestiture, and Owner shall
comply with Section 4.04(e) in respect thereof;
(ii) Deliver or permit any Permitted Lessee
to deliver possession of the Aircraft, Airframe, any Engine or any Part (x) to
the manufacturer thereof or to any third-party maintenance provider for testing,
service, repair, maintenance or overhaul work on the Aircraft, Airframe, any
Engine or any Part, or, to the extent required or permitted by Section 4.04, for
alterations or modifications in or additions to the Aircraft, Airframe or any
Engine or (y) to any Person for the purpose of transport to a Person referred to
in the preceding clause (x);
(iii) Install or permit any Permitted Lessee
to install an Engine on an airframe owned by Owner or such Permitted Lessee, as
the case may be, free and clear of all Liens, except (x) Permitted Liens and
those that do not apply to the Engines, and (y) the rights of third parties
under normal interchange or pooling agreements and arrangements of the type that
would be permitted under Section 4.02(b)(i);
(iv) Install or permit any Permitted Lessee
to install an Engine on an airframe leased to Owner or such Permitted Lessee, or
purchased by Owner or such Permitted Lessee subject to a mortgage, security
agreement, conditional sale or other secured financing arrangement, but only if
(x) such airframe is free and clear of all Liens, except (A) the rights of the
parties to such lease, or any such secured financing arrangement, covering such
airframe and (B) Liens of the type permitted by clause (iii) above and (y) Owner
or Permitted
23
Lessee, as the case may be, shall have received from the lessor, mortgagee,
secured party or conditional seller, in respect of such airframe, a written
agreement (which may be a copy of the lease, mortgage, security agreement,
conditional sale or other agreement covering such airframe), whereby such Person
agrees that it will not acquire or claim any right, title or interest in, or
Lien on, such Engine by reason of such Engine being installed on such airframe
at any time while such Engine is subject to the Lien of this Trust Indenture;
(v) Install or permit any Permitted Lessee
to install an Engine on an airframe owned by Owner or such Permitted Lessee,
leased to Owner or such Permitted Lessee, or purchased by Owner or such
Permitted Lessee subject to a conditional sale or other security agreement under
circumstances where neither clause (iii) or (iv) above is applicable; provided,
however, that any such installation shall be deemed an Event of Loss with
respect to such Engine, and Owner shall comply with Section 4.04(e) hereof in
respect thereof;
(vi) Transfer or permit any Permitted Lessee
to transfer possession of the Aircraft, Airframe or any Engine to the U.S.
Government, in which event Owner shall promptly notify Mortgagee in writing of
any such transfer of possession and, in the case of any transfer pursuant to
CRAF, in such notification shall identify by name, address and telephone numbers
the Contracting Office Representative or Representatives for the Military
Airlift Command of the United States Air Force to whom notices must be given and
to whom requests or claims must be made to the extent applicable under CRAF;
(vii) Enter into a charter or Wet Lease or
other similar arrangement with respect to the Aircraft or any other aircraft on
which any Engine may be installed (which shall not be considered a transfer of
possession hereunder); provided that the Owner's obligations hereunder shall
continue in full force and effect notwithstanding any such charter or Wet Lease
or other similar arrangement;
(viii) So long as no Event of Default shall
have occurred and be continuing, and subject to the provisions of the
immediately following paragraph, enter into a lease with respect to the
Aircraft, Airframe or any Engine to any Permitted Air Carrier that 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; provided
that, in the case only of a lease to a Permitted Foreign Air Carrier, (A) the
United States maintains diplomatic relations with the country of domicile of
such Permitted Foreign Air Carrier (or, in the case of Taiwan, diplomatic
relations at least as good as those in effect on the Closing Date) and (B) Owner
shall have furnished Mortgagee a favorable opinion of counsel, reasonably
satisfactory to Mortgagee, in the country of domicile of such Permitted Foreign
Air Carrier, that (v) the terms of such lease are the legal, valid and binding
obligations of the parties thereto enforceable under the laws of such
jurisdiction, (w) it is not necessary for Mortgagee to register or qualify to do
business in such jurisdiction, if not already so registered or qualified, as a
result, in whole or in part, of the proposed lease, (x) Mortgagee's Lien in
respect of, the Aircraft, Airframe and Engines will be recognized in such
jurisdiction, (y) the Laws of such jurisdiction of domicile require fair
compensation by the government of such jurisdiction, payable in a currency
freely convertible into Dollars, for the loss of title to the Aircraft, Airframe
or Engines in the event of the requisition by such government of such title
(unless Owner shall provide insurance in the
24
amounts required with respect to hull insurance under this Trust Indenture
covering the requisition of title to the Aircraft, Airframe or Engines by the
government of such jurisdiction so long as the Aircraft, Airframe or Engines are
subject to such lease) and (z) the agreement of such Permitted Air Carrier that
its rights under the lease are subject and subordinate to all the terms of this
Trust Indenture is enforceable against such Permitted Air Carrier under
applicable law;
provided that (1) the rights of any transferee who receives possession by reason
of a transfer permitted by this Section 4.02(b) (other than by a transfer of an
Engine which is deemed an Event of Loss) shall be subject and subordinate to all
the terms of this Trust Indenture, (2) the Owner shall remain primarily liable
for the performance of all of the terms of this Trust Indenture and all the
terms and conditions of this Trust Indenture and the other Operative Agreements
shall remain in effect and (3) no lease or transfer of possession otherwise in
compliance with this Section 4.02(b) shall (x) result in any registration or
re-registration of an Aircraft, except to the extent permitted by Section
4.02(e) or the maintenance, operation or use thereof except in compliance with
Sections 4.02(c) and 4.02(d) or (y) permit any action not permitted to the Owner
hereunder.
In the case of any lease permitted under this Section 4.02(b),
the Owner will include in such lease appropriate provisions which (t) make such
lease expressly subject and subordinate to all of the terms of this Trust
Indenture, including the rights of the Mortgagee to avoid such lease in the
exercise of its rights to repossession of the Airframe and Engines hereunder;
(u) require the Permitted Lessee to comply with the terms of Section 4.06; and
(v) require that the Airframe or any Engine subject thereto be used in
accordance with the limitations applicable to the Owner's possession and use
provided in this Trust Indenture. No lease permitted under this Section 4.02(b)
shall be entered into unless (w) Owner shall provide written notice to Mortgagee
(such notice in the event of a lease to a U.S. Air Carrier to be given promptly
after entering into any such lease or, in the case of a lease to any other
Permitted Air Carrier, 10 days in advance of entering into such lease); (x)
Owner shall furnish to Mortgagee evidence reasonably satisfactory to Mortgagee
that the insurance required by Section 4.06 remains in effect; (y) all necessary
documents shall have been duly filed, registered or recorded in such public
offices as may be required fully to preserve the first priority security
interest (subject to Permitted Liens) of Mortgagee in the Aircraft, Airframe and
Engines; and (z) Owner shall reimburse Mortgagee for all of its reasonable
out-of-pocket fees and expenses, including, without limitation, reasonable fees
and disbursements of counsel, incurred by Mortgagee in connection with any such
lease. Except as otherwise provided herein and without in any way relieving the
Owner from its primary obligation for the performance of its obligations under
this Trust Indenture, the Owner may in its sole discretion permit a lessee to
exercise any or all rights which the Owner would be entitled to exercise under
Sections 4.02 and 4.04, and may cause a lessee to perform any or all of the
Owner's obligations under Article IV, and the Mortgagee agrees to accept actual
and full performance thereof by a lessee in lieu of performance by the Owner.
Mortgagee hereby agrees, and each Note Holder by acceptance of
an Equipment Note agrees, for the benefit of each lessor, conditional seller,
indenture trustee or secured party of any engine leased to, or purchased by,
Owner or any Permitted Lessee subject to a lease, conditional sale, trust
indenture or other security agreement that Mortgagee, each Note Holder and their
respective successors and assigns will not acquire or claim, as against such
lessor,
25
conditional seller, indenture trustee or secured party, any right, title or
interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in favor
of such indenture trustee or secured party.
(c) Operation and Use. So long as the Aircraft,
Airframe or any Engine is subject to the Lien of this Trust Indenture, the Owner
shall not operate, use or locate the Aircraft, Airframe or any Engine, or allow
the Aircraft, Airframe or any Engine to be operated, used or located, (i) in any
area excluded from coverage by any insurance required by the terms of Section
4.06, except in the case of a requisition by the U.S. Government where the Owner
obtains indemnity in lieu of such insurance from the U.S. Government, or
insurance from the U.S. Government, against substantially the same risks and for
at least the amounts of the insurance required by Section 4.06 covering such
area, or (ii) in any recognized area of hostilities unless covered in accordance
with Section 4.06 by war risk insurance, or in either case unless the Aircraft,
the Airframe or any Engine is only temporarily operated, used or located in such
area as a result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition or other similar unforeseen circumstance, so long
as Owner diligently and in good faith proceeds to remove the Aircraft from such
area. So long as the Aircraft, the Airframe or any Engine is subject to the Lien
of this Trust Indenture, the Owner shall not permit such Aircraft, Airframe or
any Engine, as the case may be, to be used, operated, maintained, serviced,
repaired or overhauled (x) in violation of any Law binding on or applicable to
such Aircraft, Airframe or Engine or (y) in violation of any airworthiness
certificate, license or registration of any Government Entity relating to the
Aircraft, the Airframe or any Engine, except (i) immaterial or non-recurring
violations with respect to which corrective measures are taken promptly by Owner
or Permitted Lessee, as the case may be, upon discovery thereof, or (ii) to the
extent the validity or application of any such Law or requirement relating to
any such certificate, license or registration is being contested in good faith
by Owner or Permitted Lessee in any reasonable manner which does not involve any
material risk of the sale, forfeiture or loss of the Aircraft, Airframe or any
Engine, any material risk of criminal liability or material civil penalty
against Mortgagee or impair the Mortgagee's security interest in the Aircraft,
Airframe or any Engine.
(d) Maintenance and Repair. So long as the Aircraft,
Airframe or any Engine is subject to the Lien of this Trust Indenture, the Owner
shall cause the Aircraft, Airframe and each Engine to be maintained, serviced,
repaired and overhauled in accordance with (i) maintenance standards required by
or substantially equivalent to those required by the FAA or the central aviation
authority of Canada, France, Germany, Japan, the Netherlands or the United
Kingdom for the Aircraft, Airframe and Engines, so as to (A) keep the Aircraft,
the Airframe and each Engine in as good operating condition as on the Closing
Date, ordinary wear and tear excepted, (B) keep the Aircraft in such operating
condition as may be necessary to enable the applicable airworthiness
certification of such Aircraft to be maintained under the regulations of the FAA
or other Aviation Authority then having jurisdiction over the operation of the
Aircraft, except during (x) temporary periods of storage in accordance with
applicable regulations, (y) maintenance and modification permitted hereunder or
(z) periods when the FAA or such other Aviation Authority has revoked or
suspended the airworthiness certificates for Similar Aircraft; and (ii) except
during periods when a Permitted Lease is in effect, the same standards as Owner
uses with respect to similar aircraft of similar size in its fleet operated by
Owner in similar
26
circumstances and, during any period in which a Permitted Lease is in effect,
the same standards used by the Permitted Lessee with respect to similar aircraft
of similar size in its fleet and operated by the Permitted Lessee in similar
circumstances. Owner further agrees that the Aircraft, Airframe and Engines will
be maintained, used, serviced, repaired, overhauled or inspected in compliance
with applicable Laws with respect to the maintenance of the Aircraft and in
compliance with each applicable airworthiness certificate, license and
registration relating to the Aircraft, Airframe or any Engine issued by the
Aviation Authority, other than minor or nonrecurring violations with respect to
which corrective measures are taken upon discovery thereof and except to the
extent Owner or Permitted Lessee is contesting in good faith the validity or
application of any such Law or requirement relating to any such certificate,
license or registration in any reasonable manner which does not create a
material risk of sale, loss or forfeiture of the Aircraft, the Airframe or any
Engine or the interest of Mortgagee therein, or any material risk of criminal
liability or material civil penalty against Mortgagee. The Owner shall maintain
or cause to be maintained the Aircraft Documents in the English language.
(e) Registration. The Owner on or prior to the date
of the Closing shall cause the Aircraft to be duly registered in its name under
the Act and except as otherwise permitted by this Section 4.02(e) at all times
thereafter shall cause the Aircraft to remain so registered. So long as no
Special Default or Event of Default shall have occurred and be continuing, Owner
may, by written notice to Mortgagee, request to change the country of
registration of the Aircraft. Any such change in registration shall be effected
only in compliance with, and subject to all of the conditions set forth in,
Section 6.4.5 of the Participation Agreement. Unless the Trust Indenture has
been discharged, Owner shall also cause the Trust Indenture to be duly recorded
and at all times maintained of record as a first-priority perfected mortgage
(subject to Permitted Liens) on the Aircraft, the Airframe and each of the
Engines (except to the extent such perfection or priority cannot be maintained
solely as a result of the failure by Mortgagee to execute and deliver any
necessary documents).
(f) Markings. If permitted by applicable Law, on or
reasonably promptly after the Closing Date, Owner will cause to be affixed to,
and maintained in, the cockpit of the Airframe and on each Engine, in each case,
in a clearly visible location, a placard of a reasonable size and shape bearing
the legend: "Subject to a security interest in favor of Wilmington Trust
Company, not in its individual capacity but solely as Mortgagee." Such placards
may be removed temporarily, if necessary, in the course of maintenance of the
Airframe or Engines. If any such placard is damaged or becomes illegible, Owner
shall promptly replace it with a placard complying with the requirements of this
Section.
SECTION 4.03. INSPECTION
(a) At all reasonable times, so long as the Aircraft
is subject to the Lien of this Trust Indenture, Mortgagee and its authorized
representatives (the "Inspecting Parties") may (not more than once every 12
months unless an Event of Default has occurred and is continuing then such
inspection right shall not be so limited) inspect the Aircraft, Airframe and
Engines (including without limitation, the Aircraft Documents) and any such
Inspecting Party may make copies of such Aircraft Documents not reasonably
deemed confidential by Owner or such Permitted Lessee.
27
(b) Any inspection of the Aircraft hereunder shall be
limited to a visual, walk-around inspection and shall not include the opening of
any panels, bays or other components of the Aircraft, and no such inspection
shall interfere with Owner's or any Permitted Lessee's maintenance and operation
of the Aircraft, Airframe and Engines.
(c) With respect to such rights of inspection,
Mortgagee shall not have any duty or liability to make, or any duty or liability
by reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses
in connection with any such inspection (including the cost of any copies made in
accordance with Section 4.03(a)).
SECTION 4.04. REPLACEMENT AND POOLING OF PARTS, ALTERATIONS,
MODIFICATIONS AND ADDITIONS; SUBSTITUTION OF ENGINES
(a) Replacement of Parts. Except as otherwise
provided herein, so long as the Airframe or Engine is subject to the Lien of
this Trust Indenture, Owner, at its own cost and expense, will, or will cause a
Permitted Lessee to, at its own cost and expense, promptly replace (or cause to
be replaced) all Parts which may from time to time be incorporated or installed
in or attached to the Aircraft, Airframe or any Engine and which may from time
to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason whatsoever.
In addition, Owner may, at its own cost and expense, or may permit a Permitted
Lessee at its own cost and expense to, remove (or cause to be removed) in the
ordinary course of maintenance, service, repair, overhaul or testing any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use; provided, however, that
Owner, except as otherwise provided herein, at its own cost and expense, will,
or will cause a Permitted Lessee at its own cost and expense to, replace such
Parts as promptly as practicable. All replacement Parts shall be free and clear
of all Liens, except for Permitted Liens and pooling arrangements to the extent
permitted by Section 4.04(c) below (and except in the case of replacement
property temporarily installed on an emergency basis) and shall be in good
operating condition and have a value and utility not less than the value and
utility of the Parts replaced (assuming such replaced Parts were in the
condition required hereunder).
(b) Parts. Except as otherwise provided herein, any
Part at any time removed from the Airframe or any Engine shall remain subject to
the Lien of this Trust Indenture, no matter where located, until such time as
such Part shall be replaced by a Part that has been incorporated or installed in
or attached to such Airframe or any Engine and that meets the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to such Airframe or any Engine
as provided in Section 4.04(a), without further act, (i) the replaced Part shall
thereupon be free and clear of all rights of the Mortgagee and shall no longer
be deemed a Part hereunder, and (ii) such replacement Part shall become subject
to this Trust Indenture and be deemed part of such Airframe or any Engine, as
the case may be, for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to such Airframe or any
Engine.
28
(c) Pooling of Parts. Any Part removed from the
Aircraft, Airframe or an Engine may be subjected by the Owner or a Permitted
Lessee to a normal pooling arrangement customary in the airline industry and
entered into in the ordinary course of business of Owner or Permitted Lessee,
provided that the part replacing such removed Part shall be incorporated or
installed in or attached to such Airframe or any Engine in accordance with
Sections 4.04(a) and 4.04(b) 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 a normal pooling arrangement, so long as the Owner or a
Permitted Lessee, at its own cost and expense, as promptly thereafter as
reasonably possible, either (i) causes such replacement part to become subject
to the Lien of this Trust Indenture, free and clear of all Liens except
Permitted Liens, at which time such replacement part shall become a Part or (ii)
replaces (or causes to be replaced) such replacement part by incorporating or
installing in or attaching to the Aircraft, Airframe or any Engine a further
replacement Part owned by the Owner free and clear of all Liens except Permitted
Liens and which shall become subject to the Lien of this Trust Indenture in
accordance with Section 4.04(b).
(d) Alterations, Modifications and Additions. The
Owner shall, or shall cause a Permitted Lessee to, make (or cause to be made)
alterations and modifications in and additions to the Aircraft, Airframe and
each Engine as may be required to be made from time to time to meet the
applicable standards of the FAA or other Aviation Authority having jurisdiction
over the operation of the Aircraft, to the extent made mandatory in respect of
the Aircraft (a "Mandatory Modification"); provided however, that the Owner or a
Permitted Lessee may, in good faith and by appropriate procedure, contest the
validity or application of any law, rule, regulation or order in any reasonable
manner which does not materially adversely affect Mortgagee's interest in the
Aircraft and does not involve any material risk of sale, forfeiture or loss of
the Aircraft or the interest of Mortgagee therein, or any material risk of
material civil penalty or any material risk of criminal liability being imposed
on Mortgagee or the holder of any Equipment Note. In addition, the Owner, at its
own expense, may, or may permit a Permitted Lessee at its own cost and expense
to, from time to time make or cause to be made such alterations and
modifications in and additions to the Airframe or any Engine (each an "Optional
Modification") as the Owner or such Permitted Lessee may deem desirable in the
proper conduct of its business including, without limitation, removal of Parts
which Owner deems are obsolete or no longer suitable or appropriate for use in
the Aircraft, Airframe or such Engine; provided, however, that no such Optional
Modification shall (i) materially diminish the fair market value, utility, or
useful life of the Aircraft or any Engine below its fair market value, utility
or useful life immediately prior to such Optional Modification (assuming the
Aircraft or such Engine was in the condition required by the Trust Indenture
immediately prior to such Optional Modification) or (ii) cause the Aircraft to
cease to have the applicable standard certificate of airworthiness. All Parts
incorporated or installed in or attached to any Airframe or any Engine as the
result of any alteration, modification or addition effected by the Owner shall
be free and clear of any Liens except Permitted Liens and become subject to the
Lien of this Trust Indenture; provided that the Owner or any Permitted Lessee
may, at any time so long as the Airframe or any Engine is subject to the Lien of
this Trust Indenture, remove any such Part (such Part being referred to herein
as a "Removable Part") from such Airframe or an Engine if (i) such Part is in
addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such Airframe or any
Engine at the time of delivery
29
thereof hereunder or any Part in replacement of, or in substitution for, any
such original Part, (ii) such Part is not required to be incorporated or
installed in or attached or added to such Airframe or any Engine pursuant to the
terms of Section 4.02(d) or the first sentence of this Section 4.04(d) and (iii)
such Part can be removed from such Airframe or any Engine without materially
diminishing the fair market value, utility or remaining useful life which such
Airframe or any Engine would have had at the time of removal had such removal
not been effected by the Owner, assuming the Aircraft was otherwise maintained
in the condition required by this Trust Indenture and such Removable Part had
not been incorporated or installed in or attached to the Aircraft, Airframe or
such Engine. Upon the removal by the Owner of any such Part as above provided,
title thereto shall, without further act, be free and clear of all rights of the
Mortgagee and such Part shall no longer be deemed a Part hereunder. Removable
Parts may be leased from or financed by third parties other than Mortgagee.
(e) Substitution of Engines. Upon the occurrence of
an Event of Loss with respect to an Engine in circumstances in which an Event of
Loss with respect to the Airframe has not occurred, Owner shall promptly (and in
any event within 15 days after such occurrence) give the Mortgagee written
notice of such Event of Loss. The Owner shall have the right at its option at
any time, on at least 5 Business Days' prior notice to the Mortgagee, to
substitute, and if an Event of Loss shall have occurred with respect to an
Engine in circumstances in which an Event of Loss with respect to the Airframe
has not occurred, shall within 60 days of the occurrence of such Event of Loss
substitute, a Replacement Engine for any Engine. In such event, immediately upon
the effectiveness of such substitution and without further act, (i) the replaced
Engine shall thereupon be free and clear of all rights of the Mortgagee and the
Lien of this Trust Indenture and shall no longer be deemed an Engine hereunder
and (ii) such Replacement Engine shall become subject to this Trust Indenture
and be deemed part of the Aircraft for all purposes hereof to the same extent as
the replaced Engine. Such Replacement Engine shall be an engine manufactured by
Engine Manufacturer that is the same model as the Engine to be replaced thereby,
or an improved model, and that is suitable for installation and use on the
Airframe, and that has a value, utility and remaining useful life (without
regard to hours and cycles remaining until overhaul) at least equal to the
Engine to be replaced thereby (assuming that such Engine had been maintained in
accordance with this Trust Indenture). The Owner's right to make a replacement
hereunder shall be subject to the fulfillment (which may be simultaneous with
such replacement) of the following conditions precedent at the Owner's sole cost
and expense, and the Mortgagee agrees to cooperate with the Owner to the extent
necessary to enable it to timely satisfy such conditions:
(i) an executed counterpart (or, in the case
of subclause (B) below, a true and correct copy) of each of the following
documents shall be delivered to the Mortgagee:
(A) a Trust Indenture Supplement covering the
Replacement Engine, which shall have been duly filed for
recordation pursuant to the Act or such other applicable law
of the jurisdiction other than the United States in which the
Aircraft of which such Engine is a part is registered in
accordance with Section 4.02(e);
30
(B) a full warranty ▇▇▇▇ of sale (as to title),
covering the Replacement Engine, executed by the former owner
thereof in favor of the Owner (or, at the Owner's option,
other evidence of the Owner's ownership of such Replacement
Engine, reasonably satisfactory to the Mortgagee); and
(C) UCC financing statements covering the security
interests created by this Trust Indenture (or any similar
statements or other documents required to be filed or
delivered pursuant to the laws of the jurisdiction in which
such Aircraft may be registered) as are deemed necessary or
desirable by counsel for the Mortgagee to protect the security
interests of the Mortgagee in the Replacement Engine;
(ii) the Owner shall cause to be delivered
to the Mortgagee an opinion of counsel to the effect that the Lien of this Trust
Indenture continues to be in full force and effect with respect to the
Replacement Engine and such evidence of compliance with the insurance provisions
of Section 4.06 with respect to such Replacement Engine as Mortgagee shall
reasonably request;
(iii) the Owner shall have furnished to
Mortgagee an opinion of Owner's aviation law counsel reasonably satisfactory to
Mortgagee and addressed to Mortgagee as to the due filing for recordation of the
Trust Indenture Supplement with respect to such Replacement Engine under the Act
or such other applicable law of the jurisdiction other than the United States in
which the Aircraft is registered in accordance with Section 4.02(e), as the case
may be; and
(iv) the Owner shall have furnished to
Mortgagee a certificate of a qualified aircraft engineer (who may be an employee
of Owner) certifying that such Replacement Engine has a value and utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine so replaced (assuming that such Engine
had been maintained in accordance with this Trust Indenture). Upon satisfaction
of all conditions to such substitution, (x) the Mortgagee shall execute and
deliver to the Owner such documents and instruments, prepared at the Owner's
expense, as the Owner shall reasonably request to evidence the release of such
replaced Engine from the Lien of this Trust Indenture, (y) the Mortgagee shall
assign to the Owner all claims it may have against any other Person relating to
any Event of Loss giving rise to such substitution and (z) the Owner shall
receive all insurance proceeds (other than those reserved to others under
Section 4.06(b)) and proceeds in respect of any Event of Loss giving rise to
such replacement to the extent not previously applied to the purchase price of
the Replacement Engine as provided in Section 4.05(d).
SECTION 4.05. 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, the Owner shall
promptly (and in any event within 15 days after such occurrence) give the
Mortgagee written notice of such Event of Loss. The Owner shall, within 45 days
after such occurrence, give the Mortgagee written notice of Owner's election to
either replace the Airframe as provided under Section 4.05(a)(i) or to make
payment in respect of such Event of Loss as provided under Section
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4.05(a)(ii) (it being agreed that if Owner shall not have given the Mortgagee
such notice of such election within the above specified time period, the Owner
shall be deemed to have elected to make payment in respect of such Event of Loss
as provided under Section 4.05(a)(ii)):
(i) if Owner elects to replace the Airframe,
Owner shall, subject to the satisfaction of the conditions contained in Section
4.05(c), as promptly as possible and in any event within 120 days after the
occurrence of such Event of Loss, cause to be subjected to the Lien of this
Trust Indenture, in replacement of the Airframe with respect to which the Event
of Loss occurred, a Replacement Airframe and, if any Engine shall have been
installed on the Airframe when it suffered the Event of Loss, a Replacement
Engine therefor, such Replacement Airframe and Replacement Engines to be free
and clear of all Liens except Permitted Liens and to have a value, utility and
remaining useful life (without regard to hours or cycles remaining until the
next regular maintenance check) at least equal to the Airframe or Engine, as the
case may be, to be replaced thereby (assuming that such Airframe or Engine had
been maintained in accordance with this Trust Indenture); provided that if the
Owner shall not perform its obligation to effect such replacement under this
clause (i) during the 120-day period of time provided herein, it shall pay the
amounts required to be paid pursuant to and within the time frame specified in
clause (ii) below; or
(ii) if Owner elects to make a payment in
respect of such Event of Loss of the Airframe, Owner shall make a payment to the
Mortgagee for purposes of redeeming Equipment Notes in accordance with Section
2.10 hereof on a date on or before the Business Day next following the earlier
of (x) the 120th day following the date of the occurrence of such Event of Loss,
and (y) the fourth Business Day following the receipt of insurance proceeds with
respect to such Event of Loss (but in any event not earlier than the date of
Owner's election under Section 4.05(a) to make payment under this Section 4.05
(a)(ii)); and upon such payment and payment of all other Secured Obligations
then due and payable, the Mortgagee shall, at the cost and expense of the Owner,
release from the Lien of this Trust Indenture the Airframe and the Engines, by
executing and delivering to the Owner all documents and instruments as the Owner
may reasonably request to evidence such release.
(b) Effect of Replacement. Should the Owner have
provided a Replacement Airframe and Replacement Engines, if any, as provided for
in Section 4.05(a)(i), (i) the Lien of this Trust Indenture shall continue with
respect to such Replacement Airframe and Replacement Engines, if any, as though
no Event of Loss had occurred; (ii) the Mortgagee shall, at the cost and expense
of the Owner, release from the Lien of this Trust Indenture the replaced
Airframe and Engines, if any, by executing and delivering to the Owner such
documents and instruments as the Owner may reasonably request to evidence such
release; and (iii) in the case of a replacement upon an Event of Loss, the
Mortgagee shall assign to the Owner all claims the Mortgagee may have against
any other Person arising from the Event of Loss and the Owner shall receive all
insurance proceeds (other than those reserved to others under Section 4.06(b))
and proceeds from any award in respect of condemnation, confiscation, seizure or
requisition, including any investment interest thereon, to the extent not
previously applied to the purchase price of the Replacement Airframe and
Replacement Engines, if any, as provided in Section 4.05(d).
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(c) Conditions to Airframe and Engine Replacement.
The Owner's right to substitute a Replacement Airframe and Replacement Engines,
if any, as provided in Section 4.05(a)(i) shall be subject to the fulfillment,
at the Owner's sole cost and expense, in addition to the conditions contained in
such Section 4.05(a)(i), of the following conditions precedent:
(i) on the date when the Replacement
Airframe and Replacement Engines, if any, is subjected to the Lien of this Trust
Indenture (such date being referred to in this Section 4.05 as the "Replacement
Closing Date"), an executed counterpart of each of the following documents (or,
in the case of the FAA ▇▇▇▇ of Sale and full warranty ▇▇▇▇ of sale referred to
below, a photocopy thereof) shall have been delivered to the Mortgagee:
(A) a Trust Indenture Supplement covering the
Replacement Airframe and Replacement Engines, if any, which
shall have been duly filed for recordation pursuant to the Act
or such other applicable law of such jurisdiction other than
the United States in which the Replacement Airframe and
Replacement Engines, if any, are to be registered in
accordance with Section 4.02(e), as the case may be;
(B) an FAA ▇▇▇▇ of Sale (or a comparable document, if
any, of another Aviation Authority, if applicable) covering
the Replacement Airframe executed by the former owner thereof
in favor of the Owner;
(C) a full warranty (as to title) ▇▇▇▇ of sale,
covering the Replacement Airframe and Replacement Engines, if
any, executed by the former owner thereof in favor of the
Owner (or, at the Owner's option, other evidence of the
Owner's ownership of such Replacement Airframe and Replacement
Engines, if any, reasonably satisfactory to the Mortgagee);
and
(D) UCC financing statements (or any similar
statements or other documents required to be filed or
delivered pursuant to the laws of the jurisdiction in which
the Replacement Airframe and Replacement Engines, if any, may
be registered in accordance with Section 4.02(e)) as are
deemed necessary or desirable by counsel for the Mortgagee to
protect the security interests of the Mortgagee in the
Replacement Airframe and Replacement Engines, if any;
(ii) the Replacement Airframe and
Replacement Engines, if any, shall be of the same model as the Airframe or
Engines, as the case may be, or an improved model of such aircraft or engines of
the manufacturer thereof, shall have a value and utility (without regard to
hours or cycles remaining until the next regular maintenance check) at least
equal to, and be in as good operating condition and repair as, the Airframe and
any Engines replaced (assuming such Airframe and Engines had been maintained in
accordance with this Trust Indenture);
(iii) the Mortgagee (acting directly or by
authorization to its special counsel) shall have received satisfactory evidence
as to the compliance with Section 4.06 with respect to the Replacement Airframe
and Replacement Engines, if any;
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(iv) on the Replacement Closing Date, (A)
the Owner shall cause the Replacement Airframe and Replacement Engines, if any,
to be subject to the Lien of this Trust Indenture free and clear of Liens (other
than Permitted Liens), (B) the Replacement Airframe shall have been duly
certified by the FAA as to type and airworthiness in accordance with the terms
of this Trust Indenture and (C) application for registration of the Replacement
Airframe in accordance with Section 4.02(e) shall have been duly made with the
FAA or other applicable Aviation Authority and the Owner shall have authority to
operate the Replacement Airframe;
(v) the Mortgagee at the expense of the
Owner, shall have received (acting directly or by authorization to its special
counsel) (A) an opinion of counsel, addressed to the Mortgagee, to the effect
that the Replacement Airframe and Replacement Engine, if any, has or have duly
been made subject to the Lien of this Trust Indenture, and Mortgagee will be
entitled to the benefits of Section 1110 with respect to the Replacement
Airframe, provided that such opinion with respect to Section 1110 need not be
delivered to the extent that immediately prior to such replacement the benefits
of Section 1110 were not, solely by reason of a change in law or court
interpretation thereof, available to Mortgagee, and (B) an opinion of Owner's
aviation law counsel reasonably satisfactory to and addressed to Mortgagee as to
the due registration of any such Replacement Airframe and the due filing for
recordation of each Trust Indenture Supplement with respect to such Replacement
Airframe or Replacement Engine under the Act or such other applicable law of the
jurisdiction other than the United States in which the Replacement Airframe is
to be registered in accordance with Section 4.02(e), as the case may be; and
(vi) the Owner shall have furnished to the
Mortgagee a certificate of a qualified aircraft engineer (who may be an employee
of Owner) certifying that the Replacement Airframe and Replacement Engines, if
any, have a value and utility and remaining useful life (without regard to hours
and cycles remaining until overhaul) at least equal to the Airframe and any
Engines so replaced (assuming that such Airframe and Engines had been maintained
in accordance with this Trust Indenture).
(d) Non-Insurance Payments Received on Account of an
Event of Loss. Any amounts, other than insurance proceeds in respect of damage
or loss not constituting an Event of Loss (the application of which is provided
for in Annex B), received at any time by Mortgagee or Owner from any Government
Entity or any other Person in respect of any Event of Loss will be applied as
follows:
(i) If such amounts are received with respect to the
Airframe, and any Engine installed thereon at the time of such
Event of Loss, upon compliance by Owner with the applicable
terms of Section 4.05(c) with respect to the Event of Loss for
which such amounts are received, such amounts shall be paid
over to, or retained by, Owner;
(ii) If such amounts are received with respect to an
Engine (other than an Engine installed on the Airframe at the
time such Airframe suffers an Event of Loss), upon compliance
by Owner with the applicable terms of Section 4.04(e)
34
with respect to the Event of Loss for which such amounts are
received, such amounts shall be paid over to, or retained by,
Owner;
(iii) If such amounts are received, in whole or in
part, with respect to the Airframe, and Owner makes, has made
or is deemed to have made the election set forth in Section
4.05(a)(ii), such amounts shall be applied as follows:
first, if the sum described in Section
4.05(a)(ii) has not then been paid in full by Owner, such
amounts shall be paid to Mortgagee to the extent necessary to
pay in full such sum; and
second, the remainder, if any, shall be
paid to Owner.
(e) Requisition for Use. In the event of a
requisition for use by any Government Entity of the Airframe and the Engines, if
any, or engines installed on such Airframe while such Airframe is subject to the
Lien of this Trust Indenture, the Owner shall promptly notify the Mortgagee of
such requisition and all of the Owner's obligations under this Trust Indenture
shall continue to the same extent as if such requisition had not occurred except
to the extent that the performance or observance of any obligation by the Owner
shall have been prevented or delayed by such requisition; provided that the
Owner's obligations under this Section 4.05 with respect to the occurrence of an
Event of Loss for the payment of money and under Section 4.06 (except while an
assumption of liability by the U.S. Government of the scope referred to in
Section 4.02(c) is in effect) shall not be reduced or delayed by such
requisition. Any payments received by the Mortgagee or the Owner or Permitted
Lessee from such Government Entity with respect to such requisition of use shall
be paid over to, or retained by, the Owner. In the event of an Event of Loss of
an Engine resulting from the requisition for use by a Government Entity of such
Engine (but not the Airframe), the Owner will replace such Engine hereunder by
complying with the terms of Section 4.04(e) and any payments received by the
Mortgagee or the Owner from such Government Entity with respect to such
requisition shall be paid over to, or retained by, the Owner.
(f) Certain Payments to be Held As Security. Any
amount referred to in this Section 4.05 or Section 4.06 which is payable or
creditable to, or retainable by, the Owner shall not be paid or credited to, or
retained by the Owner if at the time of such payment, credit or retention a
Special Default or an Event of Default shall have occurred and be continuing,
but shall be paid to and held by the Mortgagee as security for the obligations
of the Owner under this Trust Indenture and the Operative Agreements, and at
such time as there shall not be continuing any such Special Default or Event of
Default such amount and any gain realized as a result of investments required to
be made pursuant to Section 6.06 shall to the extent not theretofore applied as
provided herein, be paid over to the Owner.
SECTION 4.06. INSURANCE
(a) Owner's Obligation to Insure. Until termination
of this Trust Indenture pursuant to Section 11.01, Owner shall comply with, or
cause to be complied with, each of the provisions of Annex B, which provisions
are hereby incorporated by this reference as if set forth in full herein.
35
(b) Insurance for Own Account. Nothing in Section
4.06 shall limit or prohibit (a) Owner from maintaining the policies of
insurance required under Annex B with higher limits than those specified in
Annex B, or (b) Mortgagee from obtaining insurance for its own account (and any
proceeds payable under such separate insurance shall be payable as provided in
the policy relating thereto); provided, however, that no insurance may be
obtained or maintained that would limit or otherwise adversely affect the
coverage of any insurance required to be obtained or maintained by Owner
pursuant to this Section 4.06 and Annex B.
(c) Indemnification by Government in Lieu of
Insurance. Mortgagee agrees to accept, in lieu of insurance against any risk
with respect to the Aircraft described in Annex B, indemnification from, or
insurance provided by, the U.S. Government, or upon the written consent of
Mortgagee, other Government Entity, against such risk in an amount that, when
added to the amount of insurance (including permitted self-insurance), if any,
against such risk that Owner (or any Permitted Lessee) may continue to maintain,
in accordance with this Section 4.06, during the period of such requisition or
transfer, shall be at least equal to the amount of insurance against such risk
otherwise required by this Section 4.06.
(d) Application of Insurance Proceeds. As between
Owner and Mortgagee, all insurance proceeds received as a result of the
occurrence of an Event of Loss with respect to the Aircraft or any Engine under
policies required to be maintained by Owner pursuant to this Section 4.06 will
be applied in accordance with Section 4.05(d). All proceeds of insurance
required to be maintained by Owner, in accordance with Section 4.06 and Section
B of Annex B, in respect of any property damage or loss not constituting an
Event of Loss with respect to the Aircraft, Airframe or any Engine will be
applied in payment (or to reimburse Owner) for repairs or for replacement
property, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Owner.
SECTION 4.07. MERGER OF OWNER
(a) In General. Owner shall not consolidate with or
merge into any other person under circumstances in which Owner is not the
surviving corporation, or convey, transfer or lease in one or more transactions
all or substantially all of its assets to any other person, unless:
(i) such person is organized, existing and
in good standing under the Laws of the United States, any State of the United
States or the District of Columbia and, upon consummation of such transaction,
such person will be a U.S. Air Carrier if and so long as such status is a
condition of entitlement to the benefits of Section 1110 of the Bankruptcy Code
with respect to the Aircraft;
(ii) such person executes and delivers to
Mortgagee a duly authorized, legal, valid, binding and enforceable agreement,
reasonably satisfactory in form and substance to Mortgagee, containing an
effective assumption by such person of the due and punctual performance and
observance of each covenant, agreement and condition in the Operative Agreements
to be performed or observed by Owner;
36
(iii) such person makes such filings and
recordings with the FAA pursuant to the Act as shall be necessary to evidence
such consolidation or merger; and
(iv) immediately after giving effect to such
consolidation or merger no Event of Default shall have occurred and be
continuing.
(b) Effect of Merger. Upon any such consolidation or
merger of Owner with or into, or the conveyance, transfer or lease by Owner of
all or substantially all of its assets to, any Person in accordance with this
Section 4.07, such Person will succeed to, and be substituted for, and may
exercise every right and power of, Owner under the Operative Agreements with the
same effect as if such person had been named as "Owner" therein. No such
consolidation or merger, or conveyance, transfer or lease, shall have the effect
of releasing Owner or such Person from any of the obligations, liabilities,
covenants or undertakings of Owner under the Trust Indenture.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE
SECTION 5.01. EVENT OF DEFAULT
"Event of Default" means any of the following events (whatever
the reason for such Event of Default and 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):
(i) the failure of the Owner to pay (i)
principal of, interest on or, Make-Whole Amount, if any, under any Equipment
Note when due, and such failure shall continue unremedied for a period of 10
Business Days, or (ii) any other amount payable by it to the Note Holders under
this Trust Indenture or the Participation Agreement when due, and such failure
shall continue for a period in excess of 20 Business Days after Owner has
received written notice from Mortgagee of the failure to make such payment when
due;
(ii) Owner shall fail to carry and maintain
on or with respect to the Aircraft (or cause to be carried and maintained)
insurance required to be maintained in accordance with the provisions of Section
4.06 hereof; provided that such lapse or cancellation shall not constitute an
Event of Default until the earlier of (i) 30 days after receipt by the Mortgagee
of written notice of such lapse or cancellation or (ii) the date that such lapse
or cancellation is effective as to the Mortgagee;
(iii) Owner shall fail to observe or perform
(or caused to be observed and performed) in any material respect any other
covenant, agreement or obligation set forth herein or in any other Operative
Agreement to which Owner is a party and such failure shall continue unremedied
for a period of 60 days from and after the date of written notice thereof to
Owner from Mortgagee, unless such failure is capable of being corrected and
Owner shall be diligently proceeding to correct such failure, in which case
there shall be no Event of Default unless and until such failure shall continue
unremedied for a period of 360 days after receipt of such notice;
37
(iv) any representation or warranty made by
Owner herein, in the Participation Agreement or in any other Operative Agreement
to which Owner is a party (a) shall prove to have been untrue or inaccurate in
any material respect as of the date made, (b) such untrue or inaccurate
representation or warranty is material at the time in question, (c) and the same
shall remain uncured (to the extent of the adverse impact of such incorrectness
on the interest of the Mortgagee) for a period in excess of 60 days from and
after the date of written notice thereof from Mortgagee to Owner;
(v) the Owner shall consent to the
appointment of or taking possession by a receiver, trustee or liquidator of
itself or of a substantial part of its property, or the Owner 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 its creditors, or the Owner shall file a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation or other relief 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 it in any such case, or the Owner shall
seek relief by voluntary petition, answer or consent, under the provisions of
any other bankruptcy or similar law providing for the reorganization or
winding-up of corporations (as in effect at such time), or the Owner shall seek
an agreement, composition, extension or adjustment with its creditors under such
laws or the Owner's board of directors shall adopt a resolution authorizing
corporate action in furtherance of any of the foregoing;
(vi) an order, judgment or decree shall be
entered by any court of competent jurisdiction appointing, without the consent
of the Owner, a receiver, trustee or liquidator of the Owner or of any
substantial part of its property, or any substantial part of the property of the
Owner shall be sequestered, or granting any other relief in respect of the Owner
as a debtor under any bankruptcy laws or other insolvency laws (as in effect at
such time), and any such order, judgment, decree, 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
(vii) a petition against the Owner in a
proceeding under any 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 which may apply to the Owner, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Owner of any
substantial part of its property and such jurisdiction, custody or control shall
remain in force unrelinquished, unstayed or unterminated for a period of 90
days.
SECTION 5.02. 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 Mortgagee may exercise any or all of the rights and powers and
pursue any and all of the remedies pursuant to this Article V and shall have and
may exercise all of the rights and remedies of a secured party under the Uniform
Commercial Code and may take possession of all or any part of the properties
covered or intended to be covered by the Lien created hereby or pursuant hereto
and may exclude the Owner and all persons claiming under it wholly or partly
therefrom; provided, that the Mortgagee shall give the Owner twenty days' prior
written notice of its intention to sell the
38
Aircraft. Without limiting any of the foregoing, it is understood and agreed
that the Mortgagee may exercise any right of sale of the Aircraft available to
it, even though it shall not have taken possession of the Aircraft and shall not
have possession thereof at the time of such sale.
(b) If an Event of Default shall have occurred and be
continuing, then and in every such case the Mortgagee may (and shall, upon
receipt of a written demand therefor from a Majority in Interest of Note
Holders), at any time, by delivery of written notice or notices to the Owner,
declare all the Equipment Notes to be due and payable, whereupon the unpaid
Original Amount of all Equipment Notes then outstanding, together with accrued
but unpaid interest thereon (without Make-Whole Amount) and other amounts due
thereunder or otherwise payable hereunder, 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 clause (v), (vi) or
(vii) of Section 5.01 hereof shall have occurred, then and in every such case
the unpaid Original Amount then outstanding, together with accrued but unpaid
interest and all other amounts due hereunder and under the Equipment Notes shall
immediately and without further act become due and payable without presentment,
demand, protest or notice, all of which are hereby waived.
This Section 5.02(b), however, is subject to the condition
that, if at any time after the Original Amount of the Equipment Notes shall have
become so due and payable, and before any judgment or decree for the payment of
the money so due, or any thereof, shall be entered, all overdue payments of
interest upon the Equipment Notes and all other amounts payable hereunder or
under the Equipment Notes (except the Original Amount of the Equipment Notes
which by such declaration shall have become payable) shall have been duly paid,
and every other Default and Event of Default with respect to any covenant or
provision of this Trust Indenture shall have been cured, then and in every such
case a Majority in Interest of Note Holders may (but shall not be obligated to),
by written instrument filed with the Mortgagee, rescind and annul the
Mortgagee's declaration (or such automatic acceleration) and its consequences;
but no such rescission or annulment shall extend to or affect any subsequent
Default or Event of Default or impair any right consequent thereon.
(c) The Note Holders shall be entitled, at any sale
pursuant to this Section 5.02, to credit against any purchase price bid at such
sale by such holder all or any part of the unpaid obligations owing to such Note
Holder and secured by the Lien of this Trust Indenture (only to the extent that
such purchase price would have been paid to such Note Holder pursuant to Article
III hereof if such purchase price were paid in cash and the foregoing provisions
of this subsection (c) were not given effect).
(d) In the event of any sale of the Collateral, or
any part thereof, pursuant to any judgment or decree of any court or otherwise
in connection with the enforcement of any of the terms of this Trust Indenture,
the unpaid Original Amount of all Equipment Notes then outstanding, together
with accrued interest thereon (without Make-Whole Amount), and other amounts due
thereunder, shall immediately become due and payable without presentment,
demand, protest or notice, all of which are hereby waived.
(e) Notwithstanding anything contained herein, so
long as the Pass Through Trustee under any Pass Through Trust Agreement (or its
designee) is a Note Holder, the
39
Mortgagee 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 Trust to fail to qualify as a "grantor
trust" for federal income tax purposes.
SECTION 5.03. RETURN OF AIRCRAFT, ETC.
(a) If an Event of Default shall have occurred and be
continuing and the Equipment Notes have been accelerated, at the request of the
Mortgagee, the Owner shall promptly execute and deliver to the Mortgagee such
instruments of title and other documents as the Mortgagee may deem necessary or
advisable to enable the Mortgagee or an agent or representative designated by
the Mortgagee, at such time or times and place or places as the Mortgagee may
specify, to obtain possession of all or any part of the Collateral to which the
Mortgagee shall at the time be entitled hereunder. If the Owner shall for any
reason fail to execute and deliver such instruments and documents after such
request by the Mortgagee, the Mortgagee may (i) obtain a judgment conferring on
the Mortgagee the right to immediate possession and requiring the Owner to
execute and deliver such instruments and documents to the Mortgagee, to the
entry of which judgment the Owner hereby specifically consents to the fullest
extent permitted by Law, and (ii) pursue all or part of such Collateral wherever
it may be found and may enter any of the premises of Owner wherever such
Collateral may be or be supposed to be and search for such Collateral and take
possession of and remove such Collateral. All expenses of obtaining such
judgment or of pursuing, searching for and taking such property shall, until
paid, be secured by the Lien of this Trust Indenture.
(b) Upon every such taking of possession, the
Mortgagee may, from time to time, at the expense of the Collateral, make all
such expenditures for maintenance, use, operation, storage, insurance, leasing,
control, management, disposition, modifications or alterations to and of the
Collateral, as it may deem proper. In each such case, the Mortgagee shall have
the right to maintain, use, operate, store, insure, lease, control, manage,
dispose of, modify or alter the Collateral and to exercise all rights and powers
of the Owner relating to the Collateral, as the Mortgagee shall deem best,
including the right to enter into any and all such agreements with respect to
the maintenance, use, operation, storage, insurance, leasing, control,
management, disposition, modification or alteration of the Collateral or any
part thereof as the Mortgagee may determine, and the Mortgagee shall be entitled
to collect and receive directly all rents, revenues and other proceeds of the
Collateral and every part thereof, without prejudice, however, to the right of
the Mortgagee under any provision of this Trust Indenture to collect and receive
all cash held by, or required to be deposited with, the Mortgagee hereunder.
Such rents, revenues and other proceeds shall be applied to pay the expenses of
the maintenance, use, operation, storage, insurance, leasing, control,
management, disposition, improvement, modification or alteration of the
Collateral and of conducting the business thereof, and to make all payments
which the Mortgagee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Collateral or any part
thereof (including the employment of engineers and accountants to examine,
inspect and make reports upon the properties and books and records of the
Owner), and all other payments which the Mortgagee may be required or authorized
to make under any provision of this Trust Indenture, as well as just and
reasonable compensation for the services of the Mortgagee, and of all persons
properly engaged and employed by the Mortgagee with respect hereto.
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SECTION 5.04. REMEDIES CUMULATIVE
Each and every right, power and remedy given to the Mortgagee
specifically or otherwise in this Trust Indenture shall be cumulative and shall
be in addition to every other right, power and remedy herein specifically given
or now or hereafter existing at Law, in equity or by statute, and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often and in such order as may be
deemed expedient by the Mortgagee, 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 Mortgagee in the exercise of any right,
remedy or power or in the pursuance of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of the
Owner or to be an acquiescence therein.
SECTION 5.05. DISCONTINUANCE OF PROCEEDINGS
In case the Mortgagee shall have instituted any proceeding to
enforce any right, power or remedy under this Trust 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
Mortgagee, then and in every such case the Owner and the Mortgagee 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 Owner or the Mortgagee shall continue as if no such
proceedings had been instituted.
SECTION 5.06. WAIVER OF PAST DEFAULTS
Upon written instruction from a Majority in Interest of Note
Holders, the Mortgagee 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 this Trust Indenture, but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon; provided,
that in the absence of written instructions from all the Note Holders, the
Mortgagee shall not waive any Default (i) in the payment of the Original Amount,
Make-Whole Amount, if any, and interest and other amounts due under any
Equipment Note then outstanding, or (ii) in respect of a covenant or provision
hereof which, under Article X hereof, cannot be modified or amended without the
consent of each Note Holder.
SECTION 5.07. APPOINTMENT OF RECEIVER
The Mortgagee shall, as a matter of right, be entitled to the
appointment of a receiver (who may be the Mortgagee or any successor or nominee
thereof) for all or any part of the Collateral, whether such receivership be
incidental to a proposed sale of the Collateral or the taking of possession
thereof or otherwise, and the Owner hereby consents to the appointment of such a
receiver and will not oppose any such appointment. Any receiver appointed for
all or any part of the Collateral shall be entitled to exercise all the rights
and powers of the Mortgagee with respect to the Collateral.
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SECTION 5.08. MORTGAGEE AUTHORIZED TO EXECUTE BILLS OF SALE,
ETC.
The Owner irrevocably appoints, while an Event of Default has
occurred and is continuing, the Mortgagee the true and lawful attorney-in-fact
of the Owner (which appointment is coupled with an interest) in its name and
stead and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement of the Lien of this Trust Indenture,
whether pursuant to foreclosure or power of sale, assignments and other
instruments as may be necessary or appropriate, with full power of substitution,
the Owner hereby ratifying and confirming all that such attorney or any
substitute shall do by virtue hereof in accordance with applicable law.
Nevertheless, if so requested by the Mortgagee or any purchaser, the Owner shall
ratify and confirm any such sale, assignment, transfer or delivery, by executing
and delivering to the Mortgagee 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.
SECTION 5.09. RIGHTS OF NOTE HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Trust Indenture,
the right of any Note Holder to receive payment of principal of, and premium, if
any, and interest on an Equipment Note on or after the respective due dates
expressed in such Equipment Note, or to bring suit for the enforcement of any
such payment on or after such respective dates in accordance with the terms
hereof, shall not be impaired or affected without the consent of such Note
Holder.
ARTICLE VI
DUTIES OF THE MORTGAGEE
SECTION 6.01. NOTICE OF EVENT OF DEFAULT
If the Mortgagee shall have Actual Knowledge of an Event of
Default or of a Default arising from a failure to pay any installment of
principal and interest on any Equipment Note, the Mortgagee shall give prompt
written notice thereof to each Note Holder. Subject to the terms of Sections
5.06, 6.02 and 6.03 hereof, the Mortgagee shall take such action, or refrain
from taking such action, with respect to such Event of Default or Default
(including with respect to the exercise of any rights or remedies hereunder) as
the Mortgagee shall be instructed in writing by a Majority in Interest of Note
Holders. Subject to the provisions of Section 6.03, if the Mortgagee shall not
have received instructions as above provided within 20 days after mailing notice
of such Event of Default to the Note Holders, the Mortgagee may, subject to
instructions thereafter received pursuant to the preceding provisions of this
Section 6.01, 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 or Default as it shall determine advisable in the best
interests of the Note Holders; provided, however, that the Mortgagee may not
sell the Aircraft or any Engine without the consent of a Majority in Interest of
Note Holders. For all purposes of this Trust Indenture, in the absence of Actual
Knowledge on the part of the Mortgagee, the Mortgagee shall not be deemed to
have knowledge of a Default or an Event of Default (except, the failure of Owner
to pay any installment of principal or interest within one
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Business Day after the same shall become due, which failure shall constitute
knowledge of a Default) unless notified in writing by the Owner or one or more
Note Holders.
SECTION 6.02. ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND
LIMITATIONS
Subject to the terms of Sections 5.02(a), 5.06, 6.01 and 6.03
hereof, upon the written instructions at any time and from time to time of a
Majority in Interest of Note Holders, the Mortgagee shall, subject to the terms
of this Section 6.02, take such of the following actions as may be specified in
such instructions: (i) give such notice or direction or exercise such right,
remedy or power hereunder as shall be specified in such instructions and (ii)
give such notice or direction or exercise such right, remedy or power hereunder
with respect to any part of the Collateral as shall be specified in such
instructions; it being understood that without the written instructions of a
Majority in Interest of Note Holders, the Mortgagee shall not, except as
provided in Section 6.01, approve any such matter as satisfactory to the
Mortgagee.
The Mortgagee will execute and the Owner will file such
continuation statements with respect to financing statements relating to the
security interest created hereunder in the Collateral as may be specified from
time to time in written instructions of a Majority in Interest of Note Holders
(which instructions shall be accompanied by the form of such continuation
statement so to be filed). The Mortgagee will furnish to each Note Holder,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates and other instruments furnished to the Mortgagee
hereunder.
SECTION 6.03. INDEMNIFICATION
The Mortgagee shall not be required to take any action or
refrain from taking any action under Section 6.01 (other than the first sentence
thereof), 6.02 or Article V hereof unless the Mortgagee shall have been
indemnified to its reasonable satisfaction against any liability, cost or
expense (including counsel fees) which may be incurred in connection therewith
pursuant to a written agreement with one or more Note Holders. The Mortgagee
agrees that it shall look solely to the Note Holders for the satisfaction of any
indemnity (except expenses for foreclosure of the type referred to in clause
"First" of Section 3.03 hereof) owed to it pursuant to this Section 6.03. The
Mortgagee shall not be under any obligation to take any action under this Trust
Indenture or any other Operative Agreement and nothing herein or therein shall
require the Mortgagee to expend or risk its own funds or otherwise incur the
risk of any financial liability in the performance of any of its rights or
powers if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it (the written indemnity of any Note Holder who is a QIB, signed by
an authorized officer thereof, in favor of, delivered to and in form reasonably
satisfactory to the Mortgagee shall be accepted as reasonable assurance of
adequate indemnity). The Mortgagee shall not be required to take any action
under Section 6.01 (other than the first sentence thereof) or 6.02 or Article V
hereof, nor shall any other provision of this Trust Indenture or any other
Operative Agreement be deemed to impose a duty on the Mortgagee to take any
action, if the Mortgagee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to Law.
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SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN TRUST INDENTURE
OR INSTRUCTIONS
The Mortgagee shall not have any duty or obligation to use,
operate, store, lease, control, manage, sell, 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 Trust
Indenture or any part of the Collateral, except as expressly provided by the
terms of this Trust Indenture or as expressly provided in written instructions
from Note Holders as provided in this Trust Indenture; and no implied duties or
obligations shall be read into this Trust Indenture against the Mortgagee. The
Mortgagee agrees that it will in its individual capacity and at its own cost and
expense (but without any right of indemnity in respect of any such cost or
expense under Section 8.01 hereof), promptly take such action as may be
necessary duly to discharge all liens and encumbrances on any part of the
Collateral which result from claims against it in its individual capacity not
related to the administration of the Collateral or any other transaction
pursuant to this Trust Indenture or any document included in the Collateral.
SECTION 6.05. NO ACTION EXCEPT UNDER TRUST INDENTURE OR
INSTRUCTIONS
The Mortgagee will not use, operate, store, lease, control,
manage, sell, 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 Mortgagee pursuant to this Trust Indenture and in
accordance with the express terms hereof.
SECTION 6.06. INVESTMENT OF AMOUNTS HELD BY MORTGAGEE
Any amounts held by the Mortgagee pursuant to the proviso to
the first sentence of Section 3.01, pursuant to Section 3.02, or pursuant to any
provision of any other Operative Agreement providing for amounts to be held by
the Mortgagee which are not distributed pursuant to the other provisions of
Article III hereof shall be invested by the Mortgagee from time to time in Cash
Equivalents as directed by the Owner so long as the Mortgagee may acquire the
same using its best efforts. All Cash Equivalents held by the Mortgagee pursuant
to this Section 6.06 shall either be (a) registered in the name of, payable to
the order of, or specially endorsed to, the Mortgagee, or (b) held in an
Eligible Account. Unless otherwise expressly provided in this Trust Indenture,
any income realized as a result of any such investment, net of the Mortgagee's
reasonable fees and expenses in making such investment, shall be held and
applied by the Mortgagee in the same manner as the principal amount of such
investment is to be applied and any losses, net of earnings and such reasonable
fees and expenses, shall be charged against the principal amount invested. The
Mortgagee shall not be liable for any loss resulting from any investment
required to be made by it under this Trust Indenture other than by reason of its
willful misconduct or gross negligence, and any such investment may be sold
(without regard to its maturity) by the Mortgagee without instructions whenever
such sale is necessary to make a distribution required by this Trust Indenture.
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ARTICLE VII
THE MORTGAGEE
SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES
The Mortgagee accepts the duties hereby created and applicable
to it and agrees to perform the same but only upon the terms of this Trust
Indenture and agrees to receive and disburse all monies constituting part of the
Collateral in accordance with the terms hereof. The Mortgagee, in its individual
capacity, shall not be answerable or accountable under any circumstances, except
(i) for its own willful misconduct or gross negligence (other than for the
handling of funds, for which the standard of accountability shall be willful
misconduct or negligence), (ii) as provided in the fourth sentence of Section
2.04(a) hereof and the last sentence of Section 6.04 hereof, and (iii) from the
inaccuracy of any representation or warranty of the Mortgagee (in its individual
capacity) in the Participation Agreement or expressly made hereunder.
SECTION 7.02. ABSENCE OF DUTIES
Except in accordance with written instructions furnished
pursuant to Section 6.01 or 6.02 hereof, and except as provided in, and without
limiting the generality of, Sections 6.03, 6.04 and 7.07 hereof, the Mortgagee
shall have no duty (i) to see to any registration of the Aircraft or any
recording or filing of this Trust Indenture or any other document, or to see to
the maintenance of any such registration, recording or filing, (ii) to see to
any insurance on the Aircraft or to effect or maintain any such insurance,
whether or not Owner shall be in default with respect thereto, (iii) to see to
the payment or discharge of any lien or encumbrance of any kind against any part
of the Collateral, (iv) to confirm, verify or inquire into the failure to
receive any financial statements from Owner, or (v) to inspect the Aircraft at
any time or ascertain or inquire as to the performance or observance of any of
Owner's covenants herein or any Permitted Lessee's covenants under any assigned
Permitted Lease with respect to the Aircraft.
SECTION 7.03. NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT
OR DOCUMENTS
THE MORTGAGEE IN ITS INDIVIDUAL OR TRUST CAPACITY DOES NOT
MAKE AND SHALL NOT BE DEEMED TO HAVE MADE AND HEREBY EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR
NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK
OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER. The Mortgagee, in its
individual or trust capacities, does not make or shall not be deemed to have
made any representation or warranty as to the validity, legality or
enforceability of this Trust Indenture, the Participation
45
Agreement, the Equipment Notes, or the Purchase Agreement, or as to the
correctness of any statement contained in any thereof, except for the
representations and warranties of the Owner made in its individual capacity and
the representations and warranties of the Mortgagee in its individual capacity,
in each case expressly made in this Trust Indenture or in the Participation
Agreement. The Note Holders make no representation or warranty hereunder
whatsoever.
SECTION 7.04. NO SEGREGATION OF MONIES; NO INTEREST
Any monies paid to or retained by the Mortgagee pursuant to
any provision hereof and not then required to be distributed to the Note
Holders, or the Owner as provided in Article III hereof need not be segregated
in any manner except to the extent required by Law or Section 6.06 hereof, and
may be deposited under such general conditions as may be prescribed by Law, and
the Mortgagee shall not be liable for any interest thereon (except that the
Mortgagee shall invest all monies held as directed by Owner so long as no Event
of Default has occurred and is continuing (or in the absence of such direction,
by the Majority In Interest of Note Holders) in Cash Equivalents); provided,
however, that any payments received, or applied hereunder, by the Mortgagee
shall be accounted for by the Mortgagee so that any portion thereof paid or
applied pursuant hereto shall be identifiable as to the source thereof.
SECTION 7.05. RELIANCE; AGREEMENTS; ADVICE OF COUNSEL
The Mortgagee 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 believed by
it to be genuine and believed by it to be signed by the proper party or parties.
The Mortgagee may accept a copy of a resolution of the Board of Directors (or
Executive Committee thereof) of the Owner, certified by the Secretary or an
Assistant Secretary thereof 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 the aggregate unpaid Original Amount of
Equipment Notes outstanding as of any date, the Owner may for all purposes
hereof rely on a certificate signed by any Vice President or other authorized
corporate trust officer of the Mortgagee. As to any fact or matter relating to
the Owner the manner of the ascertainment of which is not specifically described
herein, the Mortgagee may for all purposes hereof rely on a certificate, signed
by a duly authorized officer of the Owner, as to such fact or matter, and such
certificate shall constitute full protection to the Mortgagee 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 Mortgagee may execute any of the
trusts or powers hereof and perform its powers and duties hereunder directly or
through agents or attorneys and may, at the expense of the Collateral, advise
with counsel, accountants and other skilled persons to be selected and retained
by it, and the Mortgagee shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the written advice or written
opinion of any such counsel, accountants or other skilled persons.
SECTION 7.06. COMPENSATION
The Mortgagee shall be entitled to reasonable compensation,
including expenses and disbursements (including the reasonable fees and expenses
of counsel), for all services rendered hereunder and shall, on and subsequent to
an Event of Default hereunder, have a
46
priority claim on the Collateral for the payment of such compensation, to the
extent that such compensation shall not be paid by Owner, and shall have the
right, on and subsequent to an Event of Default hereunder, to use or apply any
monies held by it hereunder in the Collateral toward such payments. The
Mortgagee agrees that it shall have no right against the Note Holders for any
fee as compensation for its services as trustee under this Trust Indenture.
SECTION 7.07. INSTRUCTIONS FROM NOTE HOLDERS
In the administration of the trusts created hereunder, the
Mortgagee shall have the right to seek instructions from a Majority in Interest
of Note Holders should any provision of this Trust Indenture appear to conflict
with any other provision herein or should the Mortgagee's duties or obligations
hereunder be unclear, and the Mortgagee shall incur no liability in refraining
from acting until it receives such instructions. The Mortgagee shall be fully
protected for acting in accordance with any instructions received under this
Section 7.07.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. SCOPE OF INDEMNIFICATION
The Mortgagee shall be indemnified by the Owner to the extent
and in the manner provided in Section 8 of the Participation Agreement.
ARTICLE IX
SUCCESSOR AND SEPARATE TRUSTEES
SECTION 9.01. RESIGNATION OF MORTGAGEE; APPOINTMENT OF
SUCCESSOR
(a) The Mortgagee or any successor thereto may resign
at any time without cause by giving at least 30 days' prior written notice to
the Owner and each Note Holder, such resignation to be effective upon the
acceptance of the trusteeship by a successor Mortgagee. In addition, a Majority
in Interest of Note Holders may at any time (but only with the consent of Owner,
which consent shall not be unreasonably withheld, except that such consent shall
not be necessary if an Event of Default is continuing) remove the Mortgagee
without cause by an instrument in writing delivered to the Owner and the
Mortgagee, and the Mortgagee shall promptly notify each Note Holder thereof in
writing, such removal to be effective upon the acceptance of the trusteeship by
a successor Mortgagee. In the case of the resignation or removal of the
Mortgagee, a Majority in Interest of Note Holders may appoint a successor
Mortgagee by an instrument signed by such holders, which successor, so long as
no Event of Default shall have occurred and be continuing, shall be subject to
Owner's reasonable approval. If a successor Mortgagee shall not have been
appointed within 30 days after such notice of resignation or removal, the
Mortgagee, the Owner or any Note Holder may apply to any court of competent
jurisdiction to appoint a successor Mortgagee to act until such time, if any, as
a successor shall have been appointed as above provided. The successor Mortgagee
so appointed by such court shall immediately and without further act be
superseded by any successor Mortgagee appointed as above provided.
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(b) Any successor Mortgagee, however appointed, shall
execute and deliver to the Owner and the predecessor Mortgagee an instrument
accepting such appointment and assuming the obligations of the Mortgagee arising
from and after the time of such appointment, and thereupon such successor
Mortgagee, without further act, shall become vested with all the estates,
properties, rights, powers and duties of the predecessor Mortgagee hereunder in
the trust hereunder applicable to it with like effect as if originally named the
Mortgagee herein; but nevertheless upon the written request of such successor
Mortgagee, such predecessor Mortgagee shall execute and deliver an instrument
transferring to such successor Mortgagee, upon the trusts herein expressed
applicable to it, all the estates, properties, rights and powers of such
predecessor Mortgagee, and such predecessor Mortgagee shall duly assign,
transfer, deliver and pay over to such successor Mortgagee all monies or other
property then held by such predecessor Mortgagee hereunder.
(c) Any successor Mortgagee, however appointed, shall
be a bank or trust company having its principal place of business in the Borough
of Manhattan, City and State of New York; Chicago, Illinois; Hartford,
Connecticut; Wilmington, Delaware; or Boston, Massachusetts and having (or whose
obligations under the Operative Agreements are guaranteed by an affiliated
entity having) a combined capital and surplus of at least $100,000,000, if there
be such an institution willing, able and legally qualified to perform the duties
of the Mortgagee hereunder upon reasonable or customary terms.
(d) Any corporation into which the Mortgagee 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 Mortgagee
shall be a party, or any corporation to which substantially all the corporate
trust business of the Mortgagee may be transferred, shall, subject to the terms
of paragraph (c) of this Section 9.01, be a successor Mortgagee and the
Mortgagee under this Trust Indenture without further act.
SECTION 9.02. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES
(a) Whenever (i) the Mortgagee 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, this
Trust Indenture, any other Indenture Agreement, the Equipment Notes or any of
the transactions contemplated by the Participation Agreement, (ii) the Mortgagee
shall be advised by counsel satisfactory to it that it is so necessary or
prudent in the interests of the Note Holders (and the Mortgagee shall so advise
the Owner), or (iii) the Mortgagee shall have been requested to do so by a
Majority in Interest of Note Holders, then in any such case, the Mortgagee and,
upon the written request of the Mortgagee, the Owner, 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 bank or
trust companies or one or more persons approved by the Mortgagee, either to act
jointly with the Mortgagee 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
48
consistent with this Trust Indenture as may be provided in such supplemental
indenture or other instruments as the Mortgagee or a Majority in Interest of
Note Holders 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 9.02. If the Owner shall not have taken any action
requested of it under this Section 9.02(a) that is permitted or required by its
terms within 15 days after the receipt of a written request from the Mortgagee
so to do, or if an Event of Default shall have occurred and be continuing, the
Mortgagee may act under the foregoing provisions of this Section 9.02(a) without
the concurrence of the Owner, and the Owner hereby irrevocably appoints (which
appointment is coupled with an interest) the Mortgagee, its agent and
attorney-in-fact to act for it under the foregoing provisions of this Section
9.02(a) in either of such contingencies. The Mortgagee 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. In case any additional or separate trustee
appointed under this Section 9.02(a) shall die, 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
Mortgagee until a successor additional or separate trustee is appointed as
provided in this Section 9.02(a).
(b) No additional or separate trustee shall be
entitled to exercise any of the rights, powers, duties and obligations conferred
upon the Mortgagee 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
Agreement to the Mortgagee shall be promptly paid over by it to the Mortgagee.
All other rights, powers, duties and obligations conferred or imposed upon any
additional or separate trustee shall be exercised or performed by the Mortgagee
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 Mortgagee 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 Mortgagee or a Majority in Interest of Note Holders. No
trustee hereunder shall be personally liable by reason of any act or omission of
any other trustee hereunder, except that the Mortgagee shall be liable for the
consequences of its lack of reasonable care in selecting, and the Mortgagee's
own actions in acting with, any additional or separate trustee. Each additional
or separate trustee appointed pursuant to this Section 9.02 shall be subject to,
and shall have the benefit of Articles V through IX and Article XI hereof
insofar as they apply to the Mortgagee. The powers of any additional or separate
trustee appointed pursuant to this Section 9.02 shall not in any case exceed
those of the Mortgagee hereunder.
(c) If at any time the Mortgagee shall deem it no
longer necessary or in order to conform to any such Law or take any such action
or shall be advised by such counsel that it is no longer so necessary or
desirable in the interest of the Note Holders, or in the event that the
Mortgagee shall have been requested to do so in writing by a Majority in
Interest of Note Holders, the Mortgagee and, upon the written request of the
Mortgagee, the Owner, 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 Mortgagee may act on behalf of the Owner
under this Section 9.02(c) when and to the extent it could so act under Section
9.02(a) hereof.
49
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE
AND OTHER DOCUMENTS
SECTION 10.01. INSTRUCTIONS OF MAJORITY; LIMITATIONS
(a) The Mortgagee agrees with the Note Holders that
it shall not enter into any amendment, waiver or modification of, supplement or
consent to this Trust Indenture, or any other Operative Agreement to which it is
a party, unless such supplement, amendment, waiver, modification or consent is
consented to in writing by a Majority in Interest of Note Holders, but upon the
written request of a Majority in Interest of Note Holders, the Mortgagee shall
from time to time enter into any such supplement or amendment, or execute and
deliver any such waiver, modification or consent, as may be specified in such
request and as may be (in the case of any such amendment, supplement or
modification), to the extent such agreement is required, agreed to by the Owner
and, as may be appropriate, the Airframe Manufacturer or the Engine
Manufacturer; provided, however, that, without the consent of each holder of an
affected Equipment Note then outstanding and of the Liquidity Provider, no such
amendment, waiver or modification of the terms of, or consent under, any
thereof, shall (i) modify any of the provisions of this Section 10.01, or of
Article II or III or Section 5.01, 5.02(c), 5.02(d), or 6.02 hereof, the
definitions of "Event of Default," "Default," "Majority in Interest of Note
Holders," "Make-Whole Amount" or "Note Holder," or the percentage of Note
Holders required to take or approve any action hereunder, (ii) reduce the
amount, or change the time of payment or method of calculation of any amount, of
Original Amount, Make-Whole Amount, if any, or interest with respect to any
Equipment Note, (iii) reduce, modify or amend any indemnities in favor of the
Mortgagee or the Note Holders (except that the Mortgagee may consent to any
waiver or reduction of an indemnity payable to it), or the other Indenture
Indemnitees or (iv) permit the creation of any Lien on the Trust Indenture
Estate or any part thereof other than Permitted Liens or deprive any Note Holder
of the benefit of the Lien of this Trust Indenture on the Collateral, except as
provided in connection with the exercise of remedies under Article V hereof.
Notwithstanding the foregoing, without the consent of the affected Liquidity
Providers, neither the Owner nor the Mortgagee shall enter into any amendment,
waiver or modification of, supplement or consent to this Trust Indenture or the
other Operative Agreements which shall reduce, modify or amend any indemnities
in favor of such Liquidity Providers.
(b) The Owner and the Mortgagee may enter into one or
more agreements supplemental hereto without the consent of any Note Holder for
any of the following purposes: (i) (a) to cure any defect or inconsistency
herein or in the Equipment Notes, or to make any change not inconsistent with
the provisions hereof (provided that such change does not adversely affect the
interests of any Note Holder in its capacity solely as Note Holder) or (b) to
cure any ambiguity or correct any mistake; (ii) to evidence the succession of
another party as the Owner in accordance with the terms hereof or to evidence
the succession of a new trustee
50
hereunder pursuant hereto, the removal of the trustee hereunder or the
appointment of any co-trustee or co-trustees or any separate or additional
trustee or trustees; (iii) to convey, transfer, assign, mortgage or pledge any
property to or with the Mortgagee or to make any other provisions with respect
to matters or questions arising hereunder so long as such action shall not
adversely affect the interests of any Note Holder in its capacity solely as Note
Holder; (iv) to correct or amplify the description of any property at any time
subject to the Lien of this Trust Indenture or better to assure, convey and
confirm unto the Mortgagee any property subject or required to be subject to the
Lien of this Trust Indenture, the Airframe or Engines or any Replacement
Airframe or Replacement Engine; (v) to add to the covenants of the Owner for the
benefit of the Note Holders, or to surrender any rights or power herein
conferred upon the Owner; (vi) to add to the rights of the Note Holders; (vii)
to provide for the issuance of Series C Equipment Notes and Pass Through
Certificates issued by the Class C Pass Through Trust and to make changes
relating thereto, provided that the Series C Equipment Notes are issued in
accordance with the Participation Agreement; and (viii) to include on the
Equipment Notes any legend as may be required by Law.
SECTION 10.02. MORTGAGEE PROTECTED
If, in the opinion of the institution acting as Mortgagee
hereunder, any document required to be executed by it pursuant to the terms of
Section 10.01 hereof affects any right, duty, immunity or indemnity with respect
to such institution under this Trust Indenture, such institution may in its
discretion decline to execute such document.
SECTION 10.03. DOCUMENTS MAILED TO NOTE HOLDERS
Promptly after the execution by the Owner or the Mortgagee of
any document entered into pursuant to Section 10.01 hereof, the Mortgagee shall
mail, by first class mail, postage prepaid, a copy thereof to Owner (if not a
party thereto) and to each Note Holder at its address last set forth in the
Equipment Note Register, but the failure of the Mortgagee to mail such copies
shall not impair or affect the validity of such document.
SECTION 10.04. NO REQUEST NECESSARY FOR TRUST INDENTURE
SUPPLEMENT
No written request or consent of the Note Holders pursuant to
Section 10.01 hereof shall be required to enable the Mortgagee to execute and
deliver a Trust Indenture Supplement specifically required by the terms hereof.
51
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. TERMINATION OF TRUST INDENTURE
Upon (or at any time after):
(x) payment in full of the Original Amount of, Make-Whole
Amount, if any, and interest on and all other amounts due under all Equipment
Notes and provided that all other Secured Obligations due to the Indenture
Indemnitees, the Note Holders and the Mortgagee hereunder or under the
Participation Agreement or other Operative Agreement shall have been satisfied
or paid in full,
(y) receipt of Ratings Confirmations and after there has been
irrevocably deposited with the Mortgagee as funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Note Holders, (1)
money in an amount, or (2) Cash Equivalents described in clause (a) of the
definition thereof which, 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 (3) a combination of money and Cash
Equivalents referred to in the foregoing clause (2), sufficient, in the opinion
of a nationally recognized firm of independent certified public accountants
expressed in a written certification thereof delivered to the Mortgagee, to pay
in full the outstanding principal amount of, Make-Whole Amount, if any, and
interest on the Equipment Notes on the dates such amounts are due (including as
a result of redemption in respect of which irrevocable notice has been given to
the Mortgagee on or prior to the date of such deposit); provided, however, that
(A) upon the making of the deposit referred to above in this
clause (y), the right of the Owner to cause the redemption of Equipment
Notes (except a redemption in respect of which irrevocable notice has
therefore been given) shall terminate;
(B) the Owner has delivered to each Trustee and the Mortgagee
an officer's certificate and an opinion of counsel (both counsel and
opinion to be reasonably acceptable to the Mortgagee) to the effect
that after the Closing Date there has been published by the Internal
Revenue Service a ruling to the effect that Certificateholders will not
recognize income, gain or loss for Federal income tax purposes as a
result of the exercise by the Owner of its option under Clause (y) of
this Section 11.01 and will be subject to Federal income tax on the
same amount and in the same manner and at the same times, as would have
been the case if such option had not been exercised;
(C) all other amounts then due and payable hereunder have been
paid; and
(D) the Owner has delivered to the Mortgagee 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 Trust Indenture contemplated by this Section 11.01 have been
complied with;
the Owner shall direct the Mortgagee to execute and deliver to or as directed in
writing by the Owner an appropriate instrument releasing the Aircraft and the
Engines and all other Collateral from the Lien of the Trust Indenture and the
Mortgagee shall execute and deliver such instrument as aforesaid; provided,
however, that this Trust Indenture and the trusts created hereby shall earlier
terminate and this Trust Indenture shall be of no further force or effect upon
any sale or other final disposition by the Mortgagee of all property
constituting part of the Collateral and the final distribution by the Mortgagee
of all monies or other property or proceeds constituting part of the Collateral
in accordance with the terms hereof. Except as aforesaid
52
otherwise provided, this Trust Indenture and the trusts created hereby shall
continue in full force and effect in accordance with the terms hereof.
SECTION 11.02. NO LEGAL TITLE TO COLLATERAL IN NOTE HOLDERS
No holder of an Equipment Note 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 Note Holder in and to
the Collateral or hereunder shall operate to terminate this Trust Indenture or
entitle such holder 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 11.03. SALE OF AIRCRAFT BY MORTGAGEE IS BINDING
Any sale or other conveyance of the Collateral, or any part
thereof (including any part thereof or interest therein), by the Mortgagee made
pursuant to the terms of this Trust Indenture shall bind the Note Holders and
shall be effective to transfer or convey all right, title and interest of the
Mortgagee, the Owner and such holders in and to such Collateral or part thereof.
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
Mortgagee.
SECTION 11.04. TRUST INDENTURE FOR BENEFIT OF OWNER,
MORTGAGEE, NOTE HOLDERS AND THE OTHER INDENTURE INDEMNITEES
Nothing in this Trust Indenture, whether express or implied,
shall be construed to give any person other than the Owner, the Mortgagee, the
Note Holders and the other Indenture Indemnitees, any legal or equitable right,
remedy or claim under or in respect of this Trust Indenture, except that the
persons referred to in the last paragraph of Section 4.02(b) shall be third
party beneficiaries of such paragraph.
SECTION 11.05. NOTICES
Unless otherwise expressly specified by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers or
documents provided or permitted by this Trust Indenture to be made, given,
furnished or filed shall be in writing, personally delivered or mailed by
certified mail, postage prepaid, or by facsimile or confirmed telex, and (i) if
to the Owner, addressed to it at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Treasurer, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if
to Mortgagee, addressed to it at its office at ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Administration, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, and (iii) if to any Note Holder
or any Indenture Indemnitee, addressed to such party at such address as such
party shall have furnished by notice to the Owner and the Mortgagee, or, until
an address is so furnished, addressed to the address of such party (if any) set
forth on Schedule 1 to the Participation Agreement or in the Equipment Note
Register. Whenever any notice in writing is required to be given by the Owner or
the Mortgagee or any Note Holder to any of the other of them, such notice shall
be deemed given and such requirement satisfied when such notice is received, or
if such notice is mailed by certified mail, postage prepaid, three Business Days
after being mailed, addressed as provided above. Any party hereto may change the
address to which notices to such party will be sent by giving notice of such
change to the other parties to this Trust Indenture.
53
SECTION 11.06. SEVERABILITY
Any provision of this Trust Indenture which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof. Any such prohibition or unenforceability in any
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 11.07. NO ORAL MODIFICATION OR CONTINUING WAIVERS
No term or provision of this Trust Indenture or the Equipment
Notes may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the Owner and the Mortgagee, in compliance with
Section 10.01 hereof. 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 11.08. SUCCESSORS AND ASSIGNS
All covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, each of the parties hereto and the permitted
successors and assigns of each, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by any Note Holder
shall bind the successors and assigns of such holder. Each Note Holder by its
acceptance of an Equipment Note agrees to be bound by this Trust Indenture and
all provisions of the Operative Agreements applicable to a Note Holder.
SECTION 11.09. 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 11.10. NORMAL COMMERCIAL RELATIONS
Anything contained in this Trust Indenture to the contrary
notwithstanding. Owner and Mortgagee may conduct any banking or other financial
transactions, and have banking or other commercial relationships, with Owner,
fully to the same extent as if this Trust Indenture were not in effect,
including without limitation the making of loans or other extensions of credit
to Owner for any purpose whatsoever, whether related to any of the transactions
contemplated hereby or otherwise.
SECTION 11.11. GOVERNING LAW; COUNTERPART FORM
THIS TRUST INDENTURE SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
54
PERFORMANCE. THIS TRUST INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK.
This Trust Indenture may be executed by the parties hereto in separate
counterparts (or upon separate signature pages bound together into one or more
counterparts), each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.12. VOTING BY NOTE HOLDERS
All votes of the Note Holders shall be governed by a vote of a
Majority in Interest of Note Holders, except as otherwise provided herein.
SECTION 11.13. BANKRUPTCY
It is the intention of the parties that the Mortgagee shall be
entitled to the benefits of Section 1110 with respect to the right to take
possession of the Aircraft, Airframe, Engines and Parts and to enforce any of
its other rights or remedies as provided herein in the event of a case under
Chapter 11 of the Bankruptcy Code in which Owner is a debtor, and in any
instance where more than one construction is possible of the terms and
conditions hereof or any other pertinent Operative Agreement, each such party
agrees that a construction which would preserve such benefits shall control over
any construction which would not preserve such benefits.
55
IN WITNESS WHEREOF, the parties hereto have caused this
Trust
Indenture and Mortgage to be duly executed by their respective officers thereof
duly authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.
By:
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President - Finance
and Treasurer
WILMINGTON TRUST COMPANY,
as Mortgagee
By:
-----------------------------------
Name:
Title:
56
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly
provided, a reference to:
(i) each of "Owner," "Mortgagee," "Note Holder" or any other
person includes, without prejudice to the provisions of any
Operative Agreement, any successor in interest to it and any
permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words
importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule
or exhibit thereto, or any other part thereof, includes,
without prejudice to the provisions of any Operative
Agreement, that agreement, instrument or document, or annex,
schedule or exhibit, or part, respectively, as amended,
modified or supplemented from time to time in accordance with
its terms and in accordance with the Operative Agreements, and
any agreement, instrument or document entered into in
substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or
reenacted prior to the Closing Date, and thereafter from time
to time;
(v) the words "Agreement," "this Agreement," "hereby," "herein,"
"hereto," "hereof" and "hereunder" and words of similar import
when used in any Operative Agreement refer to such Operative
Agreement as a whole and not to any particular provision of
such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of
similar import when used in any Operative Agreement, with
respect to any matter or thing, mean including, without
limitation, such matter or thing; and
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in any
Operative Agreement, or in any annex thereto, is a reference
to a section of, or an exhibit, an annex or a schedule to,
such Operative Agreement or such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative
Agreement is incorporated in, and shall be deemed to be a part of, such
Operative Agreement.
(c) Unless otherwise defined or specified in any Operative
Agreement, all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for
convenience only and shall not in any way affect the construction of, or be
taken into consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence
and continuance of a Default or Event of Default referred to in Section 5.01(v),
(vi) or (vii) shall not be deemed to prohibit the Owner from taking any action
or exercising any right that is conditioned on no Special Default, Default or
Event of Default having occurred and be continuing if such Special Default,
Default or Event of Default consists of the institution of reorganization
proceedings with respect to Owner under Chapter 11 of the Bankruptcy Code and
the trustee or debtor-in-possession in such proceedings shall have agreed to
perform its obligations under the Trust Indenture with the approval of the
applicable court and thereafter shall have continued to perform such obligations
in accordance with Section 1110.
DEFINED TERMS
"Act" means part A of subtitle VII of title 49, United States
Code.
"Actual Knowledge" means (a) as it applies to Mortgagee,
actual knowledge of a responsible officer in the Corporate Trust Office, and (b)
as it applies to Owner, actual knowledge of a Vice President or more senior
officer of Owner or any other officer of Owner having responsibility for the
transactions contemplated by the Operative Agreements; provided that each of
Owner and Mortgagee shall be deemed to have "Actual Knowledge" of any matter as
to which it has received notice from Owner, any Note Holder or Mortgagee, such
notice having been given pursuant to Section 11.05 of the Trust Indenture.
"Affiliate" means, with respect to any person, any other
person directly or indirectly controlling, controlled by or under common control
with such person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.
"Aircraft" means, collectively, the Airframe and Engines.
"Aircraft ▇▇▇▇ of Sale" means the full warranty ▇▇▇▇ of sale
covering the Aircraft delivered by Airframe Manufacturer or its Affiliate to
Owner and dated the date of delivery of the Aircraft to Owner pursuant to the
terms of the Purchase Agreement.
"Aircraft Documents" means all technical data, manuals and log
books, and all inspection, modification and overhaul records and other service,
repair, maintenance and technical records that are required by the FAA (or the
relevant Aviation Authority), to be maintained with respect to the Aircraft,
Airframe, Engines or Parts, and such term shall include
2
all additions, renewals, revisions and replacements of any such materials from
time to time made, or required to be made, by the FAA (or other Aviation
Authority) regulations, and in each case in whatever form and by whatever means
or medium (including, without limitation, microfiche, microfilm, paper or
computer disk) such materials may be maintained or retained by or on behalf of
Owner (provided, that all such materials shall be maintained in the English
language).
"Airframe" means (a) the Aircraft (excluding Engines or
engines from time to time installed thereon) manufactured by Airframe
Manufacturer and identified by Airframe Manufacturer's model number, United
States registration number and Airframe Manufacturer's serial number set forth
in the initial Trust Indenture Supplement and any Replacement Airframe and (b)
any and all Parts incorporated or installed in or attached or appurtenant to
such airframe, and any and all Parts removed from such airframe, unless the Lien
of the Trust Indenture shall not be applicable to such Parts in accordance with
Section 4.04 of the Trust Indenture. Upon substitution of a Replacement Airframe
under and in accordance with the Trust Indenture, such Replacement Airframe
shall become subject to the Trust Indenture and shall be the "Airframe" for all
purposes of the Trust Indenture and the other Operative Agreements and thereupon
the Airframe for which the substitution is made shall no longer be subject to
the Trust Indenture, and such replaced Airframe shall cease to be the
"Airframe."
"Airframe Manufacturer" means The Boeing Company, a Delaware
corporation.
"Amortization Amount" means, with respect to any Equipment
Note, as of any Payment Date, the amount determined by multiplying the
percentage set forth opposite such Payment Date on the Amortization Schedule by
the Original Amount of such Equipment Note.
"Amortization Schedule" means, with respect to each Equipment
Note, the amortization schedule for such Equipment Note delivered pursuant to
Section 2.02 of the Trust Indenture.
"Applicable Pass Through Trust" means each of the separate
pass through trusts created under the Applicable Pass Through Trust Agreements.
"Applicable Pass Through Trust Agreement" means each of the
separate Pass Through Trust Agreements by and between the Owner and an
Applicable Pass Through Trustee.
"Applicable Pass Through Trustee" means each Pass Through
Trustee that is a party to the Participation Agreement.
"Appraiser" means a firm of internationally recognized,
independent aircraft appraisers.
"Average Life Date" for any Equipment Note shall be the date
which follows the time of determination by a period equal to the Remaining
Weighted Average Life of such Equipment Note. "Remaining Weighted Average Life"
on a given date with respect to any Equipment Note shall be the number of days
equal to the quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining scheduled payment
of principal of such Equipment Note by (ii) the number of days from and
3
including such determination date to but excluding the date on which such
payment of principal is scheduled to be made, by (b) the then outstanding
principal amount of such Equipment Note.
"Aviation Authority" means the FAA or, if the Aircraft is
permitted to be, and is, registered with any other Government Entity under and
in accordance with Section 4.02(e) of the Trust Indenture and Section 6.4.5 of
the Participation Agreement, such other Government Entity.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Sections 101 et seq.
"Basic Pass Through Trust Agreement" means the Pass Through
Trust Agreement, dated as of October 10, 2001 between Owner and Pass Through
Trustee, but does not include any Trust Supplement.
"Beneficial Owner" when used in relation to an Equipment Note
means a Person that, by reason of direct ownership, contract, share ownership or
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"Bills of Sale" means the FAA ▇▇▇▇ of Sale and the Aircraft
▇▇▇▇ of Sale.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required by law to close
in New York, New York, Dallas, Texas or Wilmington, Delaware.
"Cash Equivalents" means the following securities (which shall
mature within 90 days of the date of purchase thereof): (a) direct obligations
of the U.S. Government; (b) obligations fully guaranteed by the U.S. Government;
(c) certificates of deposit issued by, or bankers' acceptances of, or time
deposits or a deposit account with, Mortgagee or any bank, trust company or
national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Ratings Services ("Standard & Poor's") or ▇▇▇▇▇'▇ Investors Service, Inc.
("Moody's") equal to A1 or higher.
"Citizen of the United States" is defined in 49 U.S.C. Section
40102(a)(15).
"Class C Issuance Date" means the date of issuance of the Pass
Through Certificates by the Class C Pass Through Trust.
"Class C Pass Through Trust" means the Southwest Airlines Pass
Through Trust 2001-1C.
4
"Closing" means the closing of the transactions contemplated
by the Participation Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended;
provided that, when used in relation to a Plan, "Code" shall mean the Internal
Revenue Code of 1986 and any regulations and rulings issued thereunder, all as
amended and in effect from time to time.
"Collateral" is defined in the Granting Clause of the Trust
Indenture.
"Consent and Agreement" means the Manufacturer Consent and
Agreement [N700GS], dated as of even date with the Participation Agreement, of
Airframe Manufacturer.
"Corporate Trust Office" means the principal office of
Mortgagee located at Mortgagee's address for notices under the Participation
Agreement or such other office at which Mortgagee's corporate trust business
shall be administered which Mortgagee shall have specified by notice in writing
to Owner and each Note Holder.
"CRAF" means the Civil Reserve Air Fleet Program established
pursuant to 10 U.S.C. Section 9511-13 or any similar substitute program.
"Debt Rate" means, with respect to (i) any Series, the rate
per annum specified for such Series under the heading "Interest Rate" in
Schedule I to the Trust Indenture and (ii) for any other purpose, with respect
to any period, the weighted average interest rate per annum during such period
borne by the outstanding Equipment Notes, excluding any interest payable at the
Payment Due Rate.
"Default" means any event or condition that with the giving of
notice or the lapse of time or both would become an Event of Default.
"Dollars," "United States Dollars" or "$" means the lawful
currency of the United States.
"DOT" means the Department of Transportation of the United
States or any Government Entity succeeding to the functions of such Department
of Transportation.
"Eligible Account" means an account established by and with an
Eligible Institution at the request of the Mortgagee, which institution agrees,
for all purposes of the UCC ~including Article 8 thereof, that (a) such account
shall be a "securities account" (as defined in Section 8-501 of the UCC), (b)
all property (other than cash) credited to such account shall be treated as a
"financial asset" (as defined in Section 8-102(9) of the UCC), (c) the Mortgagee
shall be the "entitlement holder" (as defined in Section 8-102(7) of the UCC) in
respect of such account, (d) it will comply with all entitlement orders issued
by the Mortgagee to the exclusion of the Owner, and (e) the "securities
intermediary jurisdiction" (under Section 8-110(e) of the UCC) shall be the
State of New York.
5
"Eligible Institution" means the corporate trust department of
(a) Wilmington Trust Company, acting solely in its capacity as a "securities
intermediary" (as defined in Section 8-102(14) of the UCC), or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating from Moody's and
Standard & Poor's of at least A-3 or its equivalent.
"Engine" means (a) each of the engines manufactured by Engine
Manufacturer and identified by Engine Manufacturer's model number and Engine
Manufacturer's serial number set forth in the initial Trust Indenture Supplement
and originally installed on the Airframe, and any Replacement Engine, in any
case whether or not from time to time installed on such Airframe or installed on
any other airframe or aircraft, and (b) any and all Parts incorporated or
installed in or attached or appurtenant to such engine, and any and all Parts
removed from such engine, unless the Lien of the Trust Indenture shall not apply
to such Parts in accordance with Section 4.04 of the Trust Indenture. Upon
substitution of a Replacement Engine under and in accordance with the Trust
Indenture, such Replacement Engine shall become subject to the Trust Indenture
and shall be an "Engine" for all purposes of the Trust Indenture and the other
Operative Agreements and thereupon the Engine for which the substitution is made
shall no longer be subject to the Trust Indenture, and such replaced Engine
shall cease to be an "Engine."
"Engine Consent and Agreement" means the Engine Manufacturer
Consent and Agreement [N700GS] dated as of even date with the Participation
Agreement, of Engine Manufacturer.
"Engine Manufacturer" means CFM International, Inc., a
corporation organized under the laws of Delaware.
"Equipment Note Register" is defined in Section 2.07 of the
Trust Indenture.
"Equipment Notes" means and includes any equipment notes
issued under the Trust Indenture in the form specified in Section 2.01 thereof
(as such form may be varied pursuant to the terms of the Trust Indenture) and
any Equipment Note issued under the Trust Indenture in exchange for or
replacement of any Equipment Note.
"ERISA" means the Employee Retirement Income Security Act of
1974, and any regulations and rulings issued thereunder all as amended and in
effect from time to time.
"Event of Default" is defined in Section 5.01 of the Trust
Indenture.
"Event of Loss" means, with respect to the Aircraft, Airframe
or any Engine, any of the following circumstances, conditions or events with
respect to such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property
beyond economic repair or rendition of such property permanently unfit
for normal use by Owner;
6
(b) the actual or constructive total loss of such property or
any damage to such property, or requisition of title or use of such
property, which results in an insurance settlement with respect to such
property on the basis of a total loss or constructive or compromised
total loss;
(c) any theft, hijacking or disappearance of such property for
a period of 180 consecutive days or more;
(d) any seizure, condemnation, confiscation, taking or
requisition (including loss of title) of such property by any
Government Entity or purported Government Entity (other than a
requisition of use by a Permitted Government Entity) for a period
exceeding 12 consecutive months;
(e) as a result of any law, rule, regulation, order or other
action by the Aviation Authority or by any Government Entity of the
government of registry of the Aircraft or by any Government Entity
otherwise having jurisdiction over the operation or use of the
Aircraft, the use of such property in the normal course of Owner's
business of passenger air transportation is prohibited for a period of
18 consecutive months unless Owner, prior to the expiration of such 18
month period, shall have undertaken and shall be diligently carrying
forward such steps as may be necessary or desirable to permit the
normal use of such property by Owner, but in any event if such use
shall have been prohibited for a period of three consecutive years; and
(f) any divesture of title to an Engine treated as an Event of
Loss pursuant to Section 4.02(b) hereof.
"Expenses" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration of the United
States or any Government Entity succeeding to the functions of such Federal
Aviation Administration.
"FAA ▇▇▇▇ of Sale" means a ▇▇▇▇ of sale for the Aircraft on AC
Form 8050-2 (or such other form as may be approved by the FAA) delivered by
Airframe Manufacturer or its Affiliates to Owner and dated the date of delivery
of the Aircraft to Owner pursuant to the terms of the Purchase Agreement.
"FAA Filed Documents" means the Trust Indenture, the initial
Trust Indenture Supplement, the FAA ▇▇▇▇ of Sale and an application for
registration of the Aircraft with the FAA in the name of Owner.
"FAA Regulations" means the Federal Aviation Regulations
issued or promulgated pursuant to the Act from time to time.
"Financing Statements" means, collectively, UCC-1 (and, where
appropriate, UCC-3) financing statements covering the Collateral, by Owner, as
debtor, showing Mortgagee
7
as secured party, for filing in Texas and each other jurisdiction that, in the
opinion of Mortgagee, is necessary to perfect its Lien on the Collateral.
"GAAP" means generally accepted accounting principles as set
forth in the statements of financial accounting standards issued by the
Financial Accounting Standards Board of the American Institute of Certified
Public Accountants, as such principles may at any time or from time to time be
varied by any applicable financial accounting rules or regulations issued by the
SEC and, with respect to any person, shall mean such principles applied on a
basis consistent with prior periods except as may be disclosed in such person's
financial statements.
"Government Entity" means (a) any federal, state, provincial
or similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"Indemnitee" means (i) WTC and Mortgagee, (ii) each separate
or additional trustee appointed pursuant to the Trust Indenture, (iii) the
Subordination Agent, (iv) the Liquidity Provider, (v) the Pass Through Trustees,
(vi) each Affiliate of the persons described in clauses (i) and (ii), (vii) each
Affiliate of the persons described in clauses (iii), (iv) and (v), (viii) the
respective directors, officers, employees, agents and servants of each of the
persons described in clauses (i), (ii) and (vi), (ix) the respective directors,
officers, employees, agents and servants of each of the persons described in
clauses (iii), (iv), (v) and (vii), (x) the successors and permitted assigns of
the persons described in clauses (i), (ii) and (viii), and (xi) the successors
and permitted assigns of the persons described in clauses (iii), (iv), (v) and
(ix); provided that the persons described in clauses (iii), (iv), (v), (vii),
(ix) and (xi) are Indemnitees only for purposes of Section 8.1 of the
Participation Agreement. If any Indemnitee is Airframe Manufacturer or Engine
Manufacturer or any subcontractor or supplier of either thereof, such Person
shall be an Indemnitee only in its capacity as Note Holder.
"Indenture Agreements" means the Purchase Agreement and the
Bills of Sale, to the extent included in Granting Clause (2) of the Trust
Indenture, and any other contract, agreement or instrument from time to time
assigned or pledged under the Trust Indenture.
"Indenture Default" means any condition, circumstance, act or
event that, with the giving of notice, the lapse of time or both, would
constitute an Indenture Event of Default.
"Indenture Event of Default" means any one or more of the
conditions, circumstances, acts or events set forth in Section 5.01 of the Trust
Indenture.
"Indenture Indemnitee" means (i) WTC and the Mortgagee, (ii)
each separate or additional trustee appointed pursuant to the Trust Indenture,
(iii) the Subordination Agent, (iv) each Liquidity Provider, (v) each Pass
Through Trustee and (vi) each of the respective directors, officers, employees,
agents and servants of each of the persons described in clauses (i) through (vi)
inclusive above.
8
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Liquidity Provider and the
Subordination Agent, dated as of October 30, 2001, provided that, for purposes
of any obligation of Owner, no amendment, modification or supplement to, or
substitution or replacement of, such Intercreditor Agreement shall be effective
unless consented to by Owner.
"IRS" means the Internal Revenue Service of the United States
or any Government Entity succeeding to the functions of such Internal Revenue
Service.
"Law" means (a) any constitution, treaty, statute, law,
decree, regulation, order, rule or directive of any Government Entity, and (b)
any judicial or administrative interpretation or application of, or decision
under, any of the foregoing.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease or security interest affecting the title to or any interest
in property.
"Liquidity Facilities" means the two Revolving Credit
Agreements (consisting of a separate Revolving Credit Agreement with the
Liquidity Provider with respect to each of the Pass Through Trusts relating to
the Series A-1 Equipment Notes and the Series A-2 Equipment Notes) between the
Subordination Agent, as borrower, and the Liquidity Provider, each dated as of
October 30, 2001, provided that, for purposes of any obligation of Owner, no
amendment, modification or supplement to, or substitution or replacement of, any
such Liquidity Facility shall be effective unless consented to by Owner.
"Liquidity Provider" means Westdeutsche Landesbank
Girozentrale, acting through its New York branch, a German banking institution
organized under the laws of the State of North Rhine-Westphalia, Germany, as
"Class A-1 Liquidity Provider" and "Class A-2 Liquidity Provider" (as such terms
are defined in the Intercreditor Agreement).
"Majority in Interest of Note Holders" means as of a
particular date of determination, the holders of a majority in aggregate unpaid
Original Amount of all Equipment Notes outstanding as of such date (excluding
any Equipment Notes held by Owner or any of its Affiliates (unless all Equipment
Notes then outstanding shall be held by Owner or any Affiliate of Owner));
provided that for the purposes of directing any action or casting any vote or
giving any consent, waiver or instruction hereunder, any Note Holder of an
Equipment Note or Equipment Notes may allocate, in such Note Holder's sole
discretion, any fractional portion of the principal amount of such Equipment
Note or Equipment Notes in favor of or in opposition to any such action, vote,
consent, waiver or instruction.
"Make-Whole Amount" means, with respect to any Equipment Note,
an amount (as determined by an independent investment bank of national standing)
equal to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a semiannual basis on each Payment Date
(assuming a 360-day year of twelve 30-day months) using a discount rate equal to
the Treasury Yield over (b) the outstanding principal amount of such Equipment
Note plus accrued interest to the date of determination. For purposes of
determining the Make-Whole Amount, "Treasury Yield" means, at the date of
determination with respect to any Equipment
9
Note, the interest rate (expressed as a decimal and, in the case of United
States Treasury bills, converted to a bond equivalent yield) determined to be
the per annum rate equal to the semi-annual yield to maturity for United States
Treasury securities maturing on the Average Life Date of such Equipment Note and
trading in the public securities markets either as determined by interpolation
between the most recent weekly average yield to maturity for two series of
United States Treasury securities, trading in the public securities markets, (A)
one maturing as close as possible to, but earlier than, the Average Life Date of
such Equipment Note and (B) the other maturing as close as possible to, but
later than, the Average Life Date of such Equipment Note, in each case as
published in the most recent H.15(519) or, if a weekly average yield to maturity
for United States Treasury securities maturing on the Average Life Date of such
Equipment Note is reported on the most recent H.15(519), such weekly average
yield to maturity as published in such H.15(519). "H.15(519)" means the weekly
statistical release designated as such, or any successor publication, published
by the Board of Governors of the Federal Reserve System. The date of
determination of a Make-Whole Amount shall be the third Business Day prior to
the applicable payment or redemption date and the "most recent H.15(519)" means
the H.15(519) published prior to the close of business on the third Business Day
prior to the applicable payment or redemption date.
"Material Adverse Change" means, with respect to any person,
any event, condition or circumstance that materially and adversely affects such
person's business or consolidated financial condition, or its ability to observe
or perform its obligations, liabilities and agreements under the Operative
Agreements.
"Minimum Liability Insurance Amount" is defined in Schedule 3
to the Participation Agreement.
"Mortgaged Property" is defined in Section 3.03 of the Trust
Indenture.
"Mortgagee" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as mortgagee under the
Trust Indenture.
"Net Worth" means, for any person, the excess of its total
assets over its total liabilities.
"Non-U.S. Person" means any Person other than a United States
person, as defined in Section 7701(a)(30) of the Code.
"Note Holder" means at any time each registered holder of one
or more Equipment Notes.
"Officer's Certificate" means, in respect of any party to the
Participation Agreement, a certificate signed by the Chairman, any Vice
Chairman, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Assistant Secretary of such
party.
"Operative Agreements" means, collectively, the Participation
Agreement, the Trust Indenture, the initial Trust Indenture Supplement, the
Bills of Sale, and the Equipment Notes.
10
"Operative Indentures" means each of the indentures under
which notes have been issued and purchased by the Pass Through Trustees pursuant
to the Participation Agreement).
"Original Amount," with respect to an Equipment Note, means
the stated original principal amount of such Equipment Note and, with respect to
all Equipment Notes, means the aggregate stated original principal amounts of
all Equipment Notes.
"Owner Person" means Owner, any lessee, assignee, successor or
other user or person in possession of the Aircraft, Airframe or an Engine with
or without color of right, or any Affiliate of any of the foregoing (excluding
any Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any
person using or claiming any rights with respect to the Aircraft, Airframe or an
Engine directly by or through any of the persons in this parenthetical).
"Participation Agreement" means the Participation Agreement
[N700GS] dated as of October 30, 2001 among Owner, the Applicable Pass Through
Trustees, the Subordination Agent and Mortgagee.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings, seats and other equipment of whatever
nature (other than (a) Engines or engines, and (b) any Removable Part leased by
Owner from a third party or subject to a security interest granted to a third
party), that may from time to time be installed or incorporated in or attached
or appurtenant to the Airframe or any Engine.
"Pass Through Agreements" means the Pass Through Trust
Agreements, the Intercreditor Agreement, the Liquidity Facilities, and the Fee
Letters referred to in Section 2.03 of each of the Liquidity Facilities,
provided that no amendment, modification or supplement to, or substitution or
replacement of, any such Fee Letter shall be effective for purposes of any
obligation of Owner, unless consented to by Owner.
"Pass Through Certificates" means the pass through
certificates issued by the Pass Through Trusts (and any other pass through
certificates for which such pass through certificates may be exchanged).
"Pass Through Trust" means each of the three separate pass
through trusts created under the Pass Through Trust Agreements.
"Pass Through Trust Agreement" means each of the three
separate Trust Supplements, together in each case with the Basic Pass Through
Trust Agreement, each dated as of October 30, 2001 by and between the Owner and
a Pass Through Trustee, provided, that, for purposes of any obligation of Owner,
no amendment, modification or supplement to, or substitution or replacement of,
any such Agreement shall be effective unless consented to by Owner.
"Pass Through Trustee" means Wilmington Trust Company, a
Delaware banking corporation, in its capacity as trustee under each Pass Through
Trust Agreement.
11
"Pass Through Trustee Agreements" means the Participation
Agreement, the Pass Through Trust Agreement and the Intercreditor Agreement.
"Payment Date" means each May 1 and November 1, commencing on
May 1, 2002.
"Payment Due Rate" means, with respect to any payment made to
a Note Holder under any Series of Equipment Notes, the lesser of (a) the Debt
Rate applicable to such Series plus 1% and (b) the maximum rate permitted by
applicable law.
"Permitted Air Carrier" means (i) any manufacturer of
airframes or aircraft engines, or any Affiliate of a manufacturer of airframes
or aircraft engines, (ii) any Permitted Foreign Air Carrier, (iii) any person
approved in writing by Mortgagee or (iv) any U.S. Air Carrier.
"Permitted Country" means any country listed on Schedule 4 to
the Participation Agreement.
"Permitted Foreign Air Carrier" means any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"Permitted Government Entity" means (i) the U.S. Government,
(ii) the government of Canada, France, Germany, Japan, the Netherlands, Sweden,
Switzerland, the United Kingdom or (iii) any Government Entity if the Aircraft
is then registered under the laws of the country of such Government Entity.
"Permitted Lease" means a lease permitted under Section
4.02(b) of the Trust Indenture.
"Permitted Lessee" means the lessee under a Permitted Lease.
"Permitted Lien" means (a) the rights of Mortgagee under the
Operative Agreements, or of any Permitted Lessee under any Permitted Lease; (b)
Liens attributable to Mortgagee (both in its capacity as trustee under the Trust
Indenture and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 4.02(b) or 4.04 of the Trust Indenture; (d) Liens of Taxes of Owner (and
its U.S. federal tax law consolidated group), or Liens for Taxes of any Tax
Indemnitee (and its U.S. federal tax law consolidated group) for which Owner is
obligated to indemnify such Tax Indemnitee under any of the Operative
Agreements, in any such case either not yet delinquent or being contested in
good faith by appropriate proceedings so long as such Liens and such proceedings
do not involve any material risk of the sale, forfeiture or loss of the
Aircraft, the Airframe, or any Engine or the interest of Mortgagee therein or
impair the Lien of the Trust Indenture; (e) materialmen's, mechanics', workers',
repairers', employees' or other like Liens arising in the ordinary course of
business for amounts the payment of which is either not yet delinquent for more
than 60 days or is being contested in good faith by appropriate proceedings, so
long as such Liens and such proceedings do not involve any material risk of the
12
sale, forfeiture or loss of the Aircraft, the Airframe, or any Engine or the
interest of Mortgagee therein or impair the Lien of the Trust Indenture; (f)
Liens arising out of any judgment or award against Owner (or any Permitted
Lessee), so long as such judgment shall, within 60 days after the entry thereof,
have been discharged or vacated, or execution thereof stayed pending appeal or
shall have been discharged, vacated or reversed within 60 days after the
expiration of such stay, and so long as during any such 60 day period there is
not, or any such judgment or award does not involve, any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe, or any Engine or the
interest of Mortgagee therein or impair the Lien of the Trust Indenture; and (g)
any other Lien with respect to which Owner (or any Permitted Lessee) shall have
provided a bond, cash collateral or other security adequate in the reasonable
opinion of Mortgagee.
"Persons" or "persons" means individuals, firms, partnerships,
joint ventures, trusts, trustees, Government Entities, organizations,
associations, corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether having distinct
legal status or not, or any member of any of the same.
"Plan" means any employee benefit plan within the meaning of
Section 3(3) of ERISA, or any plan within the meaning of Section 4975(e)(1) of
the Code.
"Purchase Agreement" means the Purchase Agreement No. 1810,
dated January 19, 1994, between Airframe Manufacturer and Owner (including all
exhibits thereto, together with all letter agreements entered into that by their
terms constitute part of such Purchase Agreement), together with, with respect
to the Engines, the GTA (as defined in the Engine Consent and Agreement), in
each case, to the extent included in the Granting Clause (2) of the Trust
Indenture.
"QIB" is defined in Section 2.08 of the Trust Indenture.
"Rating Agencies" has the meaning specified for such term in
the Intercreditor Agreement.
"Removable Part" is defined in Section 4.04(d) of the Trust
Indenture.
"Replacement Airframe" means any airframe substituted for the
Airframe pursuant to Article IV of the Trust Indenture.
"Replacement Engine" means an engine substituted for an Engine
pursuant to Article IV of the Trust Indenture.
"SEC" means the Securities and Exchange Commission of the
United States, or any Government Entity succeeding to the functions of such
Securities and Exchange Commission.
"Section 1110" means 11 U.S.C. Section 1110 of the Bankruptcy
Code or any successor or analogous section of the federal bankruptcy law in
effect from time to time.
"Secured Obligations" is defined in Section 2.06 of the Trust
Indenture.
13
"Securities Act" means the Securities Act of 1933, as amended.
"Security" means a "security" as defined in Section 2(l) of
the Securities Act.
"Senior Holder" is defined in Section 2.13(c) of the Trust
Indenture.
"Series" means any of Series ▇-▇, ▇▇▇▇▇▇ ▇-▇, Series B or
Series C.
"Series A-1" or "Series A-1 Equipment Notes" means Equipment
Notes issued under the Trust Indenture and designated as "Series A-1"
thereunder, in the Original Amount and maturities and bearing interest as
specified in Schedule I to the Trust Indenture under the heading "Series A-1."
"Series A-2" or "Series A-2 Equipment Notes" means Equipment
Notes issued under the Trust Indenture and designated as "Series A-2"
thereunder, in the Original Amount and maturities and bearing interest as
specified in Schedule I to the Trust Indenture under the heading "Series A-2."
"Series B" or "Series B Equipment Notes" means Equipment Notes
issued under the Trust Indenture and designated as "Series B" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series B."
"Series C" or "Series C Equipment Notes" means Equipment
Notes, if any, issued under the Trust Indenture and designated as "Series C"
thereunder, in the Original Amount and maturities and bearing interest as
specified in Schedule I to the Trust Indenture under the heading "Series C (or,
if the Series C are issued after the Closing Date, as specified in an amendment
to the Trust Indenture at the time of issuance of the Series C).
"Similar Aircraft" means a Boeing Model 737-700 aircraft.
"Special Default" means (i) the failure by Owner to pay any
amount of principal of or interest on any Equipment Note when due or (ii) the
occurrence of any Default or Event of Default referred to in Section 5.01(v),
(vi) or (vii).
"Subordination Agent" means Wilmington Trust Company, as
subordination agent under the Intercreditor Agreement, or any successor thereto.
"Tax Indemnitee" means (a) WTC and Mortgagee, (b) each
separate or additional trustee appointed pursuant to the Trust Indenture, (c)
each Note Holder and (d) the respective successors, assigns, agents and servants
of the foregoing.
"Taxes" means all license, recording, documentary,
registration and other similar fees and all taxes, levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever imposed by any
Taxing Authority, together with any penalties, additions to tax, fines or
interest thereon or additions thereto.
14
"Taxing Authority" means any federal, state or local
government or other taxing authority in the United States, any foreign
government or any political subdivision or taxing authority thereof, any
international taxing authority or any territory or possession of the United
States or any taxing authority thereof.
"Transaction Expenses" means all costs and expenses incurred
by Mortgagee in connection with (a) the preparation, execution and delivery of
the Operative Agreements and the recording or filing of any documents,
certificates or instruments in accordance with any Operative Agreement,
including, without limitation, the FAA Filed Documents and the Financing
Statements, (b) the initial fee of Mortgagee under the Trust Indenture and (c)
the ~reasonable fees and disbursements of counsel for each Mortgagee and special
counsel in Oklahoma City, Oklahoma, in each case, in connection with the
Closing.
"Transactions" means the transactions contemplated by the
Participation Agreement.
"Transfer" means the transfer, sale, assignment or other
conveyance of all or any interest in any property, right or interest.
"Transferee" means a person to which any Note Holder purports
or intends to Transfer any or all of its right, title or interest in the
Equipment Note, as described in Section 9 of the Participation Agreement.
"Trust Indenture" means the
Trust Indenture and Mortgage
[N700GS], dated as of the date of the Participation Agreement between Owner and
Mortgagee.
"Trust Indenture Supplement" means a
Trust Indenture and
Mortgage Supplement, substantially in the form of Exhibit A to the Trust
Indenture, with appropriate modifications to reflect the purpose for which it is
being used.
"Trust Supplement" means an agreement supplemental to the
Basic Pass Through Trust Agreement pursuant to which (i) a separate trust is
created for the benefit of the holders of the Pass Through Certificates of a
class, (ii) the issuance of the Pass Through Certificates of such Class
representing fractional undivided interests in such trust is authorized and
(iii) the terms of the Pass Through Certificates of such class are established.
"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
"United States" or "U.S." means the United States of America;
provided that for geographic purposes, "United States" means, in aggregate, the
50 states and the District of Columbia of the United States of America.
"U.S. Air Carrier" means any United States air carrier that is
a Citizen of the United States holding an air carrier operating certificate
issued by the Secretary of Transportation pursuant to chapter 447 of title 49 of
the United States Code for aircraft capable of carrying 10 or more individuals
or 6000 pounds or more of cargo, and as to which there is in force an air
carrier operating certificate issued pursuant to Part 121 of the FAA
Regulations, or
15
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. Government" means the federal government of the United
States, or any instrumentality or agency thereof the obligations of which are
guaranteed by the full faith and credit of the federal government of the United
States.
"U.S. Person" means any Person described in Section 7701
(a)(30) of the Code.
"Weighted Average Life to Maturity" means, with respect to any
specified Debt, at the time of the determination thereof the number of years
obtained by dividing the then Remaining Dollar-years of such Debt by the then
outstanding principal amount of such Debt. The term "Remaining Dollar-years"
shall mean the amount obtained by (1) multiplying the amount of each
then-remaining principal payment on such Debt by the number of years (calculated
at the nearest one-twelfth) that will elapse between the date of determination
of the Weighted Average Life to Maturity of such Debt and the date of that
required payment and (2) totaling all the products obtained in clause (1) above.
"Wet Lease" means any arrangement whereby Owner or a Permitted
Lessee agrees to furnish the Aircraft, Airframe or any Engine to a third party
pursuant to which the Aircraft, Airframe or Engine shall at all times be in the
operational control of Owner or a Permitted Lessee, provided that Owner's
obligations under the Trust Indenture shall continue in full force and effect
notwithstanding any such arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking
corporation, not in its capacity as Mortgagee under the Trust Indenture, but in
its individual capacity.
16
ANNEX B
INSURANCE
Capitalized terms used but not defined herein shall have the respective
meanings set forth or incorporated by reference in Annex A to the Trust
Indenture.
A. LIABILITY INSURANCE
1. Except as provided in Section A.2 below, Owner will carry or cause
to be carried at all times, at no expense to Mortgagee, comprehensive airline
legal liability (including, but not limited to passenger liability, property
damage, baggage liability, cargo and mail liability, hangarkeeper's liability
and contractual liability insurance, but excluding manufacturer's product
liability coverage) with respect to the Aircraft, the Airframe and the Engines,
which is (i) in an amount not less than the greater of (x) the amount of
comprehensive airline legal liability insurance from time to time applicable to
aircraft owned or leased and operated by Owner of the same type and operating on
similar routes as the Aircraft and (y) the Minimum Liability Insurance Amount
per occurrence; (ii) of the type and covering the same risks as from time to
time applicable to aircraft operated by Owner of the same type as the Aircraft;
and (iii) maintained in effect with insurers of nationally or internationally
recognized responsibility (such insurers being referred to herein as "Approved
Insurers").
2. During any period that the Aircraft is on the ground and not in
operation, Owner may carry or cause to be carried, in lieu of the insurance
required by Section A.1 above, insurance otherwise conforming with the
provisions of said Section A.1 except that (i) the amounts of coverage shall not
be required to exceed the amounts of public liability and property damage
insurance from time to time applicable to aircraft owned or operated by Owner of
the same type as the Aircraft which are on the ground and not in operation and
(ii) the scope of the risks covered and the type of insurance shall be the same
as from time to time shall be applicable o to aircraft owned or operated by
Owner of the same type which are on the ground and not in operation.
▇. ▇▇▇▇ INSURANCE
1. Except as provided in Section B.2 below, Owner will carry or cause
to be carried at all times, at no expense to Mortgagee, with Approved Insurers
"all-risk" ground and flight aircraft hull insurance covering each Aircraft
(including the Engines when they are installed on the Airframe or any other
airframe) which is of the type as from time to time applicable to aircraft owned
by Owner of the same type as the Aircraft for an amount denominated in United
States Dollars not less than the unpaid Original Amount together with six months
of interest accrued thereon (the "Debt Balance").
Any policies of insurance carried in accordance with this Section B.1
or Section C covering the Aircraft and any policies taken out in substitution or
replacement for any such policies (i) shall name Mortgagee as exclusive loss
payee for any proceeds to be paid under such policies up to an amount equal to
the Debt Balance and (ii) shall provide that (A) in the event of a loss
involving proceeds in excess of the Threshold Amount (as defined in Schedule 3
of the
Participation Agreement), the proceeds in respect of such loss up to an amount
equal to the Debt Balance shall be payable to the Mortgagee, except in the case
of a loss with respect to an Engine installed on an airframe other than the
Airframe, in which case Owner (or any Permitted Lessee) shall endeavor to
arrange for any payment of insurance proceeds in respect of such loss to be held
for the account of the Mortgagee whether such payment is made to Owner (or any
Permitted Lessee) or any third party, it being understood and agreed that in the
case of any payment to Mortgagee otherwise than in respect of an Event of Loss,
the Mortgagee shall, upon receipt of evidence satisfactory to it that the damage
giving rise to such payment shall have been repaired or that such payment shall
then be required to pay for repairs then being made, pay the amount of such
payment to Owner or its order, and (B) the entire amount of any loss involving
proceeds of the Threshold Amount or less or the amount of any proceeds of any
loss in excess of the Debt Balance shall be paid to Owner or its order unless an
Event of Default shall have occurred and be continuing and the insurers have
been notified thereof by the Mortgagee. In the case of a loss with respect to an
engine (other than an Engine) installed on the Airframe, Mortgagee shall hold
any payment to it of any insurance proceeds in respect of such loss for the
account of Owner or any other third party that is entitled to receive such
proceeds.
2. During any period that the Aircraft is on the ground and not in
operation, Owner may carry or cause to be carried, in lieu of the insurance
required by Section B.1 above, insurance otherwise conforming with the
provisions of said Section B.1 except that the scope of the risks and the type
of insurance shall be the same as from time to time applicable to aircraft owned
by Owner of the same type similarly on the ground and not in operation, provided
that Owner shall maintain insurance against risk of loss or damage to the
Aircraft in an amount equal to the Debt Balance during such period that the
Aircraft is on the ground and not in operation.
C. WAR-RISK, HIJACKING AND ALLIED PERILS INSURANCE
If Owner (or any Permitted Lessee) shall at any time operate or propose
to operate the Aircraft, Airframe or any Engine (i) in any area of recognized
hostilities or (ii) on international routes and war-risk, hijacking or allied
perils insurance is maintained by Owner (or any Permitted Lessee) with respect
to other aircraft owned or operated by Owner (or any Permitted Lessee) on such
routes or in such areas, Owner shall maintain or cause to be maintained
war-risk, hijacking and related perils insurance of substantially the same type
carried by major United States commercial air carriers operating the same or
comparable models of aircraft on similar routes or in such areas and in no event
in an amount less than the unpaid Original Amount.
D. GENERAL PROVISIONS
Any policies of insurance carried in accordance with Sections A, B and
C, including any policies taken out in substitution or replacement for such
policies:
(i) in the case of Section A, shall name Mortgagee, each Note
Holder and the Liquidity Provider as an additional insured as their
interests may appear (collectively, the "Additional Insureds"), as its
interests may appear;
(ii) shall apply worldwide and have no territorial
restrictions or limitations (except only in the case of war, hijacking
and related perils insurance required under
2
Section C, which shall apply to the fullest extent available in the
international insurance market);
(iii) shall provide that, in respect of the interests of the
Additional Insureds in such policies, the insurance shall not be
invalidated or impaired by any act or omission (including
misrepresentation and nondisclosure) by Owner (or any Permitted Lessee)
or any other Person (including, without limitation, use for illegal
purposes of the Aircraft or any Engine) and shall insure the Additional
Insureds regardless of any breach or violation of any representation,
warranty, declaration, term or condition contained in such policies by
Owner (or any Permitted Lessee);
(iv) shall provide that, if the insurers cancel such insurance
for any reason whatsoever, or if the same is allowed to lapse for
nonpayment of premium, or if any material change is made in the
insurance which adversely affects the interest of any of the Additional
Insureds, such cancellation, lapse or change shall not be effective as
to the Additional Insureds for 30 (seven days in the case of war risk,
hijacking and allied perils insurance) days after receipt by the
Additional Insureds of written notice by such insurers of such
cancellation, lapse or change, provided that if any notice period
specified above is not reasonably obtainable, such policies shall
provide for as long a period of prior notice as shall then be
reasonably obtainable;
(v) shall waive any rights of setoff (including for unpaid
premiums), recoupment, counterclaim or other deduction, whether by
attachment or otherwise, against each Additional Insured;
(vi) shall be primary without right of contribution from any
other insurance that may be available to any Additional Insured;
(vii) shall provide that all of the liability insurance
provisions thereof, except the limits of liability and agreed value,
shall operate in all respects as if a separate policy had been issued
covering each party insured thereunder;
(viii) shall provide that none of the Additional Insureds
shall be liable for any insurance premium; and
(ix) shall contain a 50/50% Clause per Lloyd's Aviation
Underwriters' Association Standard Policy Form AVS 103.
E. REPORTS AND CERTIFICATES; OTHER INFORMATION
On or prior to the Closing Date and on or prior to each renewal date of
the insurance policies required hereunder, Owner will furnish or cause to be
furnished to Mortgagee insurance certificates describing in reasonable detail
the insurance maintained by Owner hereunder and a report, signed by Owner's
regularly retained independent insurance broker (the "Insurance Broker"),
stating the opinion of such Insurance Broker that (a) all premiums in connection
with the insurance then due have been paid and (b) such insurance complies with
the terms of this Annex B. To the extent such agreement is reasonably obtainable
Owner will also cause the Insurance Broker to agree to advise Mortgagee in
writing of any default in the payment of any
3
premium and of any other act or omission on the part of Owner of which it has
knowledge and which might invalidate or render unenforceable, in whole or in
part, any insurance on the Aircraft or Engines or cause the cancellation or
termination of such insurance, and to advise Mortgagee in writing at least 30
days (seven days in the case of war-risk and allied perils coverage or such
shorter period as may be available in the international insurance market, as the
case may be) prior to the cancellation, lapse or material adverse change of any
insurance maintained pursuant to this Annex B.
F. RIGHT TO PAY PREMIUMS
The Additional Insureds shall have the rights but not the obligations
of an additional named insured. None of Mortgagee and the other Additional
Insured shall have any obligation to pay any premium, commission, assessment or
call due on any such insurance (including reinsurance). Notwithstanding the
foregoing, in the event of cancellation of any insurance due to the nonpayment
of premiums, Mortgagee shall have the option, in its sole discretion, to pay any
such premium in respect of the Aircraft that is due in respect of the coverage
pursuant to this Trust Indenture and to maintain such coverage, as Mortgagee may
require, until the scheduled expiry date of such insurance and, in such event,
Owner shall, upon demand, reimburse Mortgagee for amounts so paid by them.
G. DEDUCTIBLES; SELF-INSURANCE
Owner may self-insure with respect to the Aircraft to the same extent
as it does with respect to, or maintain policies with deductibles or premium
adjustment provisions consistent with similar provisions applicable to, other
comparable aircraft operated by Owner; provided, however, that in the case of
public liability insurance, such self-insurance shall in no event exceed
$50,000,000; and provided, further that if at any time Owner's unsecured senior
long-term debt securities are not rated "Investment Grade", such self-insurance
(inclusive of any such public liability insurance and without derogation from
the preceding proviso) shall in no case be in amounts greater than 4% of Owner's
tangible net worth. The term "Investment Grade" means a rating of "Baa3" or
higher from ▇▇▇▇▇'▇, or a rating of "BBB-" or higher from Standard & Poor's.
4
o EXHIBIT A
TO
TRUST INDENTURE AND MORTGAGE
TRUST INDENTURE AND MORTGAGE SUPPLEMENT
This TRUST INDENTURE AND MORTGAGE SUPPLEMENT NO. __, dated
[______________ ___, ____] (herein called this "Trust Indenture Supplement") of
SOUTHWEST AIRLINES CO., as Owner (the "Owner").
WITNESSETH:
WHEREAS, the Trust Indenture and Mortgage [N700GS], dated as
of October 30, 2001 (as amended and supplemented to the date hereof, the "Trust
Indenture") between the Owner and Wilmington Trust Company, as Mortgagee (the
"Mortgagee"), provides for the execution and delivery of a supplement thereto
substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Mortgagee; and
WHEREAS, the Trust Indenture relates to the Airframe and
Engines described below, and a counterpart of the Trust Indenture is attached
hereto and made a part hereof and this Trust Indenture Supplement, together with
such counterpart of the Trust Indenture, is being filed for recordation on the
date hereof with the FAA as one document;
NOW, THEREFORE, this Trust Indenture Supplement WITNESSETH
that the Owner hereby confirms that the Lien of the Trust Indenture on the
Collateral covers all of Owner's right, title and interest in and to the
following described property:
AIRFRAME
One airframe identified as follows:
FAA Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ---------------- --------------
The Boeing Company 737-7H4
together with all of the Owner's right, title and interest in and to all Parts
of whatever nature, whether now owned or hereinafter acquired and which are from
time to time incorporated or installed in or attached to said airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, identified as follows:
Manufacturer Manufacturer's Model Serial Number
------------ -------------------- -------------
CFM International, Inc. CFM56-7B22
together with all of Owner's right, title and interest in and to all Parts of
whatever nature, whether now owned or hereafter acquired and which are from time
to time incorporated or installed in or attached to either of such engines.
Together with all of Owner's right, title and interest in and
to (a) all Parts of whatever nature, which from time to time are included within
the definition of "Airframe" or "Engine", whether now owned or hereafter
acquired, including all substitutions, renewals and replacements of and
additions, improvements, accessions and accumulations to the Airframe and
Engines (other than additions, improvements, accessions and accumulations which
constitute appliances, parts, instruments, appurtenances, accessories,
furnishings or other equipment excluded from the definition of Parts) and (b)
all Aircraft Documents.
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Mortgagee, its successors and assigns, in trust for the equal and
proportionate benefit and security of the Note Holders and the Indenture
Indemnitees, except as provided in Section 2.13 and Article III of the Trust
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 Trust
Indenture.
This Trust Indenture Supplement shall be construed as
supplemental to the Trust Indenture and shall form a part thereof. The Trust
Indenture is each hereby incorporated by reference herein and is hereby
ratified, approved and confirmed.
AND, FURTHER, the Owner hereby acknowledges that the Aircraft
referred to in this Trust Indenture Supplement has been delivered to the Owner
and is included in the property of the Owner subject to the pledge and mortgage
thereof under the Trust Indenture.
* * *
2
IN WITNESS WHEREOF, the Owner has caused this Trust Indenture
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SOUTHWEST AIRLINES CO.
By:
-----------------------------------
Name:
Title:
3
o SCHEDULE I
[N700GS]
ORIGINAL AMOUNT INTEREST RATE
--------------- -------------
Series A-1: $ 4,517,153.11 5.100%
Series A-2: $12,424,597.58 5.496%
Series B: $ 2,880,097.46 6.126%
Trust Indenture and Mortgage
Equipment Note Amortization
PAYMENT DUE PERCENTAGE OF ORIGINAL AMOUNT TO BE PAID
------------------------------- ---------------------------------------------------------------------------------
Series A-1 Series A-2 Series B
------------------------------- ------------------------- -------------------------- ----------------------------
May 1, 2002 7.47708% 0.00000% 0.00000%
November 1, 2002 13.02935% 0.00000% 0.00000%
May 1, 2003 0.00000% 0.00000% 0.00000%
November 1, 2003 13.02935% 0.00000% 0.00000%
May 1, 2004 0.00000% 0.00000% 0.00000%
November 1, 2004 13.02935% 0.00000% 0.00000%
May 1, 2005 0.00000% 0.00000% 0.00000%
November 1, 2005 14.82328% 0.00000% 0.00000%
May 1, 2006 38.61159% 0.00000% 0.00000%
November 1, 2006 0.00000% 100% 100%