<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
UNITED AIR LINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 4512 36-2675206
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization Classification No.) No.)
</TABLE>
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
(847) 700-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
Francesca M. Maher
Vice-President -- General Counsel and Secretary
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
(847) 700-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
With a copy to:
Elizabeth A. Raymond
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
(312) 701-7322
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enhanced Pass Through Certificates, Series
1997-1A........................ $445,826,000 100% $445,826,000
- -----------------------------------------------------------------------------------------------------------------
Enhanced Pass Through Certificates, Series
1997-1B........................ $106,607,000 100% $106,607,000
- -----------------------------------------------------------------------------------------------------------------
Total............................
=================================================================================================================
<CAPTION>
================================================== ====================
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE (2)
- -------------------------------------------------- --------------------
<S> <C>
Enhanced Pass Through Certificates, Series
1997-1A........................ $131,518.67
- -----------------------------------------------------------------------------------------------------------------
Enhanced Pass Through Certificates, Series
1997-1B........................ $ 31,449.07
- -----------------------------------------------------------------------------------------------------------------
Total............................ $162,967.74
=================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 6, 1998
PROSPECTUS
$552,433,000
UNITED AIRLINES LOGO
Offer to Exchange Enhanced Pass Through Certificates,
Series 1997-1A and Series 1997-1B,
which have been registered under the Securities Act of 1933, as amended
for any and all outstanding Enhanced Pass Through Certificates,
Series 1997-1A and Series 1997-1B
The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1998 (as such date may be extended, the "Expiration Date").
------------------------
Enhanced Pass Through Certificates, Series 1997-1A and Enhanced Pass Through
Certificates, Series 1997-1B (collectively, the "New Certificates"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this Prospectus is a part,
are hereby offered, upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and, together with this Prospectus, the "Exchange Offer"), in
exchange for an equal principal amount of outstanding Enhanced Pass Through
Certificates, Series 1997-1A (the "Old Class A Certificates") and Enhanced Pass
Through Certificates, Series 1997-1B (the "Old Class B Certificates" and,
together with the Old Class A Certificates, the "Old Certificates"). The New
Certificates offered hereby, the Old Certificates and the other Enhanced Pass
Through Certificates, Series 1997-1 are collectively referred to herein as the
"Certificates."
Any and all Old Certificates that are validly tendered and not withdrawn on
or prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. Tenders of Old Certificates may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Certificates
being tendered for exchange. However, the Exchange Offer is subject to certain
customary conditions and to the terms and provisions of the Registration Rights
Agreement. Old Certificates may be tendered only in integral multiples of
$1,000. See "The Exchange Offer."
The New Certificates will be entitled to the benefits of the same Pass
Through Trust Agreements (as defined herein) that govern the Old Certificates
and that will govern the New Certificates. The New Certificates will have terms
identical in all material respects to the Old Certificates except that the New
Certificates will not contain terms with respect to transfer restrictions or
interest rate increases as described herein and the New Certificates will be
available only in book-entry form. See "The Exchange Offer" and "Description of
New Certificates."
Each Certificate represents a fractional undivided interest in one of the
four United Airlines 1997-1 Pass Through Trusts (the "Class A Trust," the "Class
B Trust," the "Class C Trust" and the "Class D Trust") formed pursuant to a pass
through trust agreement between United Air Lines, Inc. ("United" or the
"Company") and First Security Bank, National Association (the "Trustee"), as
trustee (the "Basic Pass Through Trust Agreement"), and four separate
supplements thereto (each, a "Trust Supplement" and, together with the Basic
Pass Through Trust Agreement, collectively, the "Pass Through Trust Agreements")
relating to such Trusts between the Company and the Trustee, as trustee under
each Trust. Pursuant to an intercreditor agreement, (i) the Certificates of the
Class B Trust are subordinated in right of payment to the Certificates of the
Class A Trust, (ii) the Certificates of the Class C Trust are subordinated in
right of payment to the Certificates of the Class B Trust and (iii) the
Certificates of the Class D Trust are subordinated in right of payment to the
Certificates of the Class C Trust. Payments of interest applicable to the
Certificates issued by the Class A Trust and the Class B Trust are in each case
supported by two separate liquidity facilities for the benefit of the holders of
such Certificates, such facilities provided by Kreditanstalt fur Wiederaufbau
(the "Primary Liquidity Provider") and Credit Suisse Financial Products (the
"Above-Cap Liquidity
(continued on the following page)
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 27 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
------------------------
THE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
OFFERED
PASS THROUGH FINAL EXPECTED
CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE DISTRIBUTION DATE
- ---------------------------- ---------------- ------------------------ -----------------
<S> <C> <C> <C>
Three-Month LIBOR +
1997-1A..................... $445,826,000 0.22% December 2, 2002
Three-Month LIBOR +
1997-1B..................... $106,607,000 0.325% December 2, 2002
-----------------
Total................... $552,433,000
=================
</TABLE>
------------------------
The date of this Prospectus is , 1998
<PAGE> 3
(continued from cover page)
Provider"), which together are in an amount sufficient to pay interest on such
Certificates at the applicable interest rate for each such Trust on up to six
consecutive quarterly distribution dates.
The property of the Trusts includes, among other things, equipment notes
(the "Equipment Notes") issued (i) on a recourse basis by United in connection
with ten separate debt financings, each secured by one of two Boeing 747-422
aircraft, four Airbus A320-232 aircraft, three Boeing 777-222 aircraft or one
Boeing 777-222IGW aircraft owned by United (collectively, the "Owned Aircraft")
and (ii) on a nonrecourse basis by the trustees of separate owner trusts (each,
an "Owner Trustee") in connection with four separate leveraged lease
transactions to refinance the current indebtedness of such Owner Trustees,
originally incurred to finance the purchase of four Boeing 737-322 aircraft that
have been leased to United (collectively, the "Leased Aircraft" and, together
with the Owned Aircraft, the "Aircraft"). The Equipment Notes in respect of each
Owned Aircraft have been issued in three series (the "Series A Equipment Notes,"
the "Series B Equipment Notes" and the "Series C Equipment Notes"), and the
Equipment Notes in respect of each Leased Aircraft have been issued in four
series (the "Series A Equipment Notes," the "Series B Equipment Notes," the
"Series C Equipment Notes" and the "Series D Equipment Notes" and each a
"Series"). Each Trust has purchased the corresponding series of the Equipment
Notes issued with respect to each of the Aircraft such that all of the Equipment
Notes held in each Trust have an interest rate corresponding to the interest
rate applicable to the Certificates issued by such Trust. The Equipment Notes
issued with respect to each Aircraft are secured by a security interest in such
Aircraft and, in the case of each Leased Aircraft, are also secured by an
assignment of the lease relating thereto, including the right to receive rentals
payable with respect to such Leased Aircraft from United. The maturity date of
the Equipment Notes relating to the Leased Aircraft acquired by each Trust will
occur after December 2, 2002, which is the "Final Expected Distribution Date"
applicable to the Certificates issued by each such Trust. As a result, on the
Final Expected Distribution Date the installments of principal then due and
payable on the Equipment Notes will be insufficient to pay the final expected
distribution on the related Certificates. Under the Note Purchase Agreement, the
applicable Trustees will obtain the funds to pay the final expected distribution
on the Certificates on the Final Expected Distribution Date from the payment by
United at maturity in full of the principal and accrued interest on the
Equipment Notes issued with respect to the Owned Aircraft and by selling, or
permitting the refinancing of, the Equipment Notes issued with respect to the
Leased Aircraft for an amount equal to the principal thereof plus accrued
interest thereon. The maturity date of the Equipment Notes relating to the Owned
Aircraft is the Final Expected Distribution Date of the Certificates.
All of the Equipment Notes held in each Trust accrue interest at the
applicable rate per annum for such Trust, payable on March 2, June 2, September
2 and December 2 of each year, commencing March 2, 1998. Such interest will be
passed through to Certificateholders of such Trust on each such date, in each
case subject to the Intercreditor Agreement. See "Description of the New
Certificates -- General" and "-- Payments and Distributions."
Scheduled principal payments on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of each such Trust on any of March
2, June 2, September 2 and December 2 of specified years, commencing on March 2,
1998, in accordance with the principal repayment schedule set forth below under
"Description of the New Certificates -- Pool Factors" and "Description of the
Equipment Notes -- Principal and Interest Payments," in each case subject to the
Intercreditor Agreement.
Each Class of New Certificates will be represented by one or more permanent
global Certificates in fully registered form, which will be deposited with the
Trustee as custodian for, and registered in the name of a nominee of, DTC.
Beneficial interests in the permanent global Certificates will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants.
The New Certificates are being offered hereby in order to satisfy certain
obligations of United contained in the Registration Rights Agreement. United is
making the Exchange Offer in reliance on the position of the staff of the
Securities and Exchange Commission (the "Commission") as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
United has not sought its own interpretive letter and there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to third parties.
Based on these interpretations by the staff of the Commission, United believes
that New Certificates issued pursuant to the Exchange Offer to a holder in
exchange for Old Certificates may be offered for resale, resold and otherwise
transferred by a holder (other than (i) a broker-dealer who purchased Old
Certificates directly from United for resale pursuant to Rule 144A under the
Securities Act ("Rule 144A") or any other available exemption under the
Securities Act, (ii) an "affiliate" of United within the meaning of Rule 405
under the Securities Act, or (iii) a broker-dealer who acquired the Old
Certificates as a result of market-making or other trading activities), without
further compliance with the registration and prospectus delivery provisions of
the Securities Act; provided, that such holder is acquiring the New Certificates
in the ordinary course of business and is not participating, and
2
<PAGE> 4
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of the New Certificates.
Holders wishing to accept the Exchange Offer must represent to United, as
required by the Registration Rights Agreement, that such conditions have been
met. Any holder of Old Certificates who is not able to rely on the
interpretations of the staff of the Commission set forth in the above-mentioned
interpretive letters must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Certificates unless such sale is made pursuant to an exemption from
such requirements. See "The Exchange Offer -- General."
Each broker-dealer that receives New Certificates for its own account
pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Certificates. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, United has agreed that this Prospectus may be
used by a Participating Broker-Dealer in connection with resales of such New
Certificates. See "Plan of Distribution."
United will not receive any proceeds from this offering, but, pursuant to
the Registration Rights Agreement, United will bear certain registration
expenses. No underwriter is being utilized in connection with the Exchange
Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL UNITED ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD CERTIFICATES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CERTIFICATES ARE URGED TO READ THIS PROSPECTUS AND
THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR OLD CERTIFICATES PURSUANT TO THE EXCHANGE OFFER.
Prior to the Exchange Offer, there has been no public market for the
Certificates. If such market were to develop, the New Certificates could trade
at prices that may be higher or lower than their principal amount. Neither
United nor any Trust has applied or intends to apply for listing of the New
Certificates on any national securities exchange or otherwise. One or more of
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), BT Alex. Brown
Incorporated, Citicorp Securities, Inc., Credit Suisse First Boston Corporation,
and Merrill Lynch, Pierce, Fenner & Smith (collectively, the "Class A Initial
Purchasers") have previously made a market in the Old Class A Certificates.
United has been advised that one or more of the Class A Initial Purchasers
presently intend to make a market in the Class A Certificates, as permitted by
applicable laws and regulations, after consummation of the Exchange Offer. None
of the Class A Initial Purchasers is obligated, however, to make a market in the
Old Certificates or the New Certificates. Any such market making activity by a
Class A Initial Purchaser may be discontinued at any time without notice at the
sole discretion of such Class A Initial Purchaser. There can be no assurance as
to the liquidity of the public market for the Certificates or that any active
public market for the Certificates will develop or continue. If an active public
market does not develop or continue, the market prices and liquidity of the
Certificates may be adversely affected. See "Risk Factors -- Absence of an
Established Market for the Certificates."
3
<PAGE> 5
AVAILABLE INFORMATION
United is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Such reports
and other information concerning United may be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well as the Regional
Offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such information can be obtained by mail from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
information may also be accessed electronically by means of the Commission's
home page on the World Wide Web located at http://www.sec.gov.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by United with the Commission, through the Electronic Data Gathering, Analysis
and Retrieval System, under the Securities Act, with respect to the New
Certificates offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to United and the
securities offered hereby. Although statements concerning and summaries of
certain documents are included herein, reference is made to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. These documents may be inspected without charge at the
Office of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies may be obtained at fees and charges prescribed by the
Commission.
REPORTS TO CERTIFICATEHOLDERS
First Security Bank, National Association, in its capacity as Trustee under
each of the Trusts, will provide the Certificateholders of each Trust certain
periodic reports concerning the distributions made from such Trust. See
"Description of New Certificates -- Reports to Certificateholders." Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
United's Annual Report on Form 10-K for the fiscal year ended December 31,
1997 has been filed with the Commission pursuant to the Exchange Act and is
incorporated into this Prospectus by reference and made a part hereof.
All documents filed by United pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the initial Registration Statement
and prior to effectiveness of the Registration Statement or after the date of
this Prospectus and prior to the termination of the offering of the Certificates
offered hereby, shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON, FROM UNITED AIR LINES, INC., P.O. BOX 66100, CHICAGO, ILLINOIS
60666, ATTENTION: FRANCESCA M. MAHER, SECRETARY, TELEPHONE (847) 700-4000. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NOT
LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the detailed information appearing elsewhere in this Prospectus.
Certain capitalized terms used herein are defined elsewhere in this Prospectus
on the pages indicated in the "Index of Terms" attached as Appendix I.
THE EXCHANGE OFFER
Registration Rights
Agreement..................... The Old Class A Certificates were issued on
December 23, 1997 (the "Issuance Date") to
the Class A Initial Purchasers. The Class A
Initial Purchasers placed the Old Class A
Certificates with institutional investors.
The Old Class B Certificates were issued on
the Issuance Date to Kreditanstalt fur
Wiederaufbau (the "Class B Initial Purchaser"
and together with the Class A Initial
Purchasers, the "Initial Purchasers"). In
connection therewith, United, the Trustee
under the Class A Trust and the Class B Trust
and the Initial Purchasers entered into a
Registration Rights Agreement (the
"Registration Rights Agreement") providing,
among other things, for the Exchange Offer.
The Exchange Offer............ New Certificates are being offered in exchange
for an equal principal amount of Old
Certificates. The issuance of the New
Certificates is intended to satisfy
obligations of United contained in the
Registration Rights Agreement. As of the date
of this Prospectus, $445,826,000 aggregate
principal amount of the Old Class A
Certificates and $106,607,000 aggregate
principal amount of the Old Class B
Certificates are outstanding. Old
Certificates may be tendered only in integral
multiples of $1,000. See "The Exchange
Offer -- General."
Resale of New Certificates.... United is making the Exchange Offer in reliance
on the position of the staff of the
Securities and Exchange Commission (the
"Commission") as set forth in certain
interpretive letters addressed to third
parties in other transactions. However,
United has not sought its own interpretive
letter and there can be no assurance that the
staff of the Commission would make a similar
determination with respect to the Exchange
Offer as it has in such interpretive letters
to third parties. Based on these
interpretations by the staff of the
Commission, United believes that New
Certificates issued pursuant to the Exchange
Offer to a holder in exchange for Old
Certificates may be offered for resale,
resold and otherwise transferred by a holder
(other than (i) a broker-dealer who purchased
Old Certificates directly from United for
resale pursuant to Rule 144A or any other
available exemption under the Securities Act,
(ii) an "affiliate" of United within the
meaning of Rule 405 under the Securities Act,
or (iii) a broker-dealer who acquired the Old
Certificates as a result of market-making or
other trading activities), without further
compliance with the registration and
prospectus delivery provisions of the
Securities Act; provided, that such holder is
acquiring the New Certificates in the
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate,
in a distribution (within the meaning of the
Securities Act) of the New Certificates.
Holders wishing to accept the Exchange Offer
must represent to United, as required by the
Registration Rights Agreement, that such
conditions have been met. Any holder of Old
Certificates who is not able to rely on the
interpretations of the staff of the
Commission set forth in
5
<PAGE> 7
the above-mentioned interpretive letters must
comply with the registration and prospectus
delivery requirements of the Securities Act
in connection with any sale or other transfer
of such Old Certificates unless such sale is
made pursuant to an exemption from such
requirements. See "The Exchange Offer --
General."
Each broker-dealer that receives New
Certificates for its own account pursuant to
the Exchange Offer (a "Participating
Broker-Dealer") must acknowledge that it will
deliver a prospectus meeting the requirements
of the Securities Act in connection with any
resale of such New Certificates. The Letter
of Transmittal states that by so
acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit
that it is an "underwriter" within the
meaning of the Securities Act. This
Prospectus, as it may be amended or
supplemented from time to time, may be used
by a Participating Broker-Dealer in
connection with resales of New Certificates
received in exchange for Old Certificates
where such Old Certificates were acquired by
such Participating Broker-Dealer for its own
account as a result of market-making or other
trading activities. Subject to certain
provisions set forth in the Registration
Rights Agreement, United has agreed that this
Prospectus may be used by a Participating
Broker-Dealer in connection with resales of
such New Certificates. See "Plan of
Distribution."
Consequences of Failure to
Exchange Old Certificates..... Upon consummation of the Exchange Offer,
subject to certain exceptions, holders of Old
Certificates who do not exchange their Old
Certificates for New Certificates in the
Exchange Offer will no longer be entitled to
registration rights and will not be able to
offer or sell their Old Certificates, unless
such Old Certificates are subsequently
registered under the Securities Act (which,
subject to certain limited exceptions, United
will have no obligation to do), except
pursuant to an exemption from, or in a
transaction not subject to, the Securities
Act and applicable state securities laws. See
"Risk Factors -- Consequences of Failure to
Exchange" and "The Exchange Offer."
Expiration Date............... 5:00 p.m., New York City time, on
, 1998 (30 calendar days
following the commencement of the Exchange
Offer), unless the Exchange Offer is
extended, in which case the term "Expiration
Date" means the latest date and time to which
the Exchange Offer is extended.
Interest on the New
Certificates.................. The New Certificates will accrue interest at
the applicable per annum rate for such New
Certificates set forth on the cover page of
this Prospectus, from the most recent date to
which interest has been paid on the Old
Certificates or, if no interest has been
paid, from the Issuance Date.
Conditions to the Exchange
Offer......................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Certificates
being tendered for exchange. However, the
Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer --
Conditions." Except for the requirements of
applicable federal and state securities laws,
there are no federal or state regulatory
requirements to be complied with or obtained
by the Company in connection with the
Exchange Offer.
6
<PAGE> 8
Procedures for Tendering Old
Certificates................ Each holder of Old Certificates wishing to
accept the Exchange Offer must transmit a
properly completed and duly executed Letter
of Transmittal, or a facsimile thereof (or,
in the case of a book-entry transfer, an
Agent's Message in lieu of such Letter of
Transmittal), together with the Old
Certificates to be exchanged and any other
required documentation to the Exchange Agent
at the address set forth herein or effect a
tender of Old Certificates pursuant to the
procedures for book-entry transfer as
provided for herein. See "The Exchange Offer
-- Procedures for Tendering" and "--
Book-Entry Transfer."
Guaranteed Delivery
Procedures.................... Holders of Old Certificates who wish to tender
their Old Certificates and whose Old
Certificates are not immediately available or
who cannot deliver their Old Certificates and
a properly completed Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to
the Expiration Date may tender their Old
Certificates according to the guaranteed
delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights............. Tenders of Old Certificates may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the Expiration Date. To withdraw a
tender of Old Certificates, a written or
facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its
address set forth herein under "The Exchange
Offer -- Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date.
Acceptance of Old Certificates
and Delivery of New
Certificates................ Subject to certain conditions, any and all Old
Certificates which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date will
be accepted for exchange. The New
Certificates issued pursuant to the Exchange
Offer will be delivered promptly following
the Expiration Date. See "The Exchange
Offer."
Certain Tax Considerations.... The exchange of New Certificates for Old
Certificates will not be a sale or exchange
or otherwise a taxable event for Federal
income tax purposes. See "Federal Income Tax
Consequences."
Exchange Agent................ First Security Bank, National Association is
serving as exchange agent (the "Exchange
Agent") in connection with the Exchange
Offer.
Fees and Expenses............. All expenses incident to United's consummation
of the Exchange Offer and compliance with the
Registration Rights Agreement will be borne
by United. See "The Exchange Offer -- Fees
and Expenses."
Use of Proceeds............... There will be no cash proceeds payable to
United from the issuance of the New
Certificates pursuant to the Exchange Offer.
The proceeds from the sale of the Old
Certificates issued by each Trust were used
to purchase the Series A and Series B
Equipment Notes issued by (a) the related
Owner Trustees in connection with the
refinancing of the indebtedness originally
incurred by such Owner Trustees to finance
the purchase of each of the Leased Aircraft
and (b) United in connection with the debt
financings secured by the Owned Aircraft.
7
<PAGE> 9
TERMS OF CERTIFICATES
The Exchange Offer relates to the exchange of up to $445,826,000 aggregate
principal amount of Old Class A Certificates and $106,607,000 aggregate
principal amount of Old Class B Certificates. The New Certificates will be
entitled to the benefits of and will be governed by the same Pass Through Trust
Agreements that govern the Old Certificates. The form and terms of the New
Certificates are the same in all material respects as the form and terms of the
Old Certificates, except that the New Certificates do not provide for interest
rate increases relating to failure to implement the Exchange Offer and will not
bear legends restricting transfer.
Trusts........................ Each of the United Airlines 1997-1A Pass
Through Trust, the United Airlines 1997-1B
Pass Through Trust, the United Airlines
1997-1C Pass Through Trust and the United
Airlines 1997-1D Pass Through Trust
(collectively, with any additional trusts of
the same Class, a "Trust") has been formed
pursuant to one of the four separate Trust
Supplements to the Basic Pass Through Trust
Agreement entered into between the Company
and First Security Bank, National
Association, as trustee under each Trust
(each, together with the Basic Pass Through
Trust Agreement, a "Pass Through Trust
Agreement"). Each Trust is a separate entity.
Certificates Offered.......... The Certificates issued by each Trust represent
fractional undivided interests in such Trust.
The Certificates issued by the Class A Trust,
the Class B Trust, the Class C Trust and the
Class D Trust are referred to herein as the
"Class A Certificates" the "Class B
Certificates," the "Class C Certificates" and
the "Class D Certificates," respectively.
Subordination Agent........... First Security Bank, National Association, as
subordination agent under the Intercreditor
Agreement (the "Subordination Agent").
Trust Property................ The property of each Trust (the "Trust
Property") includes (i) Equipment Notes
issued (a) on a recourse basis by United in
connection with ten separate debt financings,
each secured by one of the Owned Aircraft and
(b) on a nonrecourse basis by the Owner
Trustees in connection with four separate
leveraged lease transactions to refinance the
current indebtedness of such Owner Trustees,
originally incurred to finance the purchase
of the Leased Aircraft leased by the related
Owner Trustee to United; (ii) the rights of
each such Trust under the Intercreditor
Agreement, the Registration Rights Agreement
and the Note Purchase Agreement (including
all monies receivable in respect of such
rights); (iii) for the Class A Trust and the
Class B Trust, all monies receivable by the
Subordination Agent under the Liquidity
Facilities for such Trust; and (iv) funds
from time to time deposited with the Trustee
in accounts relating to each such Trust.
The Equipment Notes with respect to each Owned
Aircraft have been issued in three Series
under an Indenture (each, an "Owned Aircraft
Indenture") between United and the Indenture
Trustee thereunder (the "Owned Aircraft
Indenture Trustee"). The Equipment Notes with
respect to each Leased Aircraft have been
issued in four Series under an Indenture
(each, a "Leased Aircraft Indenture" and,
collectively with the Owned Aircraft
Indentures, the "Indentures") between the
applicable Owner Trustee and the Indenture
Trustee thereunder
8
<PAGE> 10
(the "Leased Aircraft Indenture Trustees"
and, collectively with the Owned Aircraft
Indenture Trustees, the "Indenture
Trustees").
Each Trust has acquired those Equipment Notes
having an interest rate equal to the interest
rate applicable to the Certificates issued by
such Trust. The Equipment Notes have been
purchased from United, in the case of the
Equipment Notes relating to the Owned
Aircraft, and from the applicable Owner
Trustee in the case of the Equipment Notes
relating to the Leased Aircraft, in each case
pursuant to a Note Purchase Agreement (the
"Note Purchase Agreement") between United,
the Owner Trustees, the Trustees under the
Pass Through Trust Agreements, the
Subordination Agent and the Indenture
Trustees. The aggregate original principal
amount of the Equipment Notes held in each
Trust is the same as the aggregate original
face amount of the Certificates issued by
such Trust.
The maturity date of the Equipment Notes
relating to the Leased Aircraft acquired by
each Trust will occur after the Final
Expected Distribution Date applicable to the
Certificates issued by such Trust. As a
result, on the Final Expected Distribution
Date the installments of principal and
interest then due and payable on the
Equipment Notes will be insufficient to pay
the final expected distribution of principal
on the related Certificates. Under the Note
Purchase Agreement, the applicable Trustees
will obtain the funds to pay the final
expected distribution on the Certificates on
the Final Expected Distribution Date from the
payment in full by United at maturity of the
principal and accrued interest on the
Equipment Notes issued with respect to the
Owned Aircraft and by selling, or permitting
the refinancing of, the Equipment Notes
issued with respect to the Leased Aircraft
for an amount equal to the principal thereof
plus accrued interest thereon. The maturity
date of the Equipment Notes relating to the
Owned Aircraft is the Final Expected
Distribution Date of the Certificates.
9
<PAGE> 11
SUMMARY OF TERMS OF CERTIFICATES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Aggregate Face Amount......... $445,826,000 $106,607,000 $110,000,000 $11,423,182
Initial Loan to Aircraft Value
(cumulative)(1)............. 46.0% 57.0% 68.3% 82.3%
Expected Principal
Distribution Window (in
years)...................... 0.2-4.9 0.2-4.9 0.2-4.9 0.2-4.9
Initial Average Life (in
years)...................... 4.6 4.7 4.7 3.8
Regular Distribution Dates.... March 2, March 2, March 2, March 2,
June 2, June 2, June 2, June 2,
September 2 & September 2 & September 2 & September 2 &
December 2 December 2 December 2 December 2
Final Expected Distribution
Date........................ December 2, 2002 December 2, 2002 December 2, 2002 December 2, 2002
Final Maturity Date........... March 2, 2004 March 2, 2004 December 2, 2002 December 2, 2002
Minimum Denomination.......... $100,000 $100,000 $100,000 $100,000
sec. 1110 Protection(2)....... Yes Yes Yes Yes
Liquidity Facility Coverage... 6 quarterly 6 quarterly None None
interest interest
payments payments
Primary Liquidity Facility
Maximum Commitment Amount at
December 23, 1997(3)........ $70,071,917 $16,881,773 None None
</TABLE>
- -------------------------
(1) Assumes an aggregate appraised Aircraft value of $969,193,333, as of
November 6, 1997.
(2) The benefits of Section 1110 of the U.S. Bankruptcy Code are available to
each Owned Aircraft Indenture Trustee as secured party under the related
Owned Aircraft Indenture and to each Leased Aircraft Indenture Trustee as
assignee of the related Owner Trustee's rights under the related Lease.
(3) For the Class A and Class B Certificates, the Maximum Commitment Amount of
the Primary Liquidity Facilities covers six consecutive quarterly interest
payments (without regard to any future payments of principal applicable to
such Certificates) up to the Capped Interest Rate. In the aggregate for the
Class A and Class B Certificates, the initial Maximum Commitment Amount of
the Primary Liquidity Facilities is $86,953,690. The amount of the Above-Cap
Liquidity Facility is such amount as is sufficient, after payment of amounts
payable under the Primary Liquidity Facility, to pay interest on the Class A
and Class B Certificates at the then applicable interest rates thereon for
six consecutive quarterly interest payments. The Above-Cap Liquidity
Provider has no rights to indemnity or reimbursement under the Operative
Agreements.
10
<PAGE> 12
EQUIPMENT NOTES AND THE AIRCRAFT
Set forth below is certain information about the Equipment Notes held in
the Trusts and the Aircraft directly or indirectly securing such Equipment
Notes:
<TABLE>
<CAPTION>
OUTSTANDING
PRINCIPAL
AIRCRAFT AMOUNT OF
REGISTRATION AIRCRAFT DELIVERY EQUIPMENT NOTE EQUIPMENT APPRAISED
NUMBER AIRCRAFT TYPE DATE MATURITY DATE NOTES VALUE
- ------------ ------------------ ------------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
N193UA ........ Boeing 747-422 August 1996 December 2002 $ 82,857,000 $141,220,000
N194UA ........ Boeing 747-422 September 1996 December 2002 98,854,000 141,220,000
N433UA ........ Airbus A320-232 June 1996 December 2002 26,460,000 37,800,000
N434UA ........ Airbus A320-232 June 1996 December 2002 26,460,000 37,800,000
N435UA ........ Airbus A320-232 September 1996 December 2002 26,775,000 38,250,000
N436UA ........ Airbus A320-232 December 1996 December 2002 27,055,000 38,650,000
N776UA ........ Boeing 777-222 April 1996 December 2002 73,500,000 105,000,000
N778UA ........ Boeing 777-222 July 1996 December 2002 74,281,000 106,116,667
N780UA ........ Boeing 777-222 August 1996 December 2002 74,421,000 106,316,667
N786UA ........ Boeing 777-222IGW April 1997 December 2002 86,758,000 123,940,000
N202UA ........ Boeing 737-322 October 1990 December 2015 19,108,399 23,170,000
N203UA ........ Boeing 737-322 October 1990 December 2015 19,109,192 23,170,000
N398UA ........ Boeing 737-322 September 1990 December 2015 19,109,192 23,370,000
N399UA ........ Boeing 737-322 October 1990 December 2015 19,108,399 23,170,000
------------ ------------
$673,856,182 $969,193,333
============ ============
</TABLE>
The appraised value of each Aircraft set forth above is based upon the
lesser of the average and median base value of such Aircraft as appraised by
three independent appraisal and consulting firms: Aircraft Information Services,
Inc. ("AISI"), BK Associates, Inc. ("BK") and AvSolutions Inc. ("AvSolutions")
(collectively, the "Appraisers") as of November 6, 1997. See "Risk Factors --
Appraisals and Realizable Value of Aircraft" and "Description of the Aircraft
and the Appraisals."
LOAN TO AIRCRAFT VALUE RATIOS
The following table sets forth loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of the Issuance Date and the Regular Distribution
Dates specified therein. The LTVs for each Class of Certificates were obtained
for each such Regular Distribution Date by dividing (i) the expected Pool
Balance of such Class of Certificates together in each case with the expected
Pool Balance of all other Classes of Certificates senior in right of payment to
such Class of Certificates under the Intercreditor Agreement determined after
giving effect to the distributions expected to be made on such Regular
Distribution Date, by (ii) the assumed value of all of the Aircraft (the
"Assumed Aggregate Aircraft Value") on such Regular Distribution Date based on
the assumptions set forth below.
The table is based on the assumption that the value of each Aircraft
included in the Assumed Aggregate Aircraft Value opposite December 23, 1997
depreciates by approximately 2% of the initial appraised value per year through
the fifteenth year after the year of delivery of such Aircraft, by approximately
4% of the initial appraised value per year for the next five years and by
approximately 6% of the initial appraised value per year thereafter. Other rates
or methods of depreciation would result in materially different LTVs, and no
assurance can be given (i) that the depreciation rates and method assumed for
the purpose of the table are the ones most likely to occur or (ii) as to the
actual future value of any Aircraft. Although the table is compiled on an
aggregate basis, it should be noted that, because the Equipment Notes relating
to any particular Aircraft are not cross-collateralized with respect to any
other Aircraft, the excess proceeds realized from the disposition of any
particular Aircraft would not be available to offset shortfalls on the Equipment
Notes relating to any other Aircraft. Therefore, upon the occurrence of an event
of default under an Indenture (an "Indenture Default"),
11
<PAGE> 13
even if the Aircraft as a group could be sold for more than the total amounts
payable in respect of all of the outstanding Equipment Notes, if certain
Aircraft were sold for less than the total amount payable in respect of the
related Equipment Notes, there would not be sufficient proceeds to pay all
Classes of Certificates in full. See "Description of the Equipment Notes -- Loan
to Aircraft Value Ratios of Equipment Notes" for additional information
regarding LTVs for the Equipment Notes issued in respect of each Aircraft that
may be more relevant in a default situation than the aggregate values shown in
the following table. Thus, the table below should not be considered a forecast
or prediction of expected or likely LTVs but simply a mathematical calculation
based on one set of assumptions.
<TABLE>
<CAPTION>
ASSUMED CLASS A CLASS A CLASS B CLASS B
AGGREGATE CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
DATE AIRCRAFT VALUE(1) POOL BALANCE LTV POOL BALANCE LTV
---- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
December 23, 1997............. $969,193,333 $445,826,000 46.0% $106,607,000 57.0%
December 2, 1998.............. 949,199,976 431,441,817 45.5 103,989,479 56.4
December 2, 1999.............. 929,206,618 417,800,428 45.0 101,982,014 55.9
December 2, 2000.............. 909,213,260 404,159,040 44.5 99,834,174 55.4
December 2, 2001.............. 889,219,902 390,517,652 43.9 97,634,905 54.9
December 2, 2002.............. 869,226,544 0 NA 0 NA
</TABLE>
<TABLE>
<CAPTION>
ASSUMED CLASS C CLASS C CLASS D CLASS D
AGGREGATE CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
DATE AIRCRAFT VALUE(1) POOL BALANCE LTV POOL BALANCE LTV
---- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
December 23, 1997.............. $969,193,333 $110,000,000 68.3% $11,423,182 82.3%
December 2, 1998............... 949,199,976 107,809,018 67.8 10,476,668 80.3
December 2, 1999............... 929,206,618 105,392,741 67.3 9,110,081 79.0
December 2, 2000............... 909,213,260 103,116,840 66.8 7,567,869 77.4
December 2, 2001............... 889,219,902 100,892,369 66.2 5,826,516 75.6
December 2, 2002............... 869,226,544 0 NA 0 NA
</TABLE>
- -------------------------
(1) The Assumed Aggregate Aircraft Value set forth opposite December 23, 1997
(but not the Assumed Aggregate Aircraft Values for subsequent dates) was
determined based upon the lesser of the average and median base value of all
Aircraft as appraised by the Appraisers as of November 6, 1997. See
"Description of the Aircraft and the Appraisals." No assurance can be given
that such value represents the realizable value of any Aircraft. See "Risk
Factors -- Appraisals and Realizable Value of Aircraft" and "Description of
the Aircraft and the Appraisals."
12
<PAGE> 14
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure for the offering of
the Certificates and certain cash flows.
[Diagram omitted, which shows that United will pay lease rental payments
assigned by lessors on Leased Aircraft and mortgage payments on Owned Aircraft
to the Indenture Trustees for the Leased and Owned Aircraft. From such payments,
the Indenture Trustees will make Equipment Note payments on the Series A
Equipment Notes, the Series B Equipment Notes, the Series C Equipment Notes and
the Series D Equipment Notes with respect to all Aircraft to the Subordination
Agent and will, in the case of the Leased Aircraft, pay any excess rent to the
lessors for the Leased Aircraft. From such Equipment Note payments, the
Subordination Agent will reimburse the Primary Liquidity Provider with respect
to any prior advance and will then pay Principal, any Additional Payments and
interest to the Pass Through Trustee for each Trust, who will distribute such
Principal, Additional Payments and interest to the Certificateholders of such
Trust. The Subordination Agent may also receive advances, if any, from the
Liquidity Providers.]
13
<PAGE> 15
THE NEW CERTIFICATES
Certificates:
(a) Denominations; Book-Entry
Certificates............. The New Certificates of each Trust will be
issued in minimum denominations of $100,000
and in integral multiples of $1,000 in excess
thereof. The New Certificates of each Trust
will be issued in fully registered form only
and will be registered in the name of Cede &
Co. ("Cede"), as the nominee of The
Depository Trust Company ("DTC"). No person
acquiring an interest in the New Certificates
will be entitled to receive a definitive
certificate representing such person's
interest in the Trust, unless definitive
certificates are issued, which will only
occur under limited circumstances. See
"Description of the New Certificates --
General" and "-- Book-Entry; Delivery and
Form."
(b) Regular Distribution
Dates......................... March 2, June 2, September 2 and December 2,
commencing on March 2, 1998 (each, a "Regular
Distribution Date").
(c) Special Distribution
Dates......................... Any Business Day on which a Special Payment is
to be distributed (each, a "Special
Distribution Date").
(d) Record Dates.............. The fifteenth day preceding a Regular
Distribution Date or a Special Distribution
Date (each, a "Record Date").
(e) Interest.................. Interest applicable to the Class A Certificates
and the Class B Certificates will be payable
at a floating rate equal to Three-Month LIBOR
plus the spread for the corresponding Class
of Certificates set forth on the cover page
of this Prospectus.
For a description of the interest payments on
the Equipment Notes, which will be
distributed to the holders of Certificates,
see "-- Equipment Notes: (a) Interest" below.
(f) Distributions............. All payments of principal and interest received
by the Trustee on the Equipment Notes held in
each Trust will be distributed by the Trustee
to the holders of the Certificates (the
"Certificateholders") of such Trust on the
Regular Distribution Dates referred to above,
subject to the provisions of the
Intercreditor Agreement. Payments of interest
on the Equipment Notes held in each Trust
will be distributed by the Trustee to the
Certificateholders of such Trust on the
Regular Distribution Dates, commencing on
March 2, 1998. Payments of principal on the
Equipment Notes held in each Trust are
scheduled to be received in specified amounts
by the Trustee of such Trust on any of March
2, June 2, September 2 or December 2 of
specified years, commencing on March 2, 1998,
and to be distributed to the
Certificateholders of such Trust on the
corresponding Regular Distribution Date,
subject to the provisions of the
Intercreditor Agreement. Payments of
principal, any Additional Payment and
interest resulting from the early redemption
or purchase (if any) of the Equipment Notes
held in any Trust will be distributed on a
Special Distribution Date after not less than
25 nor more than 60 days' notice from the
Trustee to the Subordination Agent, subject
to the provisions of the Intercreditor
Agreement. For a discussion of distributions
upon an Indenture Default, see "Description
of the New Certificates -- Indenture Defaults
and Certain Rights Upon an Indenture
Default."
14
<PAGE> 16
(g) Events of Default......... "PTC Events of Default" are the failure to pay
within ten Business Days of the due date
thereof (i) the outstanding Pool Balance of
the applicable Class of Certificates on the
Final Maturity Date for such Class or (ii)
interest due on such Certificates on any
Regular Distribution Date (unless, in the
case of the Class A or Class B Certificates,
the Subordination Agent has made an Interest
Drawing, or a withdrawal from a Cash Account,
with respect thereto in an amount sufficient
to pay such interest and has distributed such
amount to the Certificateholders entitled
thereto). A PTC Event of Default with respect
to the most senior Class of Certificates
resulting from an Indenture Default under all
Indentures will constitute a Triggering
Event. The "Final Maturity Date" for each of
the Class A and Class B Certificates is March
2, 2004 and the "Final Maturity Date" for
each of the Class C and Class D Certificates
is December 2, 2002. Any failure to make
expected principal distributions on any Class
of Certificates on any Regular Distribution
Date (other than on the Final Maturity Date)
will not constitute a PTC Event of Default
with respect to such Certificates.
(h) Purchase Rights of
Certificateholders....... Upon the occurrence and during the continuation
of a Triggering Event, (i) the Class B
Certificateholders will have the right to
purchase, at any time, all but not less than
all of the Class A Certificates, (ii) the
Class C Certificateholders will have the
right to purchase, at any time, all but not
less than all of the Class A Certificates and
the Class B Certificates and (iii) the Class
D Certificateholders will have the right to
purchase all but not less than all of the
Class A Certificates, the Class B
Certificates and the Class C Certificates, in
each case at a purchase price equal to the
Pool Balance of the relevant Class or Classes
of Certificates plus accrued and unpaid
interest thereon to the date of purchase,
without any Additional Payment, but including
any other amounts due to the
Certificateholders of such Class or Classes.
"Triggering Event" means (a) the occurrence of
an Indenture Default under all Indentures
resulting in a PTC Event of Default with
respect to the most senior Class of
Certificates then outstanding, (b) the
acceleration of all of the outstanding
Equipment Notes or (c) certain bankruptcy or
insolvency events involving United.
Equipment Notes:
(a) Interest:
General.................. Interest on the Equipment Notes is payable on
March 2, June 2, September 2 and December 2
of each year, commencing on March 2, 1998.
Interest payments will be passed through to
Certificateholders of each Trust on each
Regular Distribution Date until the Final
Expected Distribution Date for such
Certificates, in each case subject to the
Intercreditor Agreement. Interest is
calculated on the basis of the actual number
of days elapsed over a 360-day year. See
"Description of the Equipment Notes --
Principal and Interest Payments."
The initial interest rates for each Series of
Equipment Notes is set forth below under "--
Interest Rates." The interest rates on each
Series of Equipment Notes relating to the
Leased Aircraft
15
<PAGE> 17
will reset on the Final Expected Distribution
Date as set forth below under "-- Interest
Rate Reset on Expected Final Distribution
Date." The interest rates for the Equipment
Notes are also subject to change under
certain circumstances described in "Exchange
Offer -- General."
Interest Rates........... The Series A and Series B Equipment Notes held
in each Trust will accrue interest at a
floating rate equal to Three-Month LIBOR plus
the spread for the corresponding Class of
Certificates set forth on the cover page of
this Prospectus. The Series C and Series D
Equipment Notes held in each Trust will also
accrue interest at a specified floating
interest rate.
Interest Rate Reset on
Final Expected Distribution
Date.................... The interest rate on each Series of Equipment
Notes relating to the Leased Aircraft will be
reset on the Final Expected Distribution
Date. No later than 60 days prior to the
Final Expected Distribution Date, United will
cause the Trustee to hire (and, if United
does not so cause the Trustee, the Trustee
will, no later than 30 days prior to the
Final Expected Distribution Payment, hire) an
independent investment banker (the "Reset
Agent") of recognized national standing
(which may be an Initial Purchaser) to
determine the interest rate on each Series of
the Equipment Notes relating to the Leased
Aircraft, which interest rate, in the good
faith determination of the Reset Agent, after
consideration of the then current rates for
pass through certificates of United and other
comparable equipment lessees having similar
tenor, rating and other pricing terms, will
enable each such Series of Equipment Notes to
be sold at 100% of the principal amount
thereof on the Final Expected Distribution
Date. The Reset Agent will, for such
reasonable fee payable by the Trust as is
mutually agreed by the Trustee and the Reset
Agent, use its best efforts to sell any such
Equipment Notes with such new interest rates
on the Final Expected Distribution Date or as
promptly as practicable thereafter.
No beneficial owner of any Certificates will
have any rights or claims under the Note
Purchase Agreement or against United or the
Reset Agent as a result of the Reset Agent
not providing a reset interest rate, the
Reset Agent not selling such Certificates or
United not purchasing such Certificates.
(b) Principal................. Scheduled principal payments on the Equipment
Notes held in each Trust will be passed
through to the Certificateholders of each
such Trust on one or more Regular
Distribution Dates in specified years,
commencing on March 2, 1998, in accordance
with the principal repayment schedule set
forth below under "Description of the New
Certificates -- Pool Factors" and
"Description of the Equipment Notes --
Principal and Interest Payments," in each
case subject to the Intercreditor Agreement.
(c) Redemption and Purchase:
Mandatory Redemption Upon
Event of Loss........... If an Event of Loss occurs with respect to any
Aircraft and such Aircraft is not replaced by
United under the related Lease (in the case
of the Leased Aircraft) or under the related
Owned Aircraft Indenture (in the case of the
Owned Aircraft), the Equipment Notes issued
with respect to such Aircraft will be
redeemed in whole, in each case at a price
equal to the aggregate
16
<PAGE> 18
unpaid principal thereof, together with Break
Amount, if any, and accrued interest thereon
to, but not including, the date of
redemption.
Optional Redemption or
Purchase or
Refinancing............. United or its designee may, at its option (or
the Owner Trustee will, pursuant to the
applicable Indenture), redeem, purchase or
refinance, in the case of the Owned Aircraft,
or purchase, in the case of the Leased
Aircraft, (i) the Equipment Notes of a Series
with respect to one or more Aircraft or (ii)
in whole, the Equipment Notes related to one
or more Aircraft; provided, however, that,
other than as set forth in "Description of
the Equipment Notes -- Redemption," the
Series C Equipment Notes may not be redeemed
before December 2, 2002.
The Series A Equipment Notes may be redeemed or
purchased, in each case described above, at a
price equal to the aggregate unpaid principal
amount of such Equipment Notes, together with
any Additional Payment and accrued interest
thereon to, but not including, the date of
redemption or purchase. "Additional Payment"
means a payment of Make-Whole Amount and/or
Break Amount, if any.
Optional Purchase by
Owner Trustee or Owner
Participant............. If, with respect to the Leased Aircraft, (i)
one or more Lease Events of Default have
occurred and are continuing for a period of
120 days or more and no Indenture Event of
Default (other than arising out of such Lease
Event(s) of Default) has occurred and is
continuing, (ii) the Equipment Notes with
respect to such Leased Aircraft have become
due and payable, (iii) the applicable Owner
Participant has received notice from the
applicable Indenture Trustee that it intends
to foreclose the lien of the applicable
Indenture or (iv) the Indenture Trustee has
elected to exercise remedies under the
applicable Indenture, then in each case the
Equipment Notes issued with respect to such
Leased Aircraft, upon 26 days' prior
irrevocable notice to the Indenture Trustee,
may be purchased by the Owner Trustee or the
Owner Participants on the applicable purchase
date at a price equal to the aggregate unpaid
principal thereof, together with Break
Amount, if any, and accrued interest thereon
to, but not including, the purchase date.
(d) Maturity of Equipment
Notes; Final Distribution of
Certificates............. The maturity date of the Equipment Notes
relating to the Owned Aircraft acquired by
each Trust is December 2, 2002, which is the
Final Expected Distribution Date of the
Certificates issued by such Trust.
The maturity date of the Equipment Notes issued
with respect to the Leased Aircraft acquired
by each Trust will occur after the Final
Expected Distribution Date applicable to the
Certificates to be issued by such Trust. As a
result, on the Final Expected Distribution
Date the installments of principal and
interest then due and payable on the
Equipment Notes will be insufficient to pay
the final expected distribution on the
related Certificates. Under the Note Purchase
Agreement, the applicable Trustees will
obtain the funds to pay the final expected
distribution on the Certificates on the Final
Expected Distribution Date from the payment
by United in full, at maturity of the
principal and accrued interest on the
Equipment Notes issued with respect to
17
<PAGE> 19
the Owned Aircraft and by selling, or
permitting the refinancing of, the Equipment
Notes issued with respect to the Leased
Aircraft for an amount equal to the principal
thereof plus accrued interest thereon.
On the Final Expected Distribution Date, United
or its designee may purchase the Equipment
Notes relating to the Leased Aircraft from
the Trustees for an amount equal to the
principal thereof plus accrued interest
thereon, or United may arrange for the
purchase of the Equipment Notes by a third
party for an amount equal to the principal
amount thereof plus accrued interest thereon.
Whether or not United purchases or refinances
the Equipment Notes relating to the Leased
Aircraft, the interest rates on each Series
of Equipment Notes relating to the Leased
Aircraft that remains outstanding on or after
the Final Expected Distribution Date will be
reset on the Final Expected Distribution Date
as set forth under "(a) Interest: Interest
Rate Reset on Final Expected Distribution
Date" above.
(e) Security.................. The Equipment Notes issued with respect to each
Aircraft are secured by a security interest
in the related Aircraft. In the case of each
Leased Aircraft, the related Equipment Notes
are also secured by an assignment to the
related Leased Aircraft Indenture Trustee of
certain of the related Owner Trustee's rights
under the Lease with respect to such Leased
Aircraft, including the right to receive
specified payments of rent thereunder. The
Equipment Notes are not cross-collateralized
and, consequently, the Equipment Notes issued
in respect of any one Aircraft are not
secured by any of the other Aircraft or, in
the case of the Leased Aircraft, the Leases
related thereto. There are no cross-default
provisions in the Indentures or, in the case
of the Leased Aircraft, in the Leases.
Consequently, events resulting in an
Indenture Default under any particular
Indenture may or may not result in an
Indenture Default occurring under any other
Indenture, and, in the case of the Leased
Aircraft, a Lease Event of Default under any
particular Lease will not constitute a Lease
Event of Default under any other Lease. If
the Equipment Notes issued with respect to
one or more Aircraft are in default and the
Equipment Notes issued with respect to the
remaining Aircraft are not in default, no
remedies will be exercisable under the
Indentures with respect to such remaining
Aircraft. See "Description of the Equipment
Notes -- Security" and "-- Indenture
Defaults, Notice and Waiver."
Although the Equipment Notes issued with
respect to the Leased Aircraft are not direct
obligations of, or guaranteed by, United, the
amounts unconditionally payable by United
will be at least sufficient to pay in full
when due all amounts payable on the Equipment
Notes issued with respect to the Leased
Aircraft held by the Trusts on each Regular
Distribution Date. The Equipment Notes issued
with respect to the Owned Aircraft will be
direct obligations of United. See
"Description of the Equipment Notes --
General."
(f) Section 1110 Protection... Vedder, Price, Kaufman & Kammholz, special
counsel to United, has advised: (i) each
Leased Aircraft Indenture Trustee that the
related Owner Trustee, as lessor under the
related Lease, and such Leased Aircraft
Indenture Trustee, as assignee of such Owner
Trustee's rights under such Lease pursuant to
the related
18
<PAGE> 20
Leased Aircraft Indenture, is entitled to the
benefits of Section 1110 of the U.S.
Bankruptcy Code with respect to the related
airframe and engines and (ii) each Owned
Aircraft Indenture Trustee that it is
entitled to the benefits of Section 1110 of
the U.S. Bankruptcy Code with respect to the
related airframe and engines as secured party
under the related Owned Aircraft Indenture.
See "Description of the Equipment Notes --
Remedies" for a description of that opinion
and certain assumptions contained therein.
(g) Ranking................... Series B Equipment Notes issued in respect of
any Aircraft are subordinated in right of
payment to Series A Equipment Notes issued in
respect of such Aircraft. Series C Equipment
Notes issued in respect to such Aircraft are
subordinated in right of payment to such
Series B Equipment Notes. Series D Equipment
Notes issued in respect of such Aircraft are
subordinated in right of payment to such
Series C Equipment Notes. Other than in
connection with any redemption, purchase or
refinancing of a Series of Equipment Notes
relating to the Owned Aircraft or a purchase
of a Series of Equipment Notes relating to
the Leased Aircraft, on each Regular
Distribution Date, (i) payments of interest
and principal due on Series A Equipment Notes
issued in respect of any Aircraft will be
made prior to payments of interest and
principal due on Series B Equipment Notes
issued in respect of such Aircraft, (ii)
payments of interest and principal due on
such Series B Equipment Notes will be made
prior to payments of interest and principal
due on Series C Equipment Notes issued in
respect of such Aircraft and (iii) payments
of interest and principal due on such Series
C Equipment Notes will be made prior to
payments of interest and principal due on
Series D Equipment Notes issued in respect of
such Aircraft.
Liquidity Facilities:
(a) Primary Liquidity
Facilities.................... The Subordination Agent and the Primary
Liquidity Provider have entered into
revolving credit agreements (each, a "Primary
Liquidity Facility") with respect to the
Class A Trust and the Class B Trust. Under
each Primary Liquidity Facility, the Primary
Liquidity Provider will, if necessary, make
advances ("Interest Drawings") in an
aggregate amount that will be sufficient to
pay interest on the Class A or Class B
Certificates, as the case may be, on up to
six consecutive Regular Distribution Dates
(without regard to any expected future
payments of principal on such Certificates)
at the Current Interest Rate; provided,
however, that the maximum amount available to
be drawn under such Primary Liquidity
Facility on any Regular Distribution Date to
fund any shortfall of interest on such
Certificates may not exceed an amount equal
to 1/6 of the Maximum Commitment Amount
(determined using the Capped Interest Rate
defined below) of such Primary Liquidity
Facility. The "Current Interest Rate" is
defined in the Intercreditor Agreement to
mean, with respect to Class A or Class B
Certificates, its respective interest rate
for an interest period (plus an additional
margin specified by the Registration Rights
Agreement, if applicable) (the "Stated
Interest Rate"). Initially, the "Maximum
Commitment Amount" available under the
Primary Liquidity Facilities for the Class A
Certificates and the Class B Certificates is
$70,071,917 and
19
<PAGE> 21
$16,881,773, respectively, and, thereafter,
the "Maximum Commitment Amount" available
under each Primary Liquidity Facility will
equal the product of (x) 1.5, multiplied by
(y) the Capped Interest Rate, multiplied by
(z) the Pool Balance of the related Class of
Certificates. An Interest Drawing under the
relevant Primary Liquidity Facility will be
made on the second Business Day after any
Regular Distribution Date if, after giving
effect to the subordination provisions of the
Intercreditor Agreement, there are
insufficient funds available to the
Subordination Agent to pay interest on any
Class A or Class B Certificates. The Primary
Liquidity Facility for either the Class A or
Class B Certificates does not provide for
drawings thereunder to pay for principal of
or any Additional Payment on the Certificates
of such Class, any interest on the
Certificates of such Class in excess of
10.04% (or, if within 180 days after the
Closing Date a Registration Event has not
occurred, for the period from July 1, 1998
through the date on which a Registration
Event occurs, 9.57%) (the "Capped LIBOR")
plus the applicable spread (in aggregate, the
"Capped Interest Rate"), or principal of, any
Additional Payment or interest on the
Certificates of any other Class.
Upon each Interest Drawing under any Primary
Liquidity Facility, the Subordination Agent
will be obligated to reimburse (to the extent
that the Subordination Agent has available
funds therefor) the Primary Liquidity
Provider for the amount of such drawing. Such
reimbursement obligation and any other
amounts owing to the Primary Liquidity
Provider under each Primary Liquidity
Facility or certain other agreements (the
"Liquidity Obligations") will rank senior to
the Certificates in right of payment. Upon
reimbursement in full of the Interest
Drawings, together with any accrued interest
thereon, under any Primary Liquidity
Facility, the amount available under such
Primary Liquidity Facility will be reinstated
to the then Maximum Commitment Amount of such
Primary Liquidity Facility. Such available
amount will not be so reinstated if (i) a
Triggering Event has occurred and is
continuing and (ii) less than 65% of the
aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment
Notes.
"Performing Equipment Note" means an Equipment
Note with respect to which no payment default
has occurred and is continuing; provided,
however, that in the event of a bankruptcy
proceeding involving United under the U.S.
Bankruptcy Code, (i) any payment default
existing during the 60-day period under
Section 1110(a)(1)(A) of the U.S. Bankruptcy
Code (or such longer period as may apply
under Section 1110(b) of the U.S. Bankruptcy
Code) (the "Section 1110 Period") will not be
taken into consideration, unless during the
Section 1110 Period the trustee in such
proceeding or United does not agree to
perform its obligations under the Lease
related to such Equipment Note (in the case
of a Leased Aircraft) or under the Owned
Aircraft Indenture (in the case of the Owned
Aircraft) and (ii) any payment default
occurring after the date of the order of
relief in such proceeding will not be taken
into consideration if such payment default is
cured under Section 1110(a)(1)(B) of the U.S.
Bankruptcy Code
20
<PAGE> 22
before the later of 30 days after the date of
such default or the expiration of the Section
1110 Period.
If at any time the short-term unsecured debt
rating of any Primary Liquidity Provider
issued by either Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Ratings
Services ("Standard & Poor's," and together
with Moody's, the "Rating Agencies") (or the
long-term unsecured debt rating issued by
such Rating Agency if there is no such
short-term rating for any Primary Liquidity
Provider) is lower than the applicable
Threshold Rating, the Primary Liquidity
Facility for each Class of Certificates will
be required to be replaced by another similar
facility to be provided by one or more
financial institutions having such unsecured
debt ratings issued by both Rating Agencies
which are equal to or higher than the
Threshold Rating, provided that the
commitment percentage of each financial
institution will be the same for the
replacement Class A facility and the
replacement Class B facility. If the Primary
Liquidity Facilities are not replaced within
30 days after notice of the downgrading, each
Primary Liquidity Facility will be drawn in
full (the "Downgrade Drawing") and the
proceeds will be deposited into a cash
collateral account (the "Cash Collateral
Account") for the related Class of
Certificates and used for the same purposes
and under the same circumstances, and subject
to the same conditions, as cash payments of
Interest Drawings under such Primary
Liquidity Facility would be used.
Upon receipt by the Subordination Agent of a
Termination Notice with respect to any
Primary Liquidity Facility from the Primary
Liquidity Provider (given as described in
"Description of the Liquidity Facilities --
Liquidity Events of Default"), the
Subordination Agent will request a final
drawing (the "Final Drawing") under such
Primary Liquidity Facility in an amount equal
to all available and undrawn amounts
thereunder and will hold the proceeds thereof
in the Cash Collateral Account for the
related Trust as cash collateral to be used
for the same purposes and under the same
circumstances, and subject to the same
conditions, as cash payments of Interest
Drawings under such Primary Liquidity
Facility would be used.
United may, at its option, subject to certain
conditions, arrange for replacement
facilities to replace the Primary Liquidity
Facilities, provided that the initial Primary
Liquidity Provider will only be replaced (A)
if replacement will reduce or eliminate
certain indemnity payments or obligations
that would constitute an economic hardship to
United or (B) after a Downgrade Drawing. If a
replacement facility is provided at any time
after a Downgrade Drawing under the related
Primary Liquidity Facility, the funds on
deposit in the applicable Cash Collateral
Account will be returned to the Primary
Liquidity Provider being replaced.
Notwithstanding the subordination provisions of
the Intercreditor Agreement, the holders of
the Class A and Class B Certificates will be
entitled to receive and retain the proceeds
of drawings under the applicable Primary
Liquidity Facility. See "Description of the
Liquidity Facilities -- Primary Liquidity
Facilities."
21
<PAGE> 23
(b) Above-Cap Liquidity
Facility...................... The Subordination Agent and the Above-Cap
Liquidity Provider will enter into
irrevocable interest rate cap agreements
(each, an "Above-Cap Liquidity Facility" and,
together with the Primary Liquidity
Facilities, the "Liquidity Facilities") with
respect to the Class A Trust and the Class B
Trust. Under each Above-Cap Liquidity
Facility, the Above-Cap Liquidity Provider
will, if necessary, make payments (if then
effective Three-Month LIBOR exceeds Capped
LIBOR) in an amount not to exceed the product
of (x) the difference between Three-Month
LIBOR and Capped LIBOR, multiplied by (y) the
Pool Balance of the related Class of
Certificates, multiplied by (z) actual days
elapsed in the applicable interest period
divided by 360 ("Above-Cap Interest
Payments"), which payments, in the aggregate
with the required amount of Interest Drawings
under the Primary Liquidity Facilities, will
be sufficient to pay interest on the Class A
Certificates or Class B Certificates, as the
case may be, on up to six consecutive Regular
Distribution Dates (without regard to any
expected future payments of principal on such
Certificates). An Above-Cap Interest Payment
under the relevant Above-Cap Liquidity
Facility will be made on the second Business
Day after any Regular Distribution Date if,
after giving effect to the subordination
provisions of the Intercreditor Agreement and
the Interest Drawing to be made on the
relevant Primary Liquidity Facility or
withdrawals from the related Cash Collateral
Account, there are insufficient funds
available to the Subordination Agent to pay
interest on any Class A or Class B
Certificates. The Above-Cap Liquidity
Provider under the Above-Cap Liquidity
Facility for the Class A or Class B
Certificates will be required to pay amounts
to the Subordination Agent only at such times
as Interest Drawings are payable and the
required amounts thereof are insufficient
under the Primary Liquidity Facility or
withdrawals are made from the related Cash
Collateral Account and such withdrawals are
insufficient. The Above-Cap Liquidity
Facility for either the Class A Certificates
or Class B Certificates does not provide for
payments thereunder to pay for principal of,
or any Additional Payment on, the
Certificates of such Class or principal of,
or any Additional Payment or interest on, the
Certificates of any other Class.
If at any time the short-term unsecured debt
rating of the Above-Cap Liquidity Provider
issued by any Rating Agency (or the long-term
unsecured debt rating issued by such Rating
Agency if there is no such short-term rating
for any Above-Cap Liquidity Provider) is
lower than the applicable Threshold Rating,
the Above-Cap Liquidity Facility for each
Class of Certificates will be required to be
replaced by another similar facility to be
provided by one or more financial
institutions having such unsecured debt
ratings issued by both Rating Agencies which
are equal to or higher than the Threshold
Rating; provided that the commitment
percentage of each financial institution will
be the same for the replacement Class A
facility and the replacement Class B
facility. If the Above-Cap Liquidity Facility
is not
22
<PAGE> 24
replaced within 30 days after notice by the
Above-Cap Liquidity Provider of the
downgrading, the Above-Cap Liquidity Provider
will transfer the Above-Cap Liquidity
Facility to an affiliate, reasonably
acceptable to the Rating Agencies, that is
eligible to become a debtor under the United
States Bankruptcy Code, and such affiliate
will post collateral to the Subordination
Agent for deposit into an account ("Above-Cap
Account;" and together with the Cash
Collateral Account, the "Cash Accounts") for
the benefit of the related Class of
Certificates an amount in cash equal to the
product of (x) a fraction, the numerator of
which is an amount equal to the difference
between (A) 18 and (B) three times the number
of unreimbursed Interest Drawings under the
Primary Liquidity Facility, and the
denominator of which is 12, multiplied by (y)
the greater of (A) 12.29% per annum minus
Capped LIBOR and (B) the effective Three-
Month LIBOR on such 30th day minus Capped
LIBOR, multiplied by (z) the Pool Balance of
the applicable Class of Certificates (the
"Above-Cap Collateral Amount"), and used for
the same purposes and under the same
circumstances, and subject to the same
conditions, as cash payments of Above-Cap
Interest Payments under the Above-Cap
Liquidity Facility would be used. Cash
deposited into the account will be invested
in U.S. government or agency securities. On
each Regular Distribution Date, the amount in
the account will be increased or decreased so
that on such Regular Distribution Date an
amount equal to the Above-Cap Collateral
Amount is deposited and available in the
account. If the replacement obligation
described in the first sentence of this
paragraph is not met, as an alternative to
the collateralization mechanism described
above, the Above-Cap Liquidity Provider may
provide such other assurances of
creditworthiness as will maintain the then
current ratings of the Class A and Class B
Certificates by the Rating Agencies.
Notwithstanding the subordination provisions
of the Intercreditor Agreement, the holders
of the Class A and Class B Certificates will
be entitled to receive and retain the
proceeds of payments under the applicable
Above-Cap Liquidity Facility. See
"Description of the Liquidity Facilities --
Above-Cap Liquidity Facility."
(c) Primary Liquidity
Provider...................... Kreditanstalt fur Wiederaufbau is a corporation
organized under the public law of the Federal
Republic of Germany. The Primary Liquidity
Provider provides two separate Primary
Liquidity Facilities: one for the benefit of
the holders of Class A Certificates and the
other for the benefit of the holders of Class
B Certificates.
(d) Above-Cap Liquidity
Provider...................... The Above-Cap Liquidity Provider is Credit
Suisse Financial Products which is an
unlimited company incorporated in England and
an authorized institution under the Banking
Act of 1987 of the United Kingdom.
<TABLE>
<CAPTION>
STANDARD &
MOODY'S POOR'S
------- ----------
<S> <C> <C> <C>
(e) Threshold Rating of Liquidity Providers.......... Short-term P-1 A-1+
Long-term Aa3 AA-
</TABLE>
23
<PAGE> 25
Intercreditor Agreement....... The Trustees under the Pass Through Trusts, the
Liquidity Providers and the Subordination
Agent have entered into an agreement (the
"Intercreditor Agreement"), which provides as
follows:
(a) Subordination............. (i) All payments made in respect of the
Equipment Notes and certain other payments
will be made to the Subordination Agent,
which will distribute such payments in
accordance with the provisions of paragraphs
(ii) and (iii) below.
(ii) On any Regular Distribution Date or
Special Distribution Date (each, a
"Distribution Date"), so long as no
Triggering Event has occurred (whether or not
continuing), all payments received by the
Subordination Agent in respect of the
Equipment Notes and certain other payments
will be distributed in the order of priority
described in "Description of the
Intercreditor Agreement -- Priority of
Distributions."
(iii) Upon the occurrence of a Triggering Event
and at all times thereafter, the
Subordination Agent will distribute all funds
in the order of priority described in
"Description of the Intercreditor Agreement
-- Priority of Distributions."
(b) Intercreditor Rights...... Pursuant to the Intercreditor Agreement, the
Trustees and the Primary Liquidity Providers
have agreed that, with respect to any
Indenture at any given time, the Indenture
Trustee will be directed (a) in taking, or
refraining from taking, any action thereunder
or under the related Equipment Notes by the
holders of at least a majority of the
outstanding principal amount of the Equipment
Notes issued thereunder as long as no
Indenture Default has occurred and is
continuing thereunder and (b) subject to
certain conditions, in taking, or refraining
from taking, any action under such Indenture
or with respect to such Equipment Notes,
including exercising remedies thereunder
(including acceleration of such Equipment
Notes or foreclosing the lien on the Aircraft
securing such Equipment Notes) by the
Controlling Party insofar as an Indenture
Default thereunder has occurred and is
continuing.
"Controlling Party" with respect to any
Indenture means: (w) the Trustee acting on
behalf of holders of Class A Certificates;
(x) upon payment of Final Distributions to
the holders of Class A Certificates, the
Trustee acting on behalf of the holders of
Class B Certificates; (y) upon payment of
Final Distributions to the holders of Class A
and Class B Certificates, the Trustee acting
on behalf of the holders of Class C
Certificates; and (z) upon payment of Final
Distributions to the holders of Class A,
Class B and Class C Certificates, the Trustee
acting on behalf of holders of the Class D
Certificates. See "Description of the
Certificates -- Indenture Defaults and
Certain Rights Upon an Indenture Default" for
a description of the rights of the
Certificateholders of Trusts of each Class to
direct the Trustee. Notwithstanding the
foregoing, at any time after 18 months from
the earliest to occur of (x) the date on
which the Remaining Commitment Amount (as
defined in the Intercreditor Agreement) under
any Primary Liquidity Facility is and remains
zero
24
<PAGE> 26
(for any reason other than a Downgrade
Drawing), (y) the date on which a Final
Drawing has been made under any Primary
Liquidity Facility and remains unreimbursed
and (z) the date on which all Equipment Notes
have been accelerated, the Primary Liquidity
Provider has the right to become the
Controlling Party with respect to such
Indenture; provided, however, that if there
is more than one Primary Liquidity Provider,
the Primary Liquidity Providers holding more
than 50% of the unreimbursed Liquidity
Obligations will have such right. For
purposes of giving effect to the foregoing,
the Trustee (other than as the Controlling
Party) has irrevocably agreed (and the
Certificateholders, other than the
Certificateholders represented by the
Controlling Party, have been deemed to have
agreed by virtue of their purchase of
Certificates) that the Subordination Agent,
as record holder of the Equipment Notes, will
exercise its voting rights in respect of the
Equipment Notes as directed by the
Controlling Party. For a description of
certain limitations on the Controlling
Party's rights to exercise remedies, see
"Description of the Equipment Notes --
Remedies."
"Final Distributions" means, with respect to
the Certificates of any Trust or Trusts of
the same Class on any Distribution Date, the
sum of (x) accrued and unpaid interest on
such Certificates and (y) the Pool Balance of
such Certificates as of the preceding
Distribution Date. Any unpaid Additional
Payment will be added to such Final
Distributions.
Upon the occurrence and during the continuation
of an Indenture Default under any Indenture,
the Controlling Party may, among other
things, direct the Subordination Agent, which
will in turn direct the Indenture Trustee, to
accelerate and sell all (but not less than
all) of the Equipment Notes issued under such
Indenture to any person, subject to the
provisions of the next paragraph below. The
proceeds of such sale will be distributed
pursuant to the provisions of the
Intercreditor Agreement.
Subject to the rights of any Owner Trustee or
Owner Participant, so long as any
Certificates are outstanding, during nine
months after the earlier of (x) the
acceleration of the Equipment Notes under any
Indenture or (y) the bankruptcy or insolvency
of United, without the consent of the
Trustee, (a) no Aircraft subject to the lien
of any Indenture or such Equipment Notes may
be sold if the net proceeds from such sale
would be less than the aggregate outstanding
principal amount of the Equipment Notes
related to such Aircraft, plus accrued
interest thereon, and (b) with respect to any
Leased Aircraft, the amount and payment dates
of rentals payable by United under the Lease
for such Leased Aircraft may not be adjusted,
if, as a result of such adjustment, the
discounted present value of all such rentals
would be less than 75% of the discounted
present value of the rentals payable by
United under such Lease before giving effect
to such adjustment, in each case, using the
weighted average interest rate of the
Equipment Notes issued under such Indenture
as the discount rate.
25
<PAGE> 27
Method of Distribution........ The persons in whose names the Certificates are
registered will be treated as the owners of
such Certificates for the purpose of
receiving payments of principal of and
interest on such Certificates and for all
other purposes whatsoever. Therefore, none of
the Trustees, United, the Indenture Trustees,
the Liquidity Providers, the Owner
Participants or the Owner Trustees has any
direct responsibility or liability for
distributions or payments to owners of
beneficial interests in the Certificates (the
"Certificate Owners"). Distributions by the
Trustee in respect of Certificates registered
in the name of Cede, as nominee of DTC,
including the final distribution of principal
with respect to such Certificates of any
Trust, will be made in same-day funds to DTC.
DTC will in turn make distributions in
same-day funds to those participants in DTC
who are credited with ownership of such
Certificates ("DTC Participants") in amounts
proportionate to the amount of each such DTC
Participant's respective holdings of
beneficial interests in such Certificates.
Corresponding payments by the DTC
Participants to beneficial owners of such
Certificates will be the responsibility of
such DTC Participants and will be made in
accordance with customary industry practices.
The final distribution with respect to the
Certificates of any Trust will be made only
upon surrender and presentation thereof to
the Trustee. See "Description of the New
Certificates -- Book-Entry; Delivery and
Form."
Trustee....................... First Security Bank, National Association acts
as Trustee and as paying agent and registrar
for the Certificates of each Trust. First
Security Bank, National Association also acts
as Indenture Trustee, as paying agent and
registrar for each Series of Equipment Notes
and as Subordination Agent under the
Intercreditor Agreement.
Federal Income Tax
Consequences.................. The exchange of New Certificates for Old
Certificates will not be a sale or exchange
or otherwise taxable event for Federal income
tax purposes.
ERISA Considerations.......... In general, employee benefit plans subject to
Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code") (or entities
which may be deemed to hold the assets of any
such plan) (collectively, "Plans") will be
eligible to purchase the Certificates if the
conditions of one or more administrative
class exemptions are satisfied. By its
acceptance of a Certificate, each
Certificateholder will be deemed to have
represented and warranted that either (i) no
Plan assets have been used to purchase such
Certificate or (ii) the purchase and holding
of such Certificate is exempt from the
prohibited transaction restrictions of ERISA
and Section 4975 of the Code pursuant to an
administrative class exemption. See "ERISA
Considerations" and "Transfer Restrictions."
Each Plan fiduciary (and each fiduciary for a
governmental or church plan subject to rules
similar to those imposed on Plans under
ERISA) should consult with its legal advisor
concerning an investment in any of the
Certificates.
26
<PAGE> 28
RISK FACTORS
HOLDERS OF OLD CERTIFICATES SHOULD CAREFULLY REVIEW THE INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS AND OTHER PUBLICLY AVAILABLE INFORMATION
REGARDING UNITED AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS BEFORE
TENDERING THEIR OLD CERTIFICATES IN THE EXCHANGE OFFER. THE RISK FACTORS SET
FORTH BELOW (OTHER THAN "-- CONSEQUENCES OF FAILURE TO EXCHANGE") ARE GENERALLY
APPLICABLE TO THE OLD CERTIFICATES AS WELL AS THE NEW CERTIFICATES.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Certificates who do not exchange their Old Certificates for
New Certificates pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Certificates as set forth in the legend
thereon as a consequence of the issuance of the Old Certificates pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Certificates may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. United does not currently anticipate that it will register the Old
Certificates under the Securities Act. To the extent that Old Certificates are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Certificates could be adversely affected.
APPRAISALS AND REALIZABLE VALUE OF AIRCRAFT
The proceeds realized upon a sale of any Aircraft may be less than the
appraised value thereof. Appraisals in respect of the Aircraft (without physical
inspection thereof) have been prepared by AISI, BK and AvSolutions. Such
appraisals are based on varying assumptions and methodologies, which differ
among the Appraisers. The Appraisers have delivered letters summarizing their
respective reports, copies of which are annexed to this Prospectus as Appendix
II. See "Description of the Aircraft and the Appraisals." The appraised value of
each Aircraft and, accordingly, the initial aggregate Aircraft value as referred
to herein, is based upon the lesser of the average and median base values of
such Aircraft as appraised by the Appraisers and projected as of the scheduled
delivery month of such Aircraft. Such aggregate appraised values also assume
depreciation of approximately 2% of the initial appraised value per year through
the fifteenth year after the date of delivery of such Aircraft, by approximately
4% of the initial appraised value per year for the next five years and by
approximately 6% of the initial appraised value per year thereafter, although no
assurance can be given as to the actual market value rate of depreciation, which
may differ from such rates during such period. Appraisals that are based on
different assumptions and methodologies may result in valuations that are
materially different from those contained in the appraisals of the Appraisers.
An appraisal is only an estimate of value and should not be relied upon as a
measure of realizable value. The value of the Aircraft in the event of the
exercise of remedies under the applicable Indenture will depend on market and
economic conditions, the supply of aircraft, the availability of buyers, the
condition of the Aircraft and other factors. Accordingly, there can be no
assurance that the proceeds realized upon any such exercise of remedies with
respect to the Equipment Notes and the Aircraft pursuant to the applicable Pass
Through Trust Agreement and the applicable Indenture would be sufficient to
satisfy in full payments due on the Certificates.
PRIORITY OF DISTRIBUTIONS; SUBORDINATION
Certain provisions of the Intercreditor Agreement, which provide for the
subordination of the Class B Certificates to the Class A Certificates, the
subordination of the Class C Certificates to the Class B Certificates and the
subordination of the Class D Certificates to the Class C Certificates, may
result in the holders of the subordinated Classes of Certificates receiving less
than the full amount due to them after the occurrence of a payment default under
any Equipment Note or a Triggering Event, even if all of the Equipment Notes
eventually are paid in full. Pursuant to the Intercreditor Agreement to which
the Trustees, the Subordination Agent and the Liquidity Providers will be
parties, on each Distribution Date, all payments received by the Subordination
Agent will be distributed in the order of priority described in "Description of
27
<PAGE> 29
the Intercreditor Agreement -- Priority of Distributions" depending on, among
other things, whether or not a Triggering Event has occurred.
The priority of distributions after a payment default under any Equipment
Note or a Triggering Event will have the effect in certain circumstances of
requiring the distribution to more senior Classes of Certificates of payments
received in respect of one or more junior Series of Equipment Notes. If this
occurs, interest accruing on the remaining Equipment Notes will in the aggregate
be less than interest accruing on the remaining Certificates because such
Certificates include a relatively greater proportion of junior Classes with
relatively higher interest rates. As a result of this possible interest
shortfall, the holders of one or more junior Classes of Certificates may not
receive the full amount due them after a payment default under any Equipment
Note even if all Equipment Notes are eventually paid in full.
CONTROL OVER COLLATERAL; SALE OF COLLATERAL
The Certificateholders have certain limitations on their ability to sell or
otherwise control the collateral of the Trusts as described below. Pursuant to
the Intercreditor Agreement, the Trustees and the Primary Liquidity Providers
have agreed that, with respect to any Indenture at any given time, the Indenture
Trustee will be directed (a) in taking, or refraining from taking, any action
thereunder by a Majority in Interest of Noteholders (as defined in such
Indenture) so long as no Indenture Default has occurred and is continuing
thereunder and (b) subject to certain conditions, in exercising remedies
thereunder (including acceleration of such Equipment Notes or foreclosing the
lien on the Aircraft securing such Equipment Notes) insofar as an Indenture
Default has occurred and is continuing, by the Controlling Party. See
"Description of the Certificates -- Indenture Defaults and Certain Rights Upon
an Indenture Default" for a description of the rights of the Certificateholders
of each Trust to direct the respective Trustees. Notwithstanding the foregoing,
at any time after 18 months from the earlier to occur of (x) the date on which
the Remaining Commitment Amount under any Primary Liquidity Facility is and
remains zero (for any reason other than a Downgrade Drawing), (y) the date on
which a Final Drawing has been made under any Primary Liquidity Facility and (z)
the date on which all Equipment Notes have been accelerated, the Primary
Liquidity Provider has the right to elect to become the Controlling Party with
respect to such Indenture; provided, however, that if there is more than one
Primary Liquidity Provider, the Primary Liquidity Providers holding in excess of
50% of unreimbursed Liquidity Obligations will have such right. For purposes of
giving effect to the foregoing, the Trustees (other than the Controlling Party)
will irrevocably agree (and the Certificateholders, other than the
Certificateholders represented by the Controlling Party, will be deemed to agree
by virtue of their purchase of Certificates) that the Subordination Agent, as
record holder of the Equipment Notes, will exercise its voting rights in respect
of the Equipment Notes as directed by the Controlling Party. For a description
of certain limitations on the Controlling Party's rights to exercise remedies,
see "Description of the Equipment Notes -- Remedies."
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may, among other things, direct the
Subordination Agent, which will in turn direct the Indenture Trustee, to
accelerate and, subject to the provisions of the following sentence, sell all
(but not less than all) of the Equipment Notes issued under such Indenture to
any person. Subject to the rights of any Owner Trustee or the Owner Participant,
so long as any Certificates are outstanding, during the nine months after the
earlier of (x) the acceleration of the Equipment Notes under any Indenture or
(y) the bankruptcy or insolvency of United, without the consent of the Trustee,
(a) no Aircraft subject to the lien of any Indenture or such Equipment Notes may
be sold if the net proceeds from such sale would be less than the aggregate
outstanding principal amount of the Equipment Notes related to such Aircraft,
plus accrued interest thereon, and (b) with respect to any Leased Aircraft, the
amount and payment dates of rentals payable by United under the Lease for such
Leased Aircraft may not be adjusted if, as a result of such adjustment, the
discounted present value of all such rentals would be less than 75% of the
discounted present value of the rentals payable by United under such Lease
before giving effect to such adjustment, in each case, using the weighted
average interest rate of the Equipment Notes issued under such Indenture as the
discount rate. The market for Equipment Notes at the time of the existence of
any Indenture Default may be very limited, and there can be no assurance as to
the price at which they could be sold. If the Controlling Party sells any such
28
<PAGE> 30
Equipment Notes for less than their outstanding principal amount, certain
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against United, any
Owner Trustee, any Owner Participant or any Trustee.
The Equipment Notes are not cross-collateralized and, thus, proceeds from
the sale of an Aircraft in excess of the amounts due on Equipment Notes related
to such Aircraft will not be available to cover losses, if any, on any other
Equipment Notes.
PURCHASE OR REFINANCING OF EQUIPMENT NOTES RELATING TO THE LEASED AIRCRAFT ON
THE FINAL EXPECTED DISTRIBUTION DATE
The Final Expected Distribution Date on the Certificates is scheduled to
occur prior to the maturity date of the Equipment Notes relating to the Leased
Aircraft. On the Final Expected Distribution Date, the installments of principal
and interest then due and payable on the Equipment Notes relating to the Leased
Aircraft, together with the principal and interest due on the Equipment Notes
relating to the Owned Aircraft, will be insufficient to pay the final expected
distribution of principal on the Certificates. Under the Note Purchase
Agreement, the applicable Trustees will obtain the funds to pay the final
expected distribution on the Certificates on the Final Expected Distribution
Date from the payment by United in full at maturity of the principal and accrued
interest on the Equipment Notes issued with respect to the Owned Aircraft and by
selling, or permitting the refinancing of, the Equipment Notes issued with
respect to the Leased Aircraft for an amount equal to the principal thereof plus
accrued interest thereon.
On the Final Expected Distribution Date, United or its designee may
purchase the Equipment Notes relating to the Leased Aircraft from the Trustees
for an amount equal to the principal thereof plus accrued interest thereon, or
United may arrange for the purchase of the Equipment Notes by a third party for
an amount equal to the principal amount thereof plus accrued interest thereon.
Whether or not United purchases or refinances the Equipment Notes relating
to the Leased Aircraft in full on the Final Expected Distribution Date, the
interest rates on each Series of Equipment Notes relating to the Leased Aircraft
that remains outstanding on or after the Final Expected Distribution Date will
be reset to the interest rate that, in the good faith determination of the Reset
Agent after consideration of the then current rates for pass through
certificates of United and other comparable equipment lessees having similar
tenor, rating and other pricing terms, will enable each such Series of Equipment
Notes to be sold at 100% of the principal amount thereof on the Final Expected
Distribution Date.
Neither the failure of United to purchase or refinance the Equipment Notes
relating to the Leased Aircraft nor the failure of the Reset Agent to set a rate
that results in a sale of such Equipment Notes will constitute an Indenture
Default. Consequently, Leased Aircraft Indenture Trustees will not be entitled
to exercise remedies against the Leased Aircraft, including repossession of the
Leased Aircraft pursuant to Section 1110, or accelerate the Equipment Notes
relating to the Leased Aircraft solely as a result of the failure by United to
purchase or refinance the Equipment Notes relating to the Leased Aircraft on or
prior to the Final Expected Distribution Date. While the Trustee will be
obligated to sell the Equipment Notes issued with respect to the Leased Aircraft
at par (and to reset the interest rate on such Equipment Notes to enable such
sale), the market for Equipment Notes at such time may be very limited and there
can be no assurance such sale will occur or that such sale will occur in a
timely manner.
ABSENCE OF AN ESTABLISHED MARKET FOR THE CERTIFICATES
There can be no assurance as to the liquidity of the public market for the
Certificates or that any active public market for the Certificates will develop.
Prior to the Exchange Offer, there was no public market for the Certificates and
neither United nor any Trust intends to apply for listing of the Certificates on
any securities exchange or for quotation of the Certificates on The Nasdaq Stock
Market's National Market or otherwise. United has been advised by the Class A
Initial Purchasers that one or more of them presently intend to make a market in
the Class A Certificates, as permitted by applicable laws and regulations, after
consummation of the Exchange Offer. None of the Initial Purchasers is obligated,
however, to make a market in the Old Certificates or the New Certificates and
any such market-making activity may be discontinued at any time without notice
at the sole discretion of each Class A Initial Purchaser. If an active public
market does not develop, the market price and liquidity of the Certificates may
be adversely affected.
29
<PAGE> 31
USE OF PROCEEDS
There will be no cash proceeds payable to United from the issuance of the
New Certificates pursuant to the Exchange Offer. The proceeds from the sale of
the Old Class A Certificates and the Old Class B Certificates were used to
purchase the Series A and Series B Equipment Notes, respectively, issued by (a)
the related Owner Trustees in connection with the refinancing of the
indebtedness originally incurred by such Owner Trustees to finance the purchase
of each of the Leased Aircraft and (b) United in connection with the debt
financings secured by the Owned Aircraft.
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information."
GENERAL
In connection with the issuance of the Old Certificates, pursuant to a
Purchase Agreement dated as of December 18, 1997, between United and the Class A
Initial Purchasers, and pursuant to a Purchase Agreement dated as of December
23, 1997, between United and the Class B Initial Purchaser, the Class A Initial
Purchasers and the Class B Initial Purchaser and their respective assignees
became entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, United is obligated to use its
best efforts to (i) file the Registration Statement of which this Prospectus is
a part for a registered exchange offer with respect to an issue of new
certificates identical in all material respects to the Old Certificates within
90 days after December 23, 1997 (the "Issuance Date"), (ii) cause the
Registration Statement to become effective under the Securities Act within 150
days after the Issuance Date, (iii) cause the Registration Statement to remain
effective until the closing of the Exchange Offer and (iv) consummate the
Exchange Offer within 180 calendar days after the Issuance Date. United will
keep the Exchange Offer open for a period of not less than 30 calendar days. The
Exchange Offer being made hereby, if commenced and consummated within the time
periods described in this paragraph, will satisfy those requirements under the
Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Certificates validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date will be accepted for exchange. New
Certificates of the same class will be issued in exchange for an equal face
amount of outstanding Old Certificates accepted in the Exchange Offer. Old
Certificates may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of the Old Certificates as of , 1998. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Certificates
being tendered for exchange. However, the obligation to accept Old Certificates
for exchange pursuant to the Exchange Offer is subject to certain conditions as
set forth herein under "-- Conditions."
Old Certificates will be deemed to have been accepted as validly tendered
when, as and if the Trustee has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Certificates for the purposes of receiving the New Certificates and
delivering New Certificates to such holders.
The New Certificates are being offered hereby in order to satisfy certain
obligations of United contained in the Registration Rights Agreement. United is
making the Exchange Offer in reliance on the position of the staff of the
Securities and Exchange Commission (the "Commission") as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
United has not sought its own interpretive letter and there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to third parties.
Based on these interpretations by the staff of the Commission, United believes
that New Certificates issued pursuant to the Exchange Offer to a holder in
exchange for Old Certificates may be offered for resale, resold and otherwise
30
<PAGE> 32
transferred by a holder (other than (i) a broker-dealer who purchased Old
Certificates directly from United for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (ii) an "affiliate" of United
within the meaning of Rule 405 under the Securities Act, or (iii) a
broker-dealer who acquired the Old Certificates as a result of market-making or
other trading activities), without further compliance with the registration and
prospectus delivery provisions of the Securities Act; provided, that such holder
is acquiring the New Certificates in the ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of the
New Certificates. Holders wishing to accept the Exchange Offer must represent to
United, as required by the Registration Rights Agreement, that such conditions
have been met. Any holder of Old Certificates who is not able to rely on the
interpretations of the staff of the Commission set forth in the above-mentioned
interpretive letters must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Certificates unless such sale is made pursuant to an exemption from
such requirements.
Each broker-dealer that receives New Certificates for its own account
pursuant to the Exchange Offer (a "Participating Broker Dealer") must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Certificates. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, United has agreed that this Prospectus may be
used by a Participating Broker-Dealer in connection with resales of such New
Certificates. See "Plan of Distribution."
If any changes in law or the applicable interpretations of the staff of the
Commission do not permit United to effect the Exchange Offer, if the
Registration Statement is not declared effective within 150 days after the
Issuance Date under certain circumstances or the Exchange Offer is not
consummated within 180 days after the Issuance Date under certain other
circumstances, at the request of a holder not eligible to participate in the
Exchange Offer or under certain other circumstances described in the
Registration Rights Agreement, United will, in lieu of effecting the
registration of the New Certificates pursuant to the Registration Statement and
at no cost to the holders of Old Certificates, (a) as promptly as practicable
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") covering resales of the Old Certificates, (b) use its best efforts
to cause the Shelf Registration Statement to be declared effective under the
Securities Act by the 180th calendar day after the Issuance Date and (c) use its
best efforts to keep effective the Shelf Registration Statement for a period of
two years after its effective date (or for such shorter period as shall end when
all of the Old Certificates covered by the Shelf Registration Statement have
been sold pursuant thereto or may be freely sold pursuant to Rule 144 under the
Securities Act).
If neither the consummation of the Exchange Offer nor the declaration by
the Commission of the Shelf Registration Statement to be effective (each, a
"Registration Event") occurs on or prior to the 180th calendar day following the
Issuance Date, the interest rate per annum borne by the Equipment Notes will be
increased by 0.50% from and including July 1, 1998 to but excluding the date on
which a Registration Event occurs. If the Shelf Registration Statement ceases to
be effective at any time during the period specified by the Registration Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period, the interest rate per annum borne by the Equipment Notes will be
increased by 0.50% from the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective until such time as the Shelf
Registration Statement again becomes effective (or, if earlier, the end of such
period specified by the Registration Rights Agreement).
Upon consummation of the Exchange Offer, subject to certain exceptions,
holders of Old Certificates who do not exchange their Old Certificates for New
Certificates in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Old Certificates, unless such
Old Certificates are subsequently registered under the Securities Act (which,
subject to certain limited exceptions,
31
<PAGE> 33
United will have no obligation to do), except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. See "Risk Factors -- Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" means , 1998 (30 calendar days
following the commencement of the Exchange Offer), unless United, in its sole
discretion, extends the Exchange Offer, in which case the term "Expiration Date"
means the latest date to which the Exchange Offer is extended. Notwithstanding
any extension of the Exchange Offer, if the Exchange Offer is not consummated by
June 21, 1998, the interest rate borne by the Equipment Notes is subject to
increase. See "-- General."
In order to extend the Expiration Date, United will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Certificates an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that United is extending the
Exchange Offer for a specified period of time.
United reserves the right (i) to delay acceptance of any Old Certificates,
to extend the Exchange Offer or to terminate the Exchange Offer and not permit
acceptance of Old Certificates not previously accepted if any of the conditions
set forth herein under "-- Conditions" have occurred and not have been waived by
United, by giving oral or written notice of such delay, extension or termination
to the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any
manner deemed by it to be advantageous to the holders of the Old Certificates.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
Exchange Agent. If the Exchange Offer is amended in a manner determined by
United to constitute a material change, United will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Certificates of such amendment.
Without limiting the manner in which United may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, United has no obligation to publish, advertise or otherwise communicate
any such public announcement, other than by making a timely release to an
appropriate news agency.
INTEREST ON THE NEW CERTIFICATES
The New Certificates will accrue interest at the applicable per annum rate
for such Trust set forth on the cover page of this Prospectus, from the most
recent date to which interest has been paid on the Old Certificates or, if no
interest has been paid, from the Issuance Date. Interest on the New Certificates
is payable on March 2, June 2, September 2 and December 2 of each year
commencing upon the consummation of the Exchange Offer, subject to the terms of
the Intercreditor Agreement.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must transmit a properly
completed and duly executed Letter of Transmittal, or a facsimile thereof,
together with any other documents required by such Letter of Transmittal, or (in
the case of a book-entry transfer) an Agent's Message in lieu of such Letter of
Transmittal, to the Exchange Agent at the address set forth below under
" -- Exchange Agent" prior to 5:00 p.m, New York City time, on the Expiration
Date. In addition, either (i) certificates for such Old Certificates must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Certificates, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date with the Letter of
Transmittal or Agent's Message in lieu of such Letter of Transmittal or (iii)
the holder must comply with the guaranteed delivery procedures described below.
The term "Agent's Message" means a message, transmitted by the Book-entry
Transfer Facility to and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering participant, which
acknowledgment states that
32
<PAGE> 34
such participant has received and agrees to be bound by, and makes the
representations and warranties contained in, the Letter of Transmittal and that
the Company may enforce such Letter of Transmittal against such participant. THE
METHOD OF DELIVERY OF OLD CERTIFICATES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD CERTIFICATES
SHOULD BE SENT TO UNITED. Delivery of all documents must be made to the Exchange
Agent at its address set forth below. Holders may also request their respective
brokers, dealers, commercial banks, trust companies or nominees to effect such
tender for such holders.
The tender by a holder of Old Certificates will constitute an agreement
between such holder and United in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Certificates may tender such Old Certificates in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Old Certificates are registered on the books of United or
any other person who has obtained a properly completed bond power from the
registered holder.
Any beneficial owner whose Old Certificates are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Certificates, either
make appropriate arrangements to register ownership of the Old Certificates in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each, an "Eligible Institution") unless the Old
Certificates tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Certificates listed therein, such Old Certificates
must be endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Certificates on behalf of the registered holder, in
each case as the name of the registered holder or holders appears on the Old
Certificates.
If the Letter of Transmittal or any Old Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
United, evidence satisfactory to United of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Certificates will be determined by
United in its sole discretion, which determination will be final and binding.
United reserves the absolute right to reject any and all Old Certificates not
properly tendered or any Old Certificates the acceptance of which would, in the
opinion of counsel for United, be unlawful. United also reserves the absolute
right to waive any irregularities or conditions of tender as to particular Old
Certificates. United's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Certificates must be cured within such time as
United shall determine. Neither United, the Exchange Agent nor any other person
will be under any duty to give notification of defects or irregularities with
respect to tenders of Old Certificates, nor will any of them incur
33
<PAGE> 35
any liability for failure to give such notification. Tenders of Old Certificates
will not be deemed to have been made until such irregularities have been cured
or waived. Any Old Certificates received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to such holder by the Exchange
Agent to the tendering holders of Old Certificates, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration Date.
In addition, United reserves the right in its sole discretion, subject to
the provisions of the Pass Through Trust Agreements, to (i) purchase or make
offers for any Old Certificates that remain outstanding subsequent to the
Expiration Date or, as set forth under "-- Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Rights Agreement
and (ii) to the extent permitted by applicable law, purchase Old Certificates in
the open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD CERTIFICATES FOR EXCHANGE; DELIVERY OF NEW CERTIFICATES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Certificates properly tendered will be accepted, promptly after the
Expiration Date, and the New Certificates will be issued promptly after
acceptance of the Old Certificates. See "-- Conditions" below. For purposes of
the Exchange Offer, Old Certificates will be deemed to have been accepted for
exchange when, as and if United has given oral or written notice thereof to the
Exchange Agent.
In all cases, issuance of New Certificates for Old Certificates that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) certificates for such Old
Certificates or a timely Book-Entry Confirmation of such Old Certificates into
the Exchange Agent's account at the Book-Entry Transfer Facility, (ii) a
properly completed and duly executed Letter of Transmittal or an Agent's Message
in lieu thereof and (iii) all other required documents. If any tendered Old
Certificates are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Certificates are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Certificates will be returned without expense to the tendering
holder thereof (or, in the case of Old Certificates tendered by book-entry
transfer procedures described below, such nonexchanged Old Certificates will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Certificates at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Certificates by causing
the Book-Entry Transfer Facility to transfer such Old Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Certificates may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees or an Agent's Message in lieu thereof,
together with any other required documents, must, in any case, be transmitted to
and received by the Exchange Agent at one of the addresses set forth below under
"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Certificates desires to tender such Old
Certificates, and the Old Certificates are not immediately available, or time
will not permit such holder's Old Certificates or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedures for book-
entry transfer cannot be completed on a timely basis, a tender may be effected
if (i) the tender is made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed notice of guaranteed delivery,
substantially in the form provided by United (a "Notice of Guaranteed Delivery")
(by facsimile transmission, mail or hand
34
<PAGE> 36
delivery), setting forth the name and address of the holder of Old Certificates
and the amount of Old Certificates tendered, stating that the tender is being
made thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Certificates, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof or an Agent's Message in lieu thereof), with any required signature
guarantees and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent and (iii) the
certificates for all physically tendered Old Certificates, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof or an Agent's Message in lieu thereof), with any required signature
guarantees and all other documents required by the Letter of Transmittal are
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Certificates may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date at the address set forth below under "-- Exchange Agent." Any
such notice of withdrawal must specify the name of the person having tendered
the Old Certificates to be withdrawn, identify the Old Certificates to be
withdrawn (including the principal amount of such Old Certificates) and (where
certificates for Old Certificates have been transmitted) specify the name in
which such Old Certificates are registered, if different from that of the
withdrawing holder. If certificates for Old Certificates have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Certificates and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
United, whose determination will be final and binding on all parties. Any Old
Certificates so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Certificates which have
been tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Certificates tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Certificates will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Certificates) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Certificates may be retendered by
following one of the procedures described under "-- Procedures for Tendering"
and "-- Book-Entry Transfer" above at any time on or prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, United will not be required to accept for
exchange, or to exchange, any Old Certificates for any New Certificates, and, as
described below, may terminate the Exchange Offer (whether or not any Old
Certificates have theretofore been accepted for exchange) or may waive any
conditions to or amend the Exchange Offer, if any of the following conditions
have occurred or exists or have not been satisfied:
(i) the due tendering of Old Certificates in accordance with the
Exchange Offer;
(ii) the Exchange Offer, or the making of any exchange by a holder,
violates any applicable law, statute, rule, regulation or any applicable
interpretation of the staff of the Commission;
35
<PAGE> 37
(iii) any law, statute, rule, regulation or interpretation by the
staff of the Commission is proposed, adopted or enacted that, in the
reasonable judgment of United, might materially impair the ability of
United to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to United; or
(iv) each holder of Old Certificates exchanged in the Exchange Offer
shall have made certain customary representations, including
representations that, among other things, (i) the holder is not an
"affiliate" of United as defined in Rule 405 of the Securities Act, (ii)
the holder is not a broker-dealer that acquired Old Certificates directly
from United in order to resell them pursuant to Rule 144A of the Securities
Act or any other available exemption under the Securities Act, (iii) the
holder will acquire New Certificates in the ordinary course of business and
(iv) that the holder is not participating, and does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the New Certificates.
If United determines in its sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied,
United may, subject to applicable law, (i) terminate the Exchange Offer (whether
or not any Old Certificates have theretofore been accepted for exchange), (ii)
extend the Exchange Offer and retain all Old Certificates tendered prior to the
expiration of the Exchange Offer subject, however, to the rights of holders to
withdraw such Old Certificates or (iii) waive any such condition or otherwise
amend the terms of the Exchange Offer in any respect. If such waiver or
amendment constitutes a material change to the Exchange Offer, United will
promptly disclose such waiver or amendment by means of a prospectus supplement
that will be distributed to the registered holders of the Old Certificates, and
United will extend the Exchange Offer to the extent required by Rule 14e-1 under
the Exchange Act.
The foregoing conditions are for the sole benefit of United and may be
waived by United in whole or in part at any time and from time to time in its
sole discretion. The failure by United at any time to exercise any of the
foregoing rights shall not be deemed a waiver of such rights and each such right
shall be deemed an ongoing right which may be asserted at any time and from time
to time. Any determination by United concerning the events described above will
be final and binding upon all parties.
In addition, United will not accept for exchange any Old Certificates
tendered, and no New Certificates will be issued in exchange for any such Old
Certificates, if at such time any stop order shall be threatened or in effect
with respect to the Registration Statement of which this Prospectus constitutes
a part or the qualification of the Pass Through Trust Agreements under the Trust
Indenture Act of 1939 (the "Trust Indenture Act").
EXCHANGE AGENT
First Security Bank, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Hand, Mail or Overnight Delivery:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Facsimile Transmission:
(801) 246-5053
Confirm by Telephone:
(801) 246-5657
Dianne Diaz
36
<PAGE> 38
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by United. The principal solicitation for tenders pursuant to the Exchange
Offer is being made by mail. However, additional solicitations may be made by
telegraph, telephone, telecopy, electronic mail or in person by officers and
regular employees of United.
United will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. United will, however, pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. United may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Certificates, and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by United, including fees and expenses of the Exchange Agent and Trustee
and accounting, legal, printing and related fees and expenses.
United will pay all transfer taxes, if any, applicable to the exchange of
Old Certificates pursuant to the Exchange Offer. If, however, certificates
representing New Certificates or Old Certificates for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Certificates tendered, or if tendered Old Certificates are registered
in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Certificates pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
MISCELLANEOUS
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Certificates are urged
to consult their financial and tax advisors in making their own decisions on
what action to take.
United may in the future seek to acquire untendered Old Certificates, to
the extent permitted by applicable law, in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. United has no
present plans to acquire any Old Certificates that are not tendered in the
Exchange Offer or to file a registration statement to permit resales of any
untendered Old Certificates.
SUMMARY OF NEW CERTIFICATES AND CERTAIN AGREEMENTS
The summaries of agreements set forth in "Description of the New
Certificates," "Description of the Liquidity Facilities" and "Description of the
Equipment Notes" below describe the terms of the New Certificates, the Equipment
Notes, the Trusts, the Pass Through Trust Agreements, the Liquidity Facilities,
the Intercreditor Agreement and certain other agreements related to the
foregoing. The summaries do not purport to be complete and are qualified in
their entirety by reference to all of the provisions of the New Certificates,
the Equipment Notes, the Leases, the Indentures, the Participation Agreements,
the Pass Through Trust Agreements, the Liquidity Facilities, the Intercreditor
Agreement, the Note Purchase Agreement and the Registration Rights Agreement
(the "Operative Agreements"), which have been filed as exhibits to the
Registration Statement and copies of which are available as set forth under the
heading "Available Information." Except as otherwise indicated, the following
summaries relate to each of the Trusts and the Certificates issued by each
Trust. Citations appearing below in parentheses relate to the relevant sections
of the Basic Pass Through Trust Agreement unless otherwise indicated. Copies of
the Operative Agreements are available from the Trustee.
37
<PAGE> 39
DESCRIPTION OF THE NEW CERTIFICATES
GENERAL
The New Certificates of each Trust will be issued in fully registered form
only. Each New Certificate will represent a fractional undivided interest in the
Trust created by the Trust Supplement pursuant to which such New Certificate is
issued. The Trust Property of each Trust consists of: (i) the Equipment Notes
held in such Trust, all monies at any time paid thereon and all monies due and
to become due thereunder; (ii) the rights of such Trust under the Intercreditor
Agreement, the Registration Rights Agreement and the Note Purchase Agreement
(including all monies receivable in respect of such rights); (iii) in the case
of the Class A and Class B Trusts, all monies receivable by the Subordination
Agent under the Liquidity Facilities for such Trust; and (iv) funds from time to
time deposited with the Trustee in accounts relating to such Trust. The New
Certificates represent pro rata shares of the Equipment Notes and property held
in the related Trust and will be issued only in minimum denominations of
$100,000 and integral multiples of $1,000 in excess thereof. (Section 3.01(b))
The Certificates issued by the Class C Trust were initially acquired by
Kreditanstalt fur Wiederaufbau, and the Certificates issued by the Class D Trust
were initially acquired by an affiliate of United.
The Certificates represent interests in the respective Trusts and all
payments and distributions thereon will be made only from the Trust Property.
(Sections 3.01(a) and 3.11) The Certificates do not represent an interest in or
an obligation of United, the Trustees, the Liquidity Providers, any of the
Indenture Trustees or Owner Trustees in their individual capacities, any Owner
Participant, or any affiliate of any thereof. The existence of each Trust will
not limit the liability that Certificateholders of such Trust would otherwise
incur if such holders owned directly the corresponding Equipment Notes or
incurred directly the obligations of such Trust.
SUBORDINATION
Pursuant to the Intercreditor Agreement to which the Trusts, the
Subordination Agent and the Liquidity Providers are parties, on each
Distribution Date all payments received by the Subordination Agent will be
distributed in the order of priority described below in "Description of the
Intercreditor Agreement -- Priority of Distributions."
The priority of distributions after a payment default under any Equipment
Note will have the effect in certain circumstances of requiring the distribution
to more senior Classes of Certificates of payments received in respect of one or
more junior Series of Equipment Notes. If this occurs, interest accruing on the
remaining Equipment Notes will in the aggregate be less than interest accruing
on the remaining Certificates because such Certificates include a relatively
greater proportion of junior Classes with relatively higher interest rates. As a
result of this possible interest shortfall, the holders of one or more junior
Classes of Certificates may not receive the full amount due them after a payment
default under any Equipment Note even if all Equipment Notes are eventually paid
in full.
PAYMENTS AND DISTRIBUTIONS
Payments of principal, any Additional Payments and interest with respect to
the Equipment Notes or other Trust Property held in each Trust will be
distributed by the Trustee to Certificateholders of such Trust on the date
receipt of such payment is confirmed, except in the case of certain types of
Special Payments (as defined herein).
Interest applicable to the Class A and Class B Certificates will be payable
at a floating rate equal to Three-Month LIBOR plus the spread for the Class A
and Class B Certificates, respectively, set forth on the cover page of this
Prospectus.
Interest on the Equipment Notes is payable on March 2, June 2, September 2
and December 2 of each year, commencing on March 2, 1998. These interest
payments will be passed through to Certificateholders of each Trust on each
Regular Distribution Date until the Final Expected Distribution Date for such
Certificates,
38
<PAGE> 40
in each case subject to the Intercreditor Agreement. Interest is calculated on
the basis of the actual number of days elapsed over a 360-day year.
"Three-Month LIBOR" means, with respect to each interest period beginning
on and including a Regular Distribution Date and ending on but excluding the
next Regular Distribution Date, the interest rate per annum (calculated on the
basis of a 360-day year and actual days elapsed) at which deposits in U.S.
Dollars are offered to prime banks in the London interbank market as indicated
on display page 3750 (British Bankers Association-LIBOR) of the Dow Jones
Markets Service (or such other page as may replace such display page 3750 for
the purpose of displaying London interbank offered rates for Dollar deposits),
or if not so indicated, the average (rounded upwards to the nearest 1/100%), as
determined by the Calculation Agent, of such rates as indicated on the Reuters
Screen LIBO Page (or such other page as may replace such Reuters Screen LIBO
Page for the purpose of displaying London interbank offering rates for Dollar
deposits) or, if neither such alternative is indicated, the average (rounded
upwards to the nearest 1/100%), as determined by the Calculation Agent, of such
rates offered by the London Reference Banks to prime banks in the London
interbank market, in each case at or about 11:00 a.m. (London time) on the LIBOR
Business Day that is two LIBOR Business Days prior to the first day of such
interest period (the "Three Month LIBOR Reference Date") for deposits for a
period of three months in an amount substantially equal to the principal amount
of the Equipment Notes then outstanding. For the purposes of this paragraph, the
"London Reference Banks" means the principal London offices of National
Westminster Bank Plc, Barclays Bank Plc and Bayerische Landesbank Girozentrale,
or such other bank or banks as may from time to time be agreed to by the Company
and the Calculation Agent. The Calculation Agent will, if necessary, request
that each of the London Reference Banks provide a quotation of its rate. If at
least two such quotations are provided, the rate will be the average of the
quotations (rounded upwards to the nearest 1/100%). If no such quotation can be
obtained, the rate will be Three-Month LIBOR for the immediately preceding
interest period. The "Calculation Agent" with respect to any Indenture is the
applicable Indenture Trustee.
"LIBOR Business Day" means any day other than a Saturday or Sunday or any
other day on which banks are required or authorized to close in New York, New
York or London, England.
The interest rate applicable to each Class of Certificates is subject to
change to the same extent as the interest rate for the corresponding Series of
Equipment Notes (see "Description of the Equipment Notes -- Principal and
Interest Payments") and under certain circumstances described in "Exchange Offer
- --General."
Payments of interest on the Class A and Class B Certificates are supported
by two separate Liquidity Facilities provided by Kreditanstalt fur Wiederaufbau
(the "Primary Liquidity Provider") and Credit Suisse Financial Products (the
"Above-Cap Liquidity Provider") (each of the Primary Liquidity Provider and the
Above-Cap Liquidity Provider being a "Liquidity Provider") for the benefit of
the holders of such Certificates in an aggregate amount sufficient to pay
interest thereon on up to six consecutive Regular Distribution Dates.
Notwithstanding the subordination provisions of the Intercreditor Agreement, the
holders of the Class A and Class B Certificates will be entitled to receive and
retain the proceeds of drawings under the Liquidity Facilities for such Trust.
See "Description of the Liquidity Facilities."
Payments of principal on the Equipment Notes held in each Trust are
scheduled to be received in specified amounts by the Trustee of such Trust on
any of March 2, June 2, September 2 or December 2 of specified years depending
upon the terms of the Equipment Notes held in such Trust, commencing on March 2,
1998. Scheduled payments of interest and principal on the Equipment Notes are
referred to herein as "Scheduled Payments." Each of March 2, June 2, September 2
and December 2 of each year are referred to herein as a "Regular Distribution
Date." See "Description of the Equipment Notes -- Principal and Interest
Payments." The Final Maturity Date for each of the Class A and Class B
Certificates is March 2, 2004, and the Final Maturity Date for the Class C and
Class D Certificates is December 2, 2002.
39
<PAGE> 41
The Scheduled Payments of principal on the Equipment Notes held in each
Trust are set forth in the following table, along with the corresponding
scheduled distributions of principal of such Trust.
<TABLE>
<CAPTION>
1997-1A TRUST 1997-1B TRUST
---------------------------- ----------------------------
INSTALLMENTS DISTRIBUTIONS INSTALLMENTS DISTRIBUTIONS
OF PRINCIPAL ON PASS OF PRINCIPAL ON PASS
OF EQUIPMENT THROUGH OF EQUIPMENT THROUGH
DATE NOTES CERTIFICATES NOTES CERTIFICATES
---- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
March 2, 1998............................ $ 415,900 $ 415,900 $ 385,563 $ 385,563
June 2, 1998............................. 10,062,730 10,062,730 1,874,904 1,874,904
September 2, 1998........................ 327,095 327,095 0 0
December 2, 1998......................... 3,578,458 3,578,458 357,054 357,054
June 2, 1999............................. 10,062,730 10,062,730 1,874,904 1,874,904
December 2, 1999......................... 3,578,659 3,578,659 132,560 132,560
June 2, 2000............................. 10,062,730 10,062,730 1,874,904 1,874,904
December 2, 2000......................... 3,578,658 3,578,658 272,936 272,936
June 2, 2001............................. 10,062,730 10,062,730 1,874,904 1,874,904
December 2, 2001......................... 3,578,658 3,578,658 324,365 324,365
June 2, 2002............................. 10,062,730 10,062,730 1,874,904 1,874,904
December 2, 2002......................... 343,441,714 380,454,922 86,909,019 95,760,001
December 2, 2003......................... 993,599 0 237,600 0
December 2, 2004......................... 993,600 0 237,600 0
December 2, 2005......................... 1,737,194 0 560,860 0
December 2, 2006......................... 1,987,202 0 329,756 0
December 2, 2007......................... 1,987,199 0 475,199 0
December 2, 2008......................... 1,987,199 0 475,199 0
December 2, 2009......................... 1,987,202 0 895,592 0
December 2, 2010......................... 2,730,794 0 865,335 0
December 2, 2011......................... 2,980,802 0 80,089 0
December 2, 2012......................... 3,354,296 0 339,305 0
December 2, 2013......................... 2,607,305 0 1,402,015 0
December 2, 2014......................... 3,573,444 0 2,429,133 0
December 2, 2015......................... 10,093,372 0 523,299 0
------------ ------------ ------------ ------------
$445,826,000 $445,826,000 $106,607,000 $106,607,000
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1997-1C TRUST 1997-1D TRUST
---------------------------- ----------------------------
INSTALLMENTS DISTRIBUTIONS INSTALLMENTS DISTRIBUTIONS
OF PRINCIPAL ON PASS OF PRINCIPAL ON PASS
OF EQUIPMENT THROUGH OF EQUIPMENT THROUGH
DATE NOTES CERTIFICATES NOTES CERTIFICATES
---- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
March 2, 1998............................ $ 0 $ 0 $ 514,352 $ 514,352
June 2, 1998............................. 1,841,130 1,841,130 0 0
December 2, 1998......................... 349,852 349,852 432,161 432,161
June 2, 1999............................. 1,841,130 1,841,130 0 0
December 2, 1999......................... 575,147 575,147 1,366,587 1,366,587
June 2, 2000............................. 1,841,130 1,841,130 0 0
December 2, 2000......................... 434,770 434,770 1,542,212 1,542,212
June 2, 2001............................. 1,841,130 1,841,130 0 0
December 2, 2001......................... 383,341 383,341 1,741,353 1,741,353
June 2, 2002............................. 1,841,130 1,841,130 0 0
December 2, 2002......................... 88,590,986 99,051,239 1,944,865 5,826,516
December 2, 2003......................... 280,800 0 2,157,978 0
December 2, 2004......................... 1,151,107 0 1,513,776 0
December 2, 2005......................... 1,848,223 0 0 0
December 2, 2007......................... 731,826 0 0 0
December 2, 2008......................... 1,244,732 0 0 0
December 2, 2009......................... 1,217,541 0 0 0
December 2, 2010......................... 153,675 0 0 0
December 2, 2012......................... 247,803 0 0 0
December 2, 2013......................... 1,653,367 0 209,896 0
December 2, 2014......................... 1,931,179 0 0 0
------------ ------------ ------------ ------------
$110,000,000 $110,000,000 $ 11,423,182 $ 11,423,182
============ ============ ============ ============
</TABLE>
40
<PAGE> 42
The Trustee of each Trust will distribute, subject to the Intercreditor
Agreement, on each Regular Distribution Date to the Certificateholders of such
Trust all Scheduled Payments, the receipt of which has been confirmed by the
Trustee on such Regular Distribution Date. Each Certificateholder of each Trust
will be entitled to receive a pro rata share of any distribution in respect of
Scheduled Payments of principal and interest made on the Equipment Notes held in
such Trust. Each such distribution of Scheduled Payments will be made by the
Trustee of each Trust to the Certificateholders of record of such Trust on the
Record Date applicable to such Scheduled Payment subject to certain exceptions.
(Section 4.02(a)) If a Scheduled Payment is not received by the Trustee on a
Regular Distribution Date but is received within five days thereafter, it will
be distributed to such holders of record on the date received. If it is received
after such five-day period, it will be treated as a Special Payment and
distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Indenture Estate under (and as defined in) each Indenture (other than a
Scheduled Payment) (each, a "Special Payment") will be distributed on, in the
case of an early redemption or a purchase of all or any series of the Equipment
Notes relating to one or more Aircraft, the date of such early redemption or
purchase (which will be a Business Day), and otherwise on the Business Day
specified for distribution of such Special Payment pursuant to a notice
delivered by the Trustee as soon as practicable after the Trustee has received
funds for such Special Payment, in each case subject to the Intercreditor
Agreement. The Trustee will mail notice to the Certificateholders of the
applicable Trust not less than 20 days prior to the Special Distribution Date on
which any Special Payment is scheduled to be distributed by the Trustee stating
such anticipated Special Distribution Date. (Section 4.02(c)) Each distribution
of a Special Payment, other than a final distribution, on a Special Distribution
Date for any Trust will be made by the Trustee to the Certificateholders of
record of such Trust on the Record Date applicable to such Special Payment. See
"-- Indenture Defaults and Certain Rights Upon an Indenture Default" and
"Description of the Equipment Notes -- Redemption."
The Basic Pass Through Trust Agreement requires that the Trustee establish
and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more non-interest bearing accounts (the
"Certificate Account") for the deposit of payments representing Scheduled
Payments on the Equipment Notes held in such Trust. The Basic Pass Through Trust
Agreement also requires that the Trustee establish and maintain, for the related
Trust and for the benefit of the Certificateholders of such Trust, one or more
accounts (the "Special Payments Account") for the deposit of payments
representing Special Payments, which account will be non-interest bearing except
in certain circumstances where the Trustee may invest amounts in such account in
certain permitted investments. Pursuant to the terms of the Basic Pass Through
Trust Agreement, the Trustee is required to deposit any Scheduled Payments
relating to the applicable Trust received by it in the Certificate Account of
such Trust and to deposit any Special Payments so received by it in the Special
Payments Account of such Trust. (Sections 4.01 and 4.04) All amounts so
deposited will be distributed by the Trustee on a Regular Distribution Date or a
Special Distribution Date, as appropriate. (Section 4.02)
Distributions by the Trustee from the Certificate Account or the Special
Payments Account of each Trust on a Regular Distribution Date or a Special
Distribution Date in respect of Certificates issued by such Trust in definitive
form will be made to each Certificateholder of record of such Certificates on
the applicable Record Date. (Section 4.02) The final distribution for each
Trust, however, will be made only upon presentation and surrender of the
Certificates for such Trust at the office or agency of the Trustee specified in
the notice given by the Trustee of such final distribution. The Trustee will
mail such notice of the final distribution to the Certificateholders of such
Trust, specifying the date set for such final distribution and the amount of
such distribution. (Section 11.01) See "-- Termination of the Trusts" below.
Distributions in respect of Certificates issued in global form will be made as
described in "-- Book Entry; Delivery and Form" below.
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date will be made on the next Business Day with
additional interest at the interest rate then applicable to the Certificates.
41
<PAGE> 43
"Business Day" means any day (x) other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in Chicago,
Illinois, New York, New York, Frankfurt, Germany or the city and state in which
any Trustee, the Subordination Agent or any Indenture Trustee maintains its
corporate trust office or receives and disburses funds, and (y) on which
dealings are carried on in the London interbank market.
POOL FACTORS
Unless there has been an early redemption, purchase or a default in the
payment of principal or interest in respect of one or more issues of the
Equipment Notes held in a Trust, as described in "-- Indenture Defaults and
Certain Rights Upon an Indenture Default" and "Description of the Equipment
Notes -- Redemption," the Pool Factor with respect to each Trust will decline in
proportion to the scheduled repayments of principal on the Equipment Notes held
in such Trust as described below in "Description of the Equipment Notes --
General." In the event of such redemption, purchase or default, the Pool Factor
and the Pool Balance of each Trust so affected will be recomputed after giving
effect thereto and notice thereof will be mailed to the Certificateholders of
such Trust. Each Trust will have a separate Pool Factor.
The "Pool Balance" for each Trust or for the Certificates issued by any
Trust indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect of
interest or any Additional Payment thereon or reimbursement of any costs and
expenses in connection therewith. The Pool Balance for each Trust as of any
Regular Distribution Date or Special Distribution Date will be computed after
giving effect to the payment of principal, if any, on the Equipment Notes or
other Trust Property held in such Trust and the distribution thereof to be made
on that date.
The "Pool Factor" for the Certificates issued pursuant to any Trust as of
any date is the quotient (rounded to the seventh decimal place) computed by
dividing (i) the Pool Balance by (ii) the original aggregate face amount of the
Certificates of such Trust. The Pool Factor for each Trust as of any Regular
Distribution Date or Special Distribution Date will be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or other
Trust Property held in such Trust and the distribution thereof to be made on
that date. Assuming that no early redemption or purchase, or default, in respect
of any Equipment Notes has occurred, the Pool Factor for each Trust will be
1.0000000 on the date of issuance of the Certificates. Thereafter, the Pool
Factor for each Trust will decline as described herein to reflect reductions in
the Pool Balance of such Trust. The amount of a Certificateholder's pro rata
share of the Pool Balance of a Trust can be determined by multiplying the par
value of the holder's Certificate of such Trust by the Pool Factor for such
Trust as of the applicable Regular Distribution Date or Special Distribution
Date. Notice of the Pool Factor and the Pool Balance for each Trust will be
mailed to Certificateholders of such Trust on each Regular Distribution Date and
Special Distribution Date.
<TABLE>
<CAPTION>
1997-1A TRUST 1997-1A TRUST 1997-1B TRUST 1997-1B TRUST
SCHEDULED PAYMENTS EXPECTED SCHEDULED PAYMENTS EXPECTED
DATE OF PRINCIPAL POOL FACTOR OF PRINCIPAL POOL FACTOR
---- ------------------ ------------- ------------------ -------------
<S> <C> <C> <C> <C>
March 2, 1998........................ $ 415,900 0.9990671 $ 385,563 0.9963833
June 2, 1998......................... 10,062,730 0.9764961 1,874,904 0.9787963
September 2, 1998.................... 327,095 0.9757625 0 0.9787963
December 2, 1998..................... 3,578,458 0.9677359 357,054 0.9754470
June 2, 1999......................... 10,062,730 0.9451649 1,874,904 0.9578599
December 2, 1999..................... 3,578,659 0.9371379 132,560 0.9566165
June 2, 2000......................... 10,062,730 0.9145669 1,874,904 0.9390294
December 2, 2000..................... 3,578,658 0.9065399 272,936 0.9364692
June 2, 2001......................... 10,062,730 0.8839689 1,874,904 0.9188822
December 2, 2001..................... 3,578,658 0.8759419 324,365 0.9158395
June 2, 2002......................... 10,062,730 0.8533709 1,874,904 0.8982525
December 2, 2002..................... 380,454,922 0.0000000 95,760,001 0.0000000
</TABLE>
42
<PAGE> 44
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date with
respect to a class of Certificates, the applicable Trustee will include with
each distribution of a Scheduled Payment or Special Payment, respectively, to
Certificateholders of the related Class a statement, giving effect to such
distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per $1,000 aggregate
principal amount of Certificate for such Class, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to any Additional Payments;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor. (Section 4.03)
With respect to the Certificates registered in the name of Cede & Co., as
nominee for DTC, on the Record Date prior to each Distribution Date, the
applicable Trustee will request from DTC a securities position listing setting
forth the names of all DTC Participants reflected on DTC's books as holding
interests in the Certificates on such Record Date. On each Distribution Date,
the applicable Trustee will mail to each such DTC Participant the statement
described above and will make available additional copies as requested by such
DTC Participant for forwarding to holders of Certificates. (Section 4.03(a))
In addition, within a reasonable period of time after the end of each
calendar year, the applicable Trustee will prepare for each Certificateholder of
each Trust at any time during the preceding calendar year a report containing
the sum of the amounts determined pursuant to clauses (i) and (ii) above with
respect to the related Trust for such calendar year or, or if such person was a
Certificateholder during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to such Trustee and which a Certificateholder shall reasonably request
as necessary for the purpose of such Certificateholder's preparation of its
federal income tax returns. (Section 4.03(b)) Such report and such items will be
prepared on the basis of information supplied to the applicable Trustee by the
DTC Participants and will be delivered by such Trustee to such DTC Participants
to be available for forwarding by such DTC Participants to Certificate Owners in
the manner described above. (Section 4.03)
With respect to the Certificates issued in definitive form, the applicable
Trustee will prepare and deliver the information described above to each
Certificateholder of record of each Trust as the name of such Certificateholder
appears on the records of the registrar of the Certificates.
INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT
An "Indenture Default" will, with respect to the Leased Aircraft
Indentures, include an event of default under the related Lease (a "Lease Event
of Default"). (Leased Aircraft Indentures, Section 8.01(e)) Since the Equipment
Notes issued under an Indenture may be held in more than one Trust, a continuing
Indenture Default under such Indenture would affect the Equipment Notes held by
each such Trust. There are no cross-default provisions in the Indentures or,
with respect to the Leased Aircraft, in the Leases. Consequently, events
resulting in an Indenture Default under any particular Indenture may or may not
result in an Indenture Default under any other Indenture, and, with respect to
the Leased Aircraft, a Lease Event of Default under any particular Lease will
not constitute a Lease Event of Default under any other Lease. If an Indenture
Default occurs in fewer than all of the Indentures, notwithstanding the
treatment of Equipment Notes issued under any Indenture under which an Indenture
Default has occurred, payments of principal and interest on the Equipment Notes
issued pursuant to Indentures with respect to which an Indenture Default has not
occurred will continue to be distributed to the holders of the Certificates as
originally scheduled, subject to the Intercreditor Agreement. See "Description
of the Intercreditor Agreement -- Priority of Distributions."
With respect to each Leased Aircraft, the applicable Owner Trustee and
Owner Participant will, under the related Leased Aircraft Indenture, have the
right under certain circumstances to cure Indenture Defaults that result from
the occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or
43
<PAGE> 45
the Owner Participant exercises any such cure right, the Indenture Default will
be deemed to have been cured. (Leased Aircraft Indentures, Section 8.03(e))
If the same institution acts as Trustee of multiple Trusts, in the absence
of instructions from the Certificateholders of any such Trust, such Trustee
could be faced with a potential conflict of interest upon an Indenture Default.
In such event, such Trustee may resign as Trustee of one or all such Trusts, and
a successor trustee would be appointed in accordance with the terms of the Basic
Pass Through Trust Agreement.
Upon the occurrence and continuation of any Indenture Default under any
Indenture, the Controlling Party may accelerate and sell all (but not less than
all) of the Equipment Notes issued under such Indenture to any person, subject
to certain limitations. (Intercreditor Agreement, Section 4.1) The proceeds of
such sale will be distributed pursuant to the provisions of the Intercreditor
Agreement. Any proceeds received by the applicable Trustee upon any such sale
will be deposited in the applicable Special Payments Account and shall be
distributed to the Certificateholders of such Trust on a Special Distribution
Date. (Sections 4.01(b) and 4.02(b)) The market for Equipment Notes at the time
of the existence of any Indenture Default may be very limited and there can be
no assurance as to the price at which they could be sold. If such Trustee sells
any such Equipment Notes for less than their outstanding principal amount, the
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against United, any
Liquidity Provider, any Owner Trustee, any Owner Participant or any Trustee.
Any amount, other than Scheduled Payments, distributed to the Trustee of
any Trust by the Subordination Agent on account of the Equipment Notes or other
Trust Property held in such Trust following an Indenture Default under any
Indenture will be deposited in the Special Payments Account for such Trust and
will be distributed to the Certificateholders of such Trust on a Special
Distribution Date. (Sections 4.01(b) and 4.02(b)) In addition, if, following an
Indenture Default under any Leased Aircraft Indenture, the applicable Owner
Trustee or Owner Participant exercises its option to redeem or purchase the
outstanding Equipment Notes issued under such Leased Aircraft Indenture, the
price paid by such Owner Trustee for the Equipment Notes issued under such
Leased Aircraft Indenture and distributed to such Trust by the Subordination
Agent will be deposited in the Special Payments Account for such Trust and will
be distributed to the Certificateholders of such Trust on a Special Distribution
Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any defaulted
Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment
Notes held by the Trustee in the Special Payments Account for such Trust will,
to the extent practicable, be invested and reinvested by such Trustee in certain
permitted investments pending the distribution of such funds on a Special
Distribution Date. (Section 4.04) Such permitted investments are defined as
obligations of the United States or agencies or instrumentalities thereof the
payment of which is backed by the full faith and credit of the United States and
which mature in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. (Section 1.01)
The Basic Pass Through Trust Agreement provides that the Trustee of the
related Trust will, within 90 days after the occurrence of any Indenture
Default, give to the Company, any related Owner Trustees, the related Owner
Participants, the related Indenture Trustees and the Certificateholders of such
Trust notice, transmitted by mail, of such default with respect to such Trust
known to it; provided that, except in the case of default in the payment of
principal, any Additional Payments or interest on any of the Equipment Notes,
the applicable Trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interests of
such Certificateholders. (Section 7.02)
The Basic Pass Through Trust Agreement contains a provision stating that
the Trustee of the related Trust will be under no obligation to exercise any of
its rights or powers under the Basic Pass Through Trust Agreement or the Trust
Supplements at the request of any holders of Certificates issued thereunder
unless there has been offered to such Trustee indemnification satisfactory to
it. (Section 7.03(e))
Subject to the Intercreditor Agreement, the holders of the Certificates of
the Trusts of each class evidencing fractional undivided interests aggregating
not less than a majority in interest of the Trusts of the same class may, on
behalf of the holders of all the Certificates of such Trusts, waive any past
default under the
44
<PAGE> 46
Basic Pass Through Trust Agreement or under the related Trust Supplements with
respect to such Trusts or, if the Trustee of such Trusts is the Controlling
Party, may direct such Trustee to instruct the applicable Indenture Trustee to
waive any past Indenture Default with respect to such Trusts and thereby annul
any direction given by such holders or such Trustee to such Indenture Trustee
with respect thereto, except a default (i) in the deposit of any Scheduled
Payment or Special Payment or in the distribution thereof, (ii) in payment of
the principal, any Additional Payments or interest with respect to any of the
Equipment Notes held in such Trust and (iii) in respect of any covenant or
provision of the Basic Pass Through Trust Agreement that cannot be modified or
amended without the consent of each Certificateholder of such Trusts affected
thereby. (Section 6.04) Each Indenture provides that, with certain exceptions
and subject to the terms of the Intercreditor Agreement, the holders of the
majority in aggregate unpaid principal amount of the Equipment Notes issued
thereunder may on behalf of all such holders waive any past default or Indenture
Default thereunder. (Leased Aircraft Indentures, Section 8.05; Owned Aircraft
Indentures, Section 8.04) Notwithstanding the foregoing provisions of this
paragraph, however, pursuant to the Intercreditor Agreement, only the
Controlling Party is entitled to waive any such past default or Indenture
Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
Upon the occurrence and during the continuation of a Triggering Event, (i)
the Class B Certificateholders will have the right to purchase all, but not less
than all, of the Class A Certificates, (ii) the Class C Certificateholders will
have the right to purchase all, but not less than all, of the Class A
Certificates and the Class B Certificates and (iii) the Class D
Certificateholders will have the right to purchase all, but not less than all,
of the Class A Certificates, the Class B Certificates and the Class C
Certificates, in each case at a purchase price equal to the Pool Balance of the
relevant Class or Classes of Certificates, plus accrued and unpaid interest
thereon to the date of purchase, without any Additional Payments, but including
any other amounts due to the Certificateholders of such Class or Classes.
(Section 6.01(b))
PTC EVENT OF DEFAULT
A PTC Event of Default is defined under the Intercreditor Agreement as the
failure to pay within 10 Business Days of the due date thereof: (i) the
outstanding Pool Balance of the applicable Class of Certificates on the Final
Maturity Date or (ii) interest due on such Certificates on any Distribution Date
(unless the Subordination Agent has made an Interest Drawing, or a withdrawal
from a Cash Account, with respect thereto in an amount sufficient to pay such
interest and has distributed such amount to the Certificateholders entitled
thereto). (Intercreditor Agreement, Section 1.1) Any failure to make expected
principal distributions on any Class of Certificates on any Regular Distribution
Date (other than the Final Maturity Date) will not constitute a PTC Event of
Default with respect to such Certificates. A PTC Event of Default with respect
to the most senior Class of Certificates resulting from an Indenture Default
under all Indentures will constitute a Triggering Event.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
United is prohibited from consolidating with or merging into any other
corporation or transferring substantially all of its assets as an entirety to
any other corporation unless: (i) the surviving successor or transferee
corporation shall (a) be a "citizen of the United States" as defined in Section
40102(a)(15) of Title 49 of the United States Code, as amended, relating to
aviation (the "Aviation Act"), (b) be a U.S. certificated air carrier and (c)
expressly assume all of the obligations of United contained in the Basic Pass
Through Trust Agreement, the Note Purchase Agreement, the Indentures, the
Participation Agreements and the Leases; (ii) in the case of the Leased
Aircraft, immediately after giving effect to such transactions, no Lease Event
of Default has occurred and is continuing; and (iii) United has delivered a
certificate and an opinion or opinions of counsel indicating that such
transaction complies with such conditions. (Leased Aircraft Participation
Agreements, Section 8(s); Owned Aircraft Participation Agreements, Section 6(d))
The Basic Pass Through Trust Agreement and the Indentures do not contain
any covenants or provisions that may afford the applicable Trustee or
Certificateholders protection in the event of a highly leveraged
45
<PAGE> 47
transaction, including transactions effected by management or affiliates, which
may or may not result in a change in control of United.
MODIFICATIONS OF THE BASIC PASS THROUGH TRUST AGREEMENT AND CERTAIN OTHER
AGREEMENTS
The Basic Pass Through Trust Agreement contains provisions permitting the
execution of supplemental trust agreements, without the consent of the holders
of any Class of the Certificates of the Trusts, (i) to provide for the formation
of a Trust, the issuance of a Class of Certificates and other matters
contemplated by the Basic Pass Through Trust Agreement, (ii) to evidence the
succession of another corporation to United and the assumption by such
corporation of United's covenants under the Basic Pass Through Trust Agreement,
(iii) to add to the covenants of United for the benefit of holders of such
Certificates or to surrender any right or power in the Basic Pass Through Trust
Agreement conferred upon United, (iv) to correct or supplement any defective or
inconsistent provision of, or to cure any ambiguity or correct any mistake in,
the Basic Pass Through Trust Agreement, the Intercreditor Agreement or the
Liquidity Facilities, (v) to modify any other provisions with respect to matters
or questions arising under the Basic Pass Through Trust Agreement, the
Intercreditor Agreement, the Note Purchase Agreement or the Liquidity
Facilities, provided such action does not materially adversely affect the
interests of the holders of such Certificates, (vi) to modify, eliminate or add
provisions necessary to continue the qualification of the Basic Pass Through
Trust Agreement under the Trust Indenture Act, and to modify or add to the Basic
Pass Through Trust Agreement such other provisions as may be expressly permitted
by the Trust Indenture Act, (vii) to provide for a successor Trustee under the
Basic Pass Through Trust Agreement or to add to or change any provision of the
Basic Pass Through Trust Agreement as shall be necessary to facilitate the
administration of the trusts by more than one Trustee, (viii) to modify or
eliminate provisions relating to the transfer or exchange of Exchange
Certificates or the Initial Certificates upon consummation of the Exchange Offer
or effectiveness of the Registration Statement, and (ix) to comply with any
requirement of the Commission, any applicable law, rules or regulations of any
exchange or quotation system on which the Certificates of any Class are listed
or of any regulatory body. (Section 9.01)
In addition, with respect to each Trust and the Class of Certificates
relating thereto and with the consent of the holders of the Certificates of the
related Trust evidencing fractional undivided interests aggregating not less
than a majority in interest of such Trust, United may (with the consent of the
applicable Owner Trustee, if any, which consent may not be unreasonably
withheld) and the Trustee will, subject to the provisions of the Basic Pass
Through Trust Agreement, enter into supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of the Basic Pass
Through Trust Agreement, the Intercreditor Agreement, the Primary Liquidity
Facility, the Registration Rights Agreement or the Note Purchase Agreement;
provided, however, that no such supplemental agreement will, without the consent
of the holder of each outstanding Certificate so affected thereby, (a) reduce in
any manner the amount of, or delay the timing of, any receipt by the Trustee of
payments on the Equipment Notes held in such Trust or distributions in respect
of any Certificate related to such Trust, or change the date of payment on any
Certificate or place of any payment where, or the coin or currency in which, any
Certificate is payable, or impair the right of any Certificateholder of such
Trust to institute suit for the enforcement of any such payment when due, (b)
permit the disposition of any Equipment Note held in such Trust, except as
provided in the Basic Pass Through Trust Agreement or the Note Purchase
Agreement, or otherwise deprive such Certificateholder of the benefit of the
ownership of the applicable Equipment Notes, (c) alter the priority of
distributions specified in the Intercreditor Agreement, (d) reduce the
percentage of the aggregate fractional undivided interests of such Trust which
is required for any such supplemental agreement or reduce such percentage
required for any waiver provided for in the Basic Pass Through Trust Agreement,
or (e) amend provisions of the Intercreditor Agreement relating to priority of
distribution in a manner that has a material adverse effect on the
Certificateholders. (Section 9.02)
TERMINATION OF THE TRUSTS
In respect of each Trust created by the Basic Pass Through Trust Agreement
as supplemented by a related Trust Supplement, the obligations of United and the
applicable Trustee with respect to a Trust will
46
<PAGE> 48
terminate upon the distribution to Certificateholders of such Trust and such
Trustee of all amounts required to be distributed to them pursuant to the Basic
Pass Through Trust Agreement and the Trust Supplement and the disposition of all
property held in such Trust. The applicable Trustee will send to each
Certificateholder of record of such Trust notice of the termination of such
Trust, the amount of the proposed final payment and the proposed date for the
distribution of such final payment for such Trust. The final distribution to any
Certificateholder of such Trust will be made only upon surrender of such
Certificateholder's Certificates at the office or agency of the applicable
Trustee specified in such notice of termination. (Section 11.01)
THE TRUSTEES
The Trustee for each Trust is First Security Bank, National Association.
With certain exceptions, the Trustees make no representations as to the
validity or sufficiency of the Basic Pass Through Trust Agreement or the Trust
Supplements, the Certificates of any class, the Note Purchase Agreement, the
Equipment Notes, the Intercreditor Agreement, the Registration Rights Agreement,
the Indentures, the Leases, the Participation Agreements or other related
documents. (Sections 7.04 and 7.15) The Trustee of any Trust will not be liable,
with respect to the Certificates of such Trust, for any action taken or omitted
to be taken by it in good faith in accordance with the direction of the holders
of a majority in principal amount of outstanding Certificates of such Trust.
(Section 7.03(h)) Subject to certain provisions, the Trustees are under no
obligation to exercise any of their rights or powers under the Basic Pass
Through Trust Agreement or the Trust Supplements at the request of any holders
of Certificates issued thereunder unless there shall have been offered to the
Trustees indemnity satisfactory to them. (Section 7.03(e)) The Basic Pass
Through Trust Agreement provides that the Trustees in their individual or any
other capacity may acquire and hold Certificates issued thereunder and, subject
to certain conditions, may otherwise deal with United, any Owner Trustee or the
Indenture Trustees with the same rights they would have if they were not the
Trustees. (Section 7.05)
Any Trustee may resign with respect to any or all of the Trusts of which it
is the Trustee at any time, in which event United will be obligated to appoint a
successor trustee, which successor trustee shall be a financial institution that
is unaffiliated with and independent of United. Once appointed, such successor
trustee may not be removed except with the consent of the holders of a majority
of the principal amount of the Certificates or as otherwise provided below. If
any Trustee ceases to be eligible to continue as Trustee with respect to a Trust
or becomes incapable of acting as Trustee or becomes insolvent, United may
remove such Trustee, or any holder of the Certificates of such Trust for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of such Trustee and
the appointment of a successor trustee of such Trust. Any resignation or removal
of the Trustee with respect to a Trust and appointment of a successor trustee
for such Trust does not become effective until acceptance of the appointment by
the successor trustee. (Sections 7.09 and 7.10)
The Basic Pass Through Trust Agreement provides that United will pay, or
cause to be paid, the applicable Trustee's reasonable fees and expenses.
(Section 7.07)
BOOK-ENTRY; DELIVERY AND FORM
The New Certificates of each Trust will be represented by one or more
permanent global Certificates, in definitive, fully registered form without
interest coupons (the "Global Certificates"), to be deposited with the Trustee
as custodian for DTC and registered in the name of Cede & Co., as nominee of
DTC. (Section 3.01(c))
DTC has advised United as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "clearing agency" registered pursuant to the provision of Section 17A
of the Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include
47
<PAGE> 49
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Ownership of beneficial interests in the Global Certificates will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Ownership of beneficial interests in the
Global Certificates will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). The laws of some states require
that certain purchasers of securities take physical delivery of such securities.
Such limits and such laws may limit the market for beneficial interests in the
Global Certificates. Qualified institutional buyers may hold their interests in
the Global Certificates directly through DTC if they are participants in such
system, or indirectly through organizations that are participants in such
system.
So long as DTC or its nominee is the registered owner or holder of the
Global Certificates, DTC or such nominee, as the case may be, will be considered
the sole record owner or holder of the Certificates represented by such Global
Certificates for all purposes under the Basic Pass Through Trust Agreement. No
beneficial owners of an interest in the Global Certificates will be able to
transfer that interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Basic Pass Through Trust Agreement and,
if applicable, Euroclear or Cedel.
Payments of the principal of, any Additional Payments and interest on the
Global Certificates will be made to DTC or its nominee, as the case may be, as
the registered owner thereof. Neither United, the Trustee nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Certificates or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
United expects that DTC or its nominee, upon receipt of any payment of
principal, any Additional Payments or interest in respect of the Global
Certificates will credit participants' accounts with payments in amounts
proportionate to their respective beneficial ownership interests in the
principal amount of such Global Certificates, as shown on the records of DTC or
its nominee. United also expects that payments by participants to owners of
beneficial interests in such Global Certificates held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
participants.
Neither United nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Certificates and a successor depositary is not appointed within 90
days, the Trusts will issue Definitive Certificates in exchange for the Global
Certificates, which, in the case of Certificates issued in exchange for the
Global Certificates will bear the legend referred to under the heading "Transfer
Restrictions."
48
<PAGE> 50
DESCRIPTION OF THE LIQUIDITY FACILITIES
PRIMARY LIQUIDITY FACILITIES
GENERAL
With respect to the Certificates of the Class A Trusts and the Class B
Trusts, the Subordination Agent has entered into two separate Primary Liquidity
Facilities with the Primary Liquidity Provider pursuant to which the Primary
Liquidity Provider will, if necessary, make advances ("Interest Drawings") to
the Subordination Agent to pay interest on such Certificates subject to certain
limitations. The Primary Liquidity Facility for the Trusts of any Class is
intended to enhance the likelihood of timely receipt by the Certificateholders
of such Trusts of the interest payable on the Certificates of such Trusts at the
Current Interest Rate therefor (not to exceed the Capped Interest Rate) on up to
six consecutive quarterly Regular Distribution Dates.
DRAWINGS
Initially, the Maximum Commitment Amount available under the Primary
Liquidity Facilities for the Class A Trusts and the Class B Trusts is
$70,071,917 and $16,881,773, respectively, and, thereafter, the Maximum
Commitment Amount available under each Primary Liquidity Facility will equal the
product of (x) 1.5, multiplied by (y) the Capped Interest Rate, multiplied by
(z) the Pool Balance of the related Class of Certificates. Except as otherwise
provided below, the Primary Liquidity Facility for the Trusts of each Class will
enable the Subordination Agent to make Interest Drawings thereunder after any
Regular Distribution Date to pay interest then due and payable on the
Certificates of such Trusts at the Current Interest Rate to the extent that the
amount, if any, available to the Subordination Agent on such Regular
Distribution Date is not sufficient to pay such interest; provided, however,
that the maximum amount available to be drawn under such Primary Liquidity
Facility on any Regular Distribution Date to fund any shortfall of interest on
such Certificates may not exceed an amount equal to 1/6 of the Maximum
Commitment Amount (determined using the Capped Interest Rate) of such Primary
Liquidity Facility. (Liquidity Facilities, Section 2.02; Intercreditor
Agreement, Section 3.6(a)) The Primary Liquidity Facility for any Trust does not
provide for drawings thereunder to pay for principal of or any Additional
Payment on the Certificates of such Trust or any interest on the Certificates of
such Trust in excess of the Capped Interest Rate for such Trust or more than six
quarterly installments of interest thereon or principal of, any Additional
Payments or interest on the Certificates of any Trust of any other Class.
Each payment by the Primary Liquidity Provider under each Primary Liquidity
Facility reduces the amount available to be drawn under such Primary Liquidity
Facility, subject to reinstatement as hereinafter described. With respect to any
Interest Drawing under the Primary Liquidity Facility for the Trusts of any
Class, upon repayment to each Primary Liquidity Provider in full of the amount
of any Interest Drawing, together with accrued interest thereon, the amount
available to be drawn will be reinstated by the amount of such repaid Interest
Drawing; provided, however, that such Primary Liquidity Facility may not be so
reinstated at any time (i) a Triggering Event has occurred and is continuing and
(ii) less than 65% of the then aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes. (Primary Liquidity Facility,
Section 2.02(a); Intercreditor Agreement, Section 3.6(g)) With respect to any
other drawings under such Primary Liquidity Facility, amounts available to be
drawn thereunder are not subject to reinstatement.
If at any time the short-term unsecured debt rating of the Primary
Liquidity Provider issued by any Rating Agency (or the long-term unsecured debt
rating issued by such Rating Agency if there is no such short-term rating for
any Primary Liquidity Provider) is lower than the applicable Threshold Rating,
each Primary Liquidity Facility must be replaced by a Replacement Primary
Liquidity Facility (as defined below). If such Primary Liquidity Facility is not
replaced with a Replacement Primary Liquidity Facility within 30 days after
notice of the downgrading and as otherwise provided in the Intercreditor
Agreement, the Subordination Agent will request the Downgrade Drawing in an
amount equal to all available and undrawn amounts thereunder and will hold the
proceeds thereof in the Cash Collateral Account for such Trust as cash
collateral to be used for the same purposes and under the same circumstances as
cash payments of Interest
49
<PAGE> 51
Drawings under such Primary Liquidity Facility would be used. (Liquidity
Facilities, Section 2.02(b); Intercreditor Agreement, Section 3.6(c))
A "Replacement Primary Liquidity Facility" for any Primary Liquidity
Facility means an irrevocable revolving credit facility issued by one or more
replacement Primary Liquidity Providers for the same term as the Primary
Liquidity Facility being replaced in substantially the form of the replaced
Primary Liquidity Facility, including reinstatement provisions, or in such other
form (which may include a letter of credit) as will permit the Rating Agencies
to confirm in writing their respective ratings then in effect for each class of
Certificates (before downgrading of such ratings, if any, as a result of the
downgrading of the Primary Liquidity Provider), in a face amount equal to the
Maximum Commitment Amount for such Primary Liquidity Facility and issued by a
replacement Primary Liquidity Provider; provided that (i) upon the replacement
of the Primary Liquidity Facility for any class of Certificates, the Primary
Liquidity Facility for the other class of Certificates will also be replaced by
the same replacement Primary Liquidity Providers as provided above and (ii) the
commitment percentage of each replacement Primary Liquidity Provider will be the
same for each Primary Liquidity Facility. (Intercreditor Agreement, Section 1.1)
"Threshold Rating" means: (i) the short-term unsecured debt rating of "P-1"
by Moody's and "A-1+" by Standard & Poor's and (ii) for any Person which does
not have a published short-term unsecured debt rating from each Rating Agency,
the long-term unsecured debt rating of "Aa3" by Moody's and "AA-" by Standard &
Poor's. (Intercreditor Agreement, Section 1.1)
The Primary Liquidity Facility for each class provides that the Primary
Liquidity Provider's obligations thereunder will terminate on the making of any
Downgrade Drawing or a Final Drawing or on the earliest of: (i) March 2, 2004;
(ii) the date on which the Subordination Agent delivers to the Primary Liquidity
Provider a certification that all of the Certificates of such class have been
paid in full; (iii) the date the Subordination Agent delivers to the Primary
Liquidity Provider a certification that a Replacement Primary Liquidity Facility
has been substituted for such Primary Liquidity Facility; (iv) the fifth
Business Day following receipt by the Subordination Agent of a Termination
Notice from the Liquidity Provider (see "-- Liquidity Events of Default"); and
(v) the date on which no amount is or may (including by reason of reinstatement)
become available for drawing under such Primary Liquidity Facility. (Liquidity
Facilities, Section 2.04(b))
United may, at its option, subject to certain conditions, arrange for
replacement facilities at any time to replace the Primary Liquidity Facilities,
provided that the initial Primary Liquidity Provider will only be replaced (A)
if replacement will reduce or eliminate certain indemnity payments or
obligations that would constitute an economic hardship to United or (B) after a
Downgrade Drawing. If a replacement facility is provided at any time after a
Downgrade Drawing under the related Primary Liquidity Facility, the funds on
deposit in the applicable Cash Collateral Account will be returned to the
Primary Liquidity Provider being replaced. (Intercreditor Agreement, Section
3.6(e))
The Intercreditor Agreement provides that, upon receipt by the
Subordination Agent of a Termination Notice with respect to any Primary
Liquidity Facility from the Primary Liquidity Provider (given as described in
"-- Liquidity Events of Default"), the Subordination Agent will request a final
drawing (the "Final Drawing") under such Primary Liquidity Facility in an amount
equal to all available and undrawn amounts thereunder and will hold the proceeds
thereof in the Cash Collateral Account for the related Trust as cash collateral
to be used for the same purposes and under the same circumstances, and subject
to the same conditions, as cash payments of Interest Drawings under such Primary
Liquidity Facility would be used. (Liquidity Facilities, Section 2.02(c);
Intercreditor Agreement, Section 3.6(i))
Drawings under any Primary Liquidity Facility will be made on the second
Business Day after any Regular Distribution Date by delivery by the
Subordination Agent of a certificate in the form required by such Primary
Liquidity Facility. Upon receipt of such a certificate, the Liquidity Provider
is obligated to make payment of the drawing requested thereby in immediately
available funds. (Liquidity Facilities, Section 2.02(d)) Upon payment by the
Liquidity Provider of the amount specified in any drawing under any Primary
Liquidity Facility, the Liquidity Provider will be fully discharged of its
obligations under such Primary Liquidity Facility with respect to such drawing
and will not thereafter be obligated to make any further payments under such
Primary Liquidity Facility in respect of such drawing to the Subordination Agent
50
<PAGE> 52
or any other person or entity who makes a demand for payment in respect of
interest on the related Certificates. (Liquidity Facilities, Section 2.02(e))
REIMBURSEMENT OF DRAWINGS
Amounts drawn under any Primary Liquidity Facility by reason of an Interest
Drawing, the Final Drawing or an Applied Downgrade Advance (as defined in the
Liquidity Facilities) will be immediately due and payable, together with
interest on the amount of such drawing at a rate equal to, in the case of a
LIBOR advance, the applicable LIBOR plus 1.00% per annum or, in the case of a
Base Rate advance, the applicable Base Rate plus 1.00% per annum; provided that
the Subordination Agent will be obligated to reimburse such amounts only to the
extent that the Subordination Agent has available funds therefor. (Liquidity
Facilities, Sections 2.05 and 3.07)
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum will at all times be equal to: (a) the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day that is a Business Day, the average of the quotations for such day for
such transactions received by the Liquidity Provider from three Federal funds
brokers of recognized standing selected by it, plus (b) 1/4 of one percent.
The amount drawn under the Primary Liquidity Facility for the Trusts of any
class by reason of a Downgrade Drawing (other than an Applied Downgrade Advance)
will be treated as follows: (i) such amount will be released on any Regular
Distribution Date to the Liquidity Providers to the extent that such amount
exceeds the Maximum Commitment Amount minus any unreimbursed Interest Drawings
under such Primary Liquidity Facility; (ii) any portion of such amount withdrawn
from the Cash Collateral Account for such Certificates to pay interest on such
Certificates will be treated in the same way as Interest Drawings; and (iii) the
balance of such amount will be invested in Eligible Investments. The Downgrade
Drawing under any Primary Liquidity Facility will bear interest at a rate equal
to the investment earnings on amounts on deposit in the Cash Collateral Account.
(Liquidity Facilities, Sections 2.06 and 3.07)
LIQUIDITY EVENTS OF DEFAULT
Events of Default under each Primary Liquidity Facility (each, a "Liquidity
Event of Default") consist of: (i) the acceleration of all the Equipment Notes;
and (ii) certain bankruptcy or similar events involving United. (Primary
Liquidity Facilities, Section 1.01)
If (i) any Liquidity Event of Default occurs under any Primary Liquidity
Facility and (ii) less than 65% of the aggregate outstanding principal amount of
all Equipment Notes are Performing Equipment Notes, the Liquidity Provider may,
in its discretion, give a notice of termination of the related Primary Liquidity
Facility and accelerate the reimbursement obligations thereunder (a "Termination
Notice") the effect of which will be to cause: (i) such Primary Liquidity
Facility to expire on the fifth Business Day after the date on which such
Termination Notice is received by the Subordination Agent, (ii) the
Subordination Agent to promptly request, and the Liquidity Providers to promptly
make, a Final Drawing, (iii) any Drawing remaining unreimbursed as of the date
of termination to be automatically converted into a Final Drawing under such
Primary Liquidity Facility for purposes of determining the applicable interest
rate payable thereon, and (iv) all amounts owing to the Liquidity Provider to
become immediately due and payable. (Liquidity Facilities, Section 6.01)
Notwithstanding the foregoing, the Subordination Agent will be obligated to pay
amounts owing to the Liquidity Providers only to the extent of funds available
therefor after giving effect to the payments in accordance with the provisions
set forth under "Description of the Intercreditor Agreement -- Priority of
Distributions". (Liquidity Facilities, Section 2.09) Upon the circumstances
described below under "Description of the Intercreditor Agreement --
Intercreditor Rights," the Liquidity Providers may become the Controlling Party
with respect to the exercise of remedies under the Indentures. (Intercreditor
Agreement, Section 2.6(c))
51
<PAGE> 53
ABOVE-CAP LIQUIDITY FACILITY
The Subordination Agent and the Above-Cap Liquidity Provider have entered
into irrevocable interest rate cap agreements (each, an "Above-Cap Liquidity
Facility" and, together with the Primary Liquidity Facilities, the "Liquidity
Facilities") with respect to the Class A Trust and the Class B Trust. Under each
Above-Cap Liquidity Facility, the Above-Cap Liquidity Provider will, if
necessary, make payments (if then effective Three-Month LIBOR exceeds Capped
LIBOR) in an amount not to exceed the product of (x) the difference between
Three-Month LIBOR and Capped LIBOR, multiplied by (y) the Pool Balance of the
related Class of Certificates, multiplied by (z) actual days elapsed in the
applicable interest period divided by 360 ("Above-Cap Interest Payments"), which
payments, in the aggregate with the required amount of Interest Drawings under
the Primary Liquidity Facilities and withdrawals from the related Cash
Collateral Account, will be sufficient to pay interest on the Class A or Class B
Certificates, as the case may be, on up to six consecutive Regular Distribution
Dates (without regard to any expected future payments of principal on such
Certificates). An Above-Cap Interest Payment under the relevant Above-Cap
Liquidity Facility will be made on the second Business Day after any Regular
Distribution Date if, after giving effect to the subordination provisions of the
Intercreditor Agreement and the Interest Drawing to be made on the relevant
Primary Liquidity Facility and withdrawals from the related Cash Collateral
Account, there are insufficient funds available to the Subordination Agent to
pay interest on any Class A or Class B Certificates. The Above-Cap Liquidity
Provider under the Above-Cap Liquidity Facility for the Class A Certificates or
the Class B Certificates will only be required to pay amounts to the
Subordination Agent at such times as Interest Drawings are payable and the
required amounts thereof are insufficient under the Primary Liquidity Facilities
or withdrawals are made from the related Cash Collateral Accounts and such
withdrawals are insufficient. The Above-Cap Liquidity Facility for either the
Class A Certificates or the Class B Certificates does not provide for payments
thereunder to pay for principal of, or any Additional Payment on, the
Certificates of such Class or principal of, or any Additional Payment or
interest on the Certificates of any other Class.
If at any time the short-term unsecured debt rating of the Above-Cap
Liquidity Provider issued by any Rating Agency (or the long-term unsecured debt
rating issued by such Rating Agency if there is no such short-term rating for
any Above-Cap Liquidity Provider) is lower than the applicable Threshold Rating,
the Above-Cap Liquidity Facility for each Class of Certificates will be required
to be replaced by another similar facility to be provided by one or more
financial institutions having such unsecured debt ratings issued by both Rating
Agencies which are equal to or higher than the Threshold Rating, provided that
the commitment percentage of each financial institution will be the same for the
replacement Class A facility and the replacement Class B facility. If the
Above-Cap Liquidity Facility is not replaced within 30 days after notice by the
Above-Cap Liquidity Provider of the downgrading, the Above-Cap Liquidity
Provider will transfer the Above-Cap Liquidity Facility to an affiliate,
reasonably acceptable to the Rating Agencies, that is eligible to become a
debtor under the United States Bankruptcy Code, and such affiliate will post
collateral to the Subordination Agent for deposit into an account for the
benefit of the related Class of Certificates an amount in cash equal to the
product of (x) a fraction, the numerator of which is an amount equal to the
difference between (A) 18 and (B) three times the number of unreimbursed
Interest Drawings under the Primary Liquidity Facility, and the denominator of
which is 12, multiplied by (y) the greater of (A) 12.29% per annum minus Capped
LIBOR and (B) the effective Three-Month LIBOR on such 30th day minus Capped
LIBOR, multiplied by (z) the Pool Balance of the applicable Class of
Certificates (the "Above-Cap Collateral Amount"), and used for the same purposes
and under the same circumstances, and subject to the same conditions, as cash
payments of Above-Cap Interest Payments under the Above-Cap Liquidity Facility
would be used. Cash deposited into the account will be invested in U.S.
government or agency securities. On each Regular Distribution Date, the amount
in the account will be increased or decreased so that on such Regular
Distribution Date an amount equal to the Above-Cap Collateral Amount is
deposited and available in the account. If the replacement obligation described
in the first sentence of this paragraph is not met, as an alternative to the
collateralization mechanism described above, the Above-Cap Liquidity Provider
may provide such other assurances of creditworthiness as will maintain the then
current ratings of the Class A and Class B Certificates by the Rating Agencies.
52
<PAGE> 54
Notwithstanding the subordination provisions of the Intercreditor
Agreement, the holders of the Class A and Class B Certificates are entitled to
receive and retain the proceeds of payments under the applicable Above-Cap
Liquidity Facility.
The Above-Cap Liquidity Provider does not have any rights to indemnity or
reimbursement under the Operative Agreements.
LIQUIDITY PROVIDERS
Primary Liquidity Provider
The Primary Liquidity Provider is Kreditanstalt fur Wiederaufbau, which is
a corporation organized under the public law of the Federal Republic of Germany.
The Primary Liquidity Provider has not been involved in the preparation of, and
has not prepared, this Prospectus and is not responsible for any of its contents
except for the information provided under "Primary Liquidity Provider."
Above-Cap Liquidity Provider
The Above-Cap Liquidity Provider is Credit Suisse Financial Products which
is an unlimited company incorporated in England and an authorized institution
under the Banking Act of 1987 of the United Kingdom. The Above-Cap Liquidity
Provider has not been involved in the preparation of, and has not prepared, this
Prospectus and is not responsible for any of its contents except for the
information provided under "Above-Cap Liquidity Provider."
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
INTERCREDITOR RIGHTS
Controlling Party
Pursuant to the Intercreditor Agreement, the Trustees, the Primary
Liquidity Providers, the Above-Cap Liquidity Provider and the Subordination
Agent have agreed that, with respect to any Indenture at any given time, the
Indenture Trustee will be directed (a) in taking, or refraining from taking, any
action thereunder or under the related Equipment Notes by the holders of at
least a majority of the outstanding principal amount of the Equipment Notes
issued thereunder (provided that, for so long as the Subordination Agent is the
registered holder of the Equipment Notes, the Subordination Agent shall act with
respect to this clause (a) in accordance with the directions of the Trustees),
so long as no Indenture Default shall have occurred and be continuing thereunder
and (b) after the occurrence and during the continuance of an Indenture Default
thereunder, in taking, or refraining from taking, any action thereunder,
including exercising remedies thereunder (including acceleration of such
Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment
Notes), by the Controlling Party, subject to the limitations described below.
See "Description of the Certificates -- Indenture Defaults and Certain Rights
Upon an Indenture Default" for a description of the rights of the
Certificateholders of each Trust to direct the Trustee. For purposes of giving
effect to the foregoing, the Trustee (other than as the Controlling Party) have
irrevocably agreed (and the Certificateholders, other than the
Certificateholders represented by the Controlling Party, will be deemed to agree
by virtue of their purchase of Certificates) that the Subordination Agent, as
record holder of the Equipment Notes, will exercise its voting rights as
directed by the Controlling Party. Notwithstanding the foregoing, at any time
after 18 months from the earliest to occur of (x) the date on which the
Remaining Commitment Amount (as defined in the Liquidity Facilities) is and
remains zero (for any reason other than a Downgrade Drawing), (y) the date on
which a Final Drawing shall have been made and remains unreimbursed and (z) the
date on which all Equipment Notes shall have been accelerated, the Primary
Liquidity Providers holding more than 50% of unreimbursed liquidity obligations
payable under the Liquidity Facilities will have the right to elect to become
the Controlling Party with respect to such Indenture. (Intercreditor Agreement,
Section 2.6) For a description of certain limitations on the Controlling Party's
rights to exercise remedies, see "Description of the Equipment Notes --
Remedies."
53
<PAGE> 55
Sale of Equipment Notes or Aircraft
Upon the occurrence and during the continuation of an Indenture Default
under any Indenture, the Controlling Party may, among other things, direct the
Subordination Agent, which in turn will direct the Indenture Trustee, to
accelerate and, subject to the provisions of the immediately following sentence,
sell all (but not less than all) of the Equipment Notes issued under such
Indenture to any person. Subject to the rights of any Owner Trustee or Owner
Participant, so long as any Certificates are outstanding, during nine months
after the earlier of (x) the acceleration of the Equipment Notes under any
Indenture or (y) the bankruptcy or insolvency of United, without the consent of
the Trustee, (a) no Aircraft subject to the lien of any Indenture or such
Equipment Notes may be sold, if the net proceeds from such sale would be less
than the aggregate outstanding principal amount of such Equipment Notes, plus
accrued interest thereon, and (b) with respect to any Leased Aircraft, the
amount and payment dates of rentals payable by United under the Lease for such
Leased Aircraft may not be adjusted, if, as a result of such adjustment, the
discounted present value of all such rentals would be less than 75% of the
discounted present value of the rentals payable by United under such Lease
before giving effect to such adjustment, in each case, using the weighted
average interest rate of the Equipment Notes issued under such Indenture as the
discount rate.
The Subordination Agent may from time to time during the continuance of an
Indenture Default (and before the occurrence of a Triggering Event) commission
Appraisals with respect to all Aircraft at the request of the Controlling Party.
(Intercreditor Agreement, Section 4.1)
PRIORITY OF DISTRIBUTIONS
So long as no Triggering Event has occurred, the payments in respect of the
Equipment Notes and certain other payments received on any Distribution Date
will be promptly distributed by the Subordination Agent on such Distribution
Date in the following order of priority:
first, such amount as will be required to pay all unpaid Liquidity
Obligations (other than any interest accrued thereon on the principal
amount of any Interest Drawing) owed to each Primary Liquidity Provider
will be distributed to the Primary Liquidity Providers (the "Liquidity
Expenses");
second, such amount as will be required to pay the aggregate amount of
interest accrued on all Liquidity Obligations will be distributed to the
Primary Liquidity Providers;
third, such amount as will be required (A) if any Cash Collateral
Account had been previously funded as provided in Section 3.6(f) of the
Intercreditor Agreement, to fund such Cash Collateral Account up to the
Maximum Commitment Amount applicable to the related Primary Liquidity
Facility will be deposited in such Cash Collateral Account, (B) if any
Primary Liquidity Facility becomes a Downgraded Facility at a time when
unreimbursed Interest Drawings under such Primary Liquidity Facility have
reduced the Remaining Commitment Amount thereunder to zero, to fund the
relevant Cash Collateral Account up to the Maximum Commitment Amount
applicable to such Primary Liquidity Facility will be deposited in such
Cash Collateral Account and (C) if, with respect to any particular Primary
Liquidity Facility, neither subclause (A) nor subclause (B) of this clause
"third" are applicable, to pay or reimburse the Primary Liquidity Provider
in respect of such Primary Liquidity Facility, in each case in an amount
equal to the amount of all Liquidity Obligations then due under such
Primary Liquidity Facility (other than amounts payable pursuant to clause
"first," "second" or "third") will be distributed to such Primary Liquidity
Provider;
fourth, if, with respect to any particular Primary Liquidity Facility,
either subclause (A) or (B) of clause "third" above is applicable, then the
Primary Liquidity Provider with respect to such Primary Liquidity Facility
will be paid the excess of (x) the aggregate outstanding amount of
unreimbursed Drawings (whether or not then due) under such Primary
Liquidity Facility over (y) the Maximum Commitment Amount applicable to
such Primary Liquidity Facility;
fifth, such amount as will be required to pay Expected Distributions
to the holders of the Class A Certificates will be distributed to the
Trustee;
54
<PAGE> 56
sixth, such amount as will be required to pay Expected Distributions
to the holders of the Class B Certificates will be distributed to the
Trustee;
seventh, such amount as will be required to pay Expected Distributions
to the holders of the Class C Certificates will be distributed to the
Trustee;
eighth, such amount as will be required to pay Expected Distributions
to the holders of the Class D Certificates will be distributed to the
Trustee;
ninth, such amount as will be required to pay the aggregate unpaid
amount of fees and expenses to the Subordination Agent and the Trustee will
be distributed to the Subordination Agent and the Trustee; and
tenth, the balance, if any, remaining will be distributed to United.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date (the "Current Distribution Date") the sum of (x)
accrued and unpaid interest on such Certificates and (y) the difference between
(A) the Pool Balance of such Certificates as of the preceding Distribution Date
and (B) the Pool Balance of such Certificates as of the Current Distribution
Date, calculated on the basis that the principal of the Equipment Notes held in
such Trust has been paid when due (whether at stated maturity, upon redemption,
prepayment or acceleration or otherwise) and such payments have been distributed
to the holders of such Certificates.
So long as no Triggering Event has occurred (whether or not continuing),
the Subordination Agent will make distributions of amounts on deposit on account
of the redemption, purchase or refinancing of all of the Equipment Notes issued
pursuant to an Indenture on the Special Distribution Date in the following order
of priority:
first, such amount as will be required to pay (A) all accrued and
unpaid Liquidity Expenses then in arrears plus (B) the product of (x) the
aggregate amount of all accrued and unpaid Liquidity Expenses not in
arrears multiplied by (y) a fraction, the numerator of which is the
aggregate outstanding principal amount of Equipment Notes being redeemed,
purchased, prepaid or refinanced and the denominator of which is the
aggregate outstanding principal amount of all Equipment Notes, will be
distributed to the Primary Liquidity Providers;
second, such amount as will be required to pay (A) all accrued and
unpaid interest then in arrears on all Liquidity Obligations plus (B) the
product of (x) the aggregate amount of all accrued and unpaid interest on
all Liquidity Obligations not in arrears multiplied by (y) a fraction, the
numerator of which is the aggregate outstanding principal amount of
Equipment Notes being redeemed, purchased, prepaid or refinanced and the
denominator of which is the aggregate outstanding principal amount of all
Equipment Notes, will be distributed to the Primary Liquidity Providers;
third, such amount as will be required (A) if any Cash Collateral
Account had been previously funded as provided in Section 3.6(f) of the
Intercreditor Agreement, to fund such Cash Collateral Account up to the
Maximum Commitment Amount applicable to the related Primary Liquidity
Facility will be deposited in such Cash Collateral Account, (B) if any
Primary Liquidity Facility becomes a Downgraded Facility at a time when
unreimbursed Interest Drawings under such Primary Liquidity Facility have
reduced the Remaining Commitment Amount thereunder to zero, to fund the
relevant Cash Collateral Account up to the Maximum Commitment Amount
applicable to such Primary Liquidity Facility will be deposited in such
Cash Collateral Account and (C) if, with respect to any particular Primary
Liquidity Facility, neither subclause (A) nor subclause (B) of this clause
"third" are applicable, to pay or reimburse the Primary Liquidity Provider
in respect of such Primary Liquidity Facility, in each case in an amount
equal to the amount of any unreimbursed Interest Drawings under the Primary
Liquidity Facilities will be distributed to the Primary Liquidity
Providers;
fourth, if either subclause (A) or (B) of clause "third" above is
applicable, then the Primary Liquidity Provider will be paid the excess of
(x) the aggregate outstanding amount of unreimbursed
55
<PAGE> 57
Advances under such Primary Liquidity Facility over (y) the Maximum
Commitment Amount applicable to such Primary Liquidity Facility;
fifth, such amount as will be required to pay Expected Distributions
to the holders of Class A Certificates will be distributed to the Trustee;
sixth, such amount as will be required to pay Expected Distributions
to the holders of Class B Certificates will be distributed to the Trustee;
seventh, such amount as will be required to pay Expected Distributions
to the holders of Class C Certificates will be distributed to the Trustee;
eighth, such amount as will be required to pay Expected Distributions
to the holders of Class D Certificates will be distributed to the Trustee;
and
ninth, the balance, if any, will be distributed to United.
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other payments
will be promptly distributed by the Subordination Agent in the following order
of priority:
first, such amount as will be required to pay to the Subordination
Agent, any Trustee, any Certificateholder and any Primary Liquidity
Provider certain out-of-pocket costs and expenses actually incurred by the
Subordination Agent or any Trustee or to reimburse any Certificateholder or
any Primary Liquidity Provider in respect of payments made to the
Subordination Agent or any Trustee in connection with the protection or
realization of the value of the Equipment Notes or any Trust Indenture
estate (collectively, the "Administration Expenses");
second, such amount as will be required to pay to each Primary
Liquidity Provider the Liquidity Expenses;
third, such amount as will be required to pay to each Primary
Liquidity Provider interest accrued on the Liquidity Obligations;
fourth, such amount as will be required (A) if any Cash Collateral
Account had been previously funded as provided in Section 3.6(f) of the
Intercreditor Agreement unless (i) a Performing Note Deficiency exists and
a Triggering Event has occurred and is continuing with respect to the
relevant Liquidity Facility or (ii) a Final Drawing will have occurred with
respect to the relevant Primary Liquidity Facility, to fund such Cash
Collateral Account up to the Maximum Commitment Amount applicable to the
related Primary Liquidity Facility will be deposited in such Cash
Collateral Account, (B) if any Primary Liquidity Facility becomes a
Downgraded Facility at a time when unreimbursed LP Interest Drawings under
such Primary Liquidity Facility have reduced the Remaining Commitment
Amount thereunder to zero unless (i) a Performing Note Deficiency exists
and a Triggering Event has occurred and is continuing with respect to the
relevant Liquidity Facility or (ii) a Final Drawing will have occurred with
respect to the relevant Primary Liquidity Facility, to fund the relevant
Cash Collateral Account up to the Maximum Commitment Amount applicable to
such Primary Liquidity Facility will be deposited in such Cash Collateral
Account and (C) if, with respect to any particular Primary Liquidity
Facility, neither subclause (A) nor subclause (B) of this clause "fourth"
is applicable, to pay or reimburse the Primary Liquidity Provider in
respect of such Primary Liquidity Facility, in each case in an amount equal
to the amount of all Liquidity Obligations, whether or not then due under
such Primary Liquidity Facility (other than amounts payable pursuant to
clause "first," "second" or "third" under such Primary Liquidity Facility;
fifth, if, with respect to any particular Primary Liquidity Facility,
either subclause (A) or (B) of clause "fourth" above is applicable, then
the Primary Liquidity Provider with respect to such Primary Liquidity
Facility will be paid the excess of (x) the aggregate outstanding amount of
unreimbursed Advances (whether or not then due) under such Primary
Liquidity Facility over (y) the Maximum Commitment Amount applicable to
such Primary Liquidity Facility;
56
<PAGE> 58
sixth, such amount as will be required to pay to the Subordination
Agent, any Trustee or any Certificateholder certain fees, taxes, charges
and other amounts payable;
seventh, such amount as will be required to pay Adjusted Expected
Distributions on the Class A Certificates will be distributed to the
Trustee;
eighth, such amount as will be required to pay Adjusted Expected
Distributions on the Class B Certificates will be distributed to the
Trustee;
ninth, such amount as will be required to pay Adjusted Expected
Distributions on the Class C Certificates will be distributed to the
Trustee;
tenth, such amount as will be required to pay Adjusted Expected
Distributions on the Class D Certificates will be distributed to the
Trustee; and
eleventh, the balance, if any, remaining thereafter will be
distributed to United.
"Adjusted Expected Distributions" means, with respect to the Certificates
of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid
interest on such Certificates and (y) the greater of:
(A) the difference between (x) the Pool Balance of such Certificates
as of the preceding Distribution Date and (y) the Pool Balance of such
Certificates as of the Current Distribution Date calculated on the basis
that (i) the principal of the Equipment Notes other than Performing
Equipment Notes (the "Non-Performing Equipment Notes") held in such Trust
has been paid in full and such payments have been distributed to the
holders of such Certificates and (ii) the principal of the Performing
Equipment Notes has been paid when due (but without giving effect to any
acceleration of Performing Equipment Notes) and such payments have been
distributed to the holders of such Certificates, and
(B) the amount of the excess, if any, of (i) the Pool Balance of such
Class of Certificates as of the preceding Distribution Date, over (ii) the
Aggregate LTV Collateral Amount for such Class of Certificates for the
Current Distribution Date;
provided that, until the date of the initial LTV Appraisals, clause (B) will not
apply.
"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means the sum of the applicable LTV Collateral Amounts for all
Aircraft, minus the Pool Balance for each Class of Certificates, if any, senior
to such Class, after giving effect to any distribution of principal on such
Distribution Date on such senior Class or Classes.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates
means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of such
Aircraft and (ii) the outstanding principal amount of the Equipment Notes
secured by such Aircraft after giving effect to any principal payments of such
Equipment Notes on or before such Distribution Date.
"LTV Ratio" means for the Class A Certificates 46.0%, for the Class B
Certificates 57.0%, for the Class C Certificates 68.3% and for the Class D
Certificates 82.3%.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the most recent three Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment Note becomes a Non-Performing
Equipment Note, the Subordination Agent will obtain Appraisals for all of the
Aircraft (the "LTV Appraisals") as soon as practicable and additional LTV
Appraisals on or prior to each anniversary of the date of such initial LTV
Appraisals; provided that if the Controlling Party reasonably objects to the
appraised value of the Aircraft shown in such Appraisals, the Controlling Party
will have the right to obtain or cause to be obtained substitute LTV Appraisals
(including LTV Appraisals based upon physical inspection of the Aircraft).
Certain amounts payable to the Trustees, the Subordination Agent and the
Liquidity Provider, including fees and expenses of the Trustees and the
Subordination Agent and indemnification obligations of United, are
57
<PAGE> 59
not entitled to the benefits of the lien of the Indentures. Consequently, if a
default occurs in the payment of any such amounts, and to the extent that such
amounts are distributed to any such party in accordance with the priorities of
distribution described above, the holders of one or more junior Classes of
Certificates may not receive the full amount due them even if all Equipment
Notes are eventually paid in full, and any unpaid amounts will be unsecured
claims against United.
Interest Drawings under the Primary Liquidity Facility and withdrawals from
the Cash Collateral Account, in each case in respect of interest on the
Certificates of the Class A and Class B Trusts, will be distributed to the
Trustee for such Trust, notwithstanding the priority of distributions set forth
in the Intercreditor Agreement and otherwise described herein. All amounts on
deposit in the Cash Collateral Account for any Trust which are in excess of the
Required Amount and all investment earnings on such amounts on deposit in the
Cash Collateral Account will be paid to the Liquidity Provider.
VOTING OF EQUIPMENT NOTES
If the Subordination Agent, as the registered holder of any Equipment Note,
receives a request for its consent to any amendment, modification or waiver
under such Equipment Note or the related Indenture (or, if applicable, the
Lease, the Participation Agreement or other related document), (i) if no
Indenture Default has occurred and is continuing, the Subordination Agent will
request instructions from the applicable Trustee and the consent of each Primary
Liquidity Provider (which consent will not be unreasonably withheld or delayed)
and will vote or consent in accordance with the vote of the Trustee and the
instructions of the Primary Liquidity Provider and (ii) if any Indenture Default
(which, in the case of an Indenture pertaining to a Leased Aircraft, has not
been cured by the Owner Trustee or the Owner Participant under such Indenture)
has occurred and is continuing with respect to such Indenture, the Subordination
Agent will exercise its voting rights as directed by the Controlling Party.
(Intercreditor Agreement, Section 9.1(b))
THE SUBORDINATION AGENT
First Security Bank, National Association is the Subordination Agent under
the Intercreditor Agreement. United and its affiliates may from time to time
enter into banking and trustee relationships with the Subordination Agent and
its affiliates. The Subordination Agent's address is First Security Bank,
National Association, 79 South Main Street, Salt Lake City, Utah 84111,
Attention: Corporate Trust Administration.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. The Controlling Party may remove the Subordination Agent for cause as
provided in the Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Any resignation or removal of the Subordination Agent does not become
effective until acceptance of the appointment by the successor Subordination
Agent. No appointment of a successor Subordination Agent will be effective
unless and until Moody's and Standard & Poor's deliver a ratings confirmation.
(Intercreditor Agreement, Section 8.1)
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft are comprised of 14 Aircraft as follows: two Boeing 747-422s,
four Airbus A320-232s, three Boeing 777-222s, one Boeing 777-222IGW and four
Boeing 737-322s. The Aircraft are designed to be in compliance with Stage III
noise level standards, which constitute the most restrictive regulatory
standards currently in effect in the United States for aircraft noise abatement.
The table below sets forth certain additional information for the Aircraft.
58
<PAGE> 60
<TABLE>
<CAPTION>
AIRCRAFT APPRAISED VALUE
REGISTRATION AIRCRAFT ENGINE DELIVERY --------------------------------------------
NUMBER TYPE TYPE DATE AISI BK AVSOLUTIONS
------------ ------------------ ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
N193UA Boeing 747-422 PW4056 August 1996 $ 142,760,000 $138,100,000 $142,800,000
N194UA Boeing 747-422 PW4056 September 1996 142,760,000 138,100,000 142,800,000
N433UA Airbus A320-232 IAE2527-A5 June 1996 41,340,000 37,800,000 37,000,000
N434UA Airbus A320-232 IAE2527-A5 June 1996 41,340,000 37,800,000 37,000,000
N435UA Airbus A320-232 IAE2527-A5 September 1996 41,340,000 38,250,000 37,500,000
N436UA Airbus A320-232 IAE2527-A5 December 1996 41,340,000 38,650,000 38,100,000
N776UA Boeing 777-222 PW4077 April 1996 112,250,000 105,000,000 99,100,000
N778UA Boeing 777-222 PW4077 July 1996 112,250,000 107,000,000 99,100,000
N780UA Boeing 777-222 PW4077 August 1996 112,250,000 107,000,000 99,700,000
N786UA Boeing 777-222 IGW PW4090 April 1997 123,940,000 121,000,000 128,600,000
N202UA Boeing 737-322 CFM56-3B1 October 1990 23,170,000 25,300,000 22,900,000
N203UA Boeing 737-322 CFM56-3B1 October 1990 23,170,000 25,300,000 22,900,000
N398UA Boeing 737-322 CFM56-3B1/C1 September 1990 23,370,000 25,300,000 22,700,000
N399UA Boeing 737-322 CFM56-3B1 October 1990 23,170,000 25,300,000 22,900,000
-------------- ------------ ------------
$1,004,450,000 $969,900,000 $953,100,000
============== ============ ============
</TABLE>
APPRAISED VALUE
The appraised values set forth in the foregoing chart were determined by
the following three independent aircraft appraisal and consulting firms: AISI,
BK and AvSolutions. Each Appraiser was asked to provide its opinion as to the
fair market value of each Aircraft as of November 6, 1997. As part of this
process, all three Appraisers performed "desk-top" appraisals without any
physical inspection of the Aircraft. The Appraisers have delivered letters
summarizing their respective appraisals, copies of which are annexed to this
Prospectus as Appendix II. See "Risk Factors -- Appraisals and Realizable Value
of Aircraft."
An appraisal is only an estimate of value and should not be relied upon as
a measure of realizable value; the proceeds realized upon a sale of any Aircraft
may be less than the appraised value thereof. The value of the Aircraft in the
event of the exercise of remedies under the applicable Indenture will depend on
market and economic conditions, the availability of buyers, the condition of the
Aircraft and other similar factors. Accordingly, there can be no assurance that
the proceeds realized upon any such exercise with respect to the Equipment Notes
and the Aircraft pursuant to the applicable Indenture would be as appraised or
sufficient to satisfy in full payments due on the Equipment Notes issued
thereunder. See "Risk Factors -- Appraisals and Realizable Value of Aircraft."
DESCRIPTION OF THE EQUIPMENT NOTES
GENERAL
The Equipment Notes have been issued in three Series (in the case of
Equipment Notes relating to the Owned Aircraft) or four Series (in the case of
the Equipment Notes relating to the Leased Aircraft) with respect to each
Aircraft. The Equipment Notes with respect to each Leased Aircraft have been
issued under a separate Leased Aircraft Indenture between State Street Bank and
Trust Company of Connecticut, National Association, as Owner Trustee of a trust
for the benefit of the Owner Participant who is the beneficial owner of such
Aircraft (the "Owner Participant"), and First Security Bank, National
Association, as Leased Aircraft Indenture Trustee. The Equipment Notes with
respect to each Owned Aircraft have been issued under a separate Owned Aircraft
Indenture between United and First Security Bank, National Association, as Owned
Aircraft Indenture Trustee.
The related Owner Trustee leases each Leased Aircraft to United pursuant to
a separate Lease between such Owner Trustee and United with respect to such
Leased Aircraft. Under each Lease, United is obligated to make or cause to be
made rental and other payments to the related Leased Aircraft Indenture Trustee
on behalf of the related Owner Trustee, which rental and other payments will be
at least sufficient to pay in full
59
<PAGE> 61
when due all payments required to be made on the Equipment Notes issued with
respect to such Leased Aircraft.
The Equipment Notes issued with respect to the Leased Aircraft are not,
however, direct obligations of, or guaranteed by, United. United's rental
obligations under each Lease and United's obligations under the Equipment Notes
issued with respect to the Owned Aircraft are general obligations of United.
A financial institution is currently the Owner Participant with respect to
the four leveraged leases for the Leased Aircraft. The Owner Participant has the
right to sell, assign or otherwise transfer its interests as Owner Participant
in any or all of such leveraged leases, subject to the terms and conditions of
the relevant Participation Agreement and related documents.
NOTE PURCHASE AGREEMENT
Each Trust has acquired those Equipment Notes having an interest rate equal
to the interest rate applicable to the Certificates issued by such Trust. The
Equipment Notes were purchased from United, in the case of the Equipment Notes
relating to the Owned Aircraft, and from the applicable Owner Trustee in the
case of the Equipment Notes relating to the Leased Aircraft, in each case
pursuant to a Note Purchase Agreement (the "Note Purchase Agreement") between
United, the Owner Trustees, the Subordination Agent, the Indenture Trustees and
the Trustees under the Pass Through Trust Agreements.
SUBORDINATION
Series B Equipment Notes issued in respect of any Aircraft are subordinated
in right of payment to Series A Equipment Notes issued in respect of such
Aircraft. Series C Equipment Notes issued in respect of such Aircraft are
subordinated in right of payment to such Series B Equipment Notes. Series D
Equipment Notes issued in respect of such Aircraft are subordinated in right of
payment to such Series C Equipment Notes. On each scheduled payment date, unless
a particular Series of Equipment Notes is being purchased or redeemed, (i)
payments of interest and principal due on Series A Equipment Notes issued in
respect of any Aircraft will be made prior to payments of interest and principal
due on Series B Equipment Notes issued in respect of such Aircraft, (ii)
payments of interest and principal due on such Series B Equipment Notes will be
made prior to payments of interest and principal due on Series C Equipment Notes
issued in respect of such Aircraft and (iii) payments of interest and principal
due on such Series C Equipment Notes will be made prior to payments of interest
and principal due on Series D Equipment Notes issued in respect of such
Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Interest on the Series A Equipment Notes and the Series B Equipment Notes
held in each Trust will be payable at a floating interest rate equal to
Three-Month LIBOR plus the spread for the corresponding class of Certificates
set forth on the cover page of this Prospectus. The Series C and Series D
Equipment Notes held in each Trust are also payable at a floating interest rate.
Interest on the Equipment Notes is payable on March 2, June 2, September 2
and December 2 of each year, commencing on March 2, 1998. Interest payments will
be passed through to Certificateholders of each Trust on each Regular
Distribution Date until the Final Expected Distribution Date for such
Certificates, in each case subject to the Intercreditor Agreement. Interest is
calculated on the basis of the actual number of days elapsed over a 360-day
year.
The interest rate on each Series of Equipment Notes relating to the Leased
Aircraft will be reset on the Final Expected Distribution Date by the Reset
Agents as described in "-- Interest Rate Reset on Final Expected Distribution
Date" below. In addition, the interest rates for the Equipment Notes are subject
to change under certain circumstances described in "Exchange Offer -- General."
60
<PAGE> 62
The aggregate original principal amounts of the Equipment Notes issued with
respect to each Aircraft, as such Equipment Notes are held in each of the
Trusts, are as follows:
<TABLE>
<CAPTION>
TRUST TRUST TRUST TRUST
AIRCRAFT 1997-1A 1997-1B 1997-1C 1997-1D
REGISTRATION AIRCRAFT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
NUMBER TYPE NOTES NOTES NOTES NOTES TOTAL
- ------------ ------------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
N193UA Boeing 747-422 $ 64,961,000 $ 15,534,000 $ 2,362,000 $ 0 $ 82,857,000
N194UA Boeing 747-422 64,961,000 15,534,000 18,359,000 0 98,854,000
N433UA Airbus A320-232 17,388,000 4,158,000 4,914,000 0 26,460,000
N434UA Airbus A320-232 17,388,000 4,158,000 4,914,000 0 26,460,000
N435UA Airbus A320-232 17,595,000 4,207,000 4,973,000 0 26,775,000
N436UA Airbus A320-232 17,779,000 4,251,000 5,025,000 0 27,055,000
N776UA Boeing 777-222 48,300,000 11,550,000 13,650,000 0 73,500,000
N778UA Boeing 777-222 48,813,000 11,673,000 13,795,000 0 74,281,000
N780UA Boeing 777-222 48,905,000 11,695,000 13,821,000 0 74,421,000
N786UA Boeing 777-222 IGW 57,012,000 13,633,000 16,113,000 0 86,758,000
N202UA Boeing 737-322 10,658,000 2,548,000 3,012,000 2,890,399 19,108,399
N203UA Boeing 737-322 10,658,000 2,548,000 3,012,000 2,891,192 19,109,192
N398UA Boeing 737-322 10,750,000 2,570,000 3,038,000 2,751,192 19,109,192
N399UA... Boeing 737-322 10,658,000 2,548,000 3,012,000 2,890,399 19,108,399
------------ ------------ ------------ ----------- ------------
$445,826,000 $106,607,000 $110,000,000 $11,423,182 $673,856,182
============ ============ ============ =========== ============
</TABLE>
Scheduled principal payments on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of each such Trust on one or more
Regular Distribution Dates in specified years, commencing on March 2, 1998, in
accordance with the principal repayment schedule as set forth in Appendix III.
An "Additional Payment" means a payment of Make-Whole Amount and/or Break
Amount, if any.
The "Make-Whole Amount," with respect to the Series A Equipment Notes and
the Series B Equipment Notes to be redeemed or purchased on any redemption or
purchase date will be an amount which an independent investment banking
institution of national standing selected by United (or, following the
occurrence and during the continuance of an Indenture Default, the applicable
Indenture Trustee) determines to be equal to the excess of (i) the sum of the
present values, discounted to such redemption or purchase date, of all the
remaining scheduled payments of principal and interest, using then effective
Three-Month LIBOR plus the applicable margin for all remaining interest
payments, payable between such redemption date and the Final Expected
Distribution Date (assuming, in the case of the Equipment Notes issued with
respect to the Leased Aircraft, that all principal thereof payable after the
Final Expected Distribution Date is payable on the Final Expected Distribution
Date), discounted quarterly on each Regular Distribution Date, using then
effective Three-Month LIBOR less 0.05% as the discount rate over (ii) the
aggregate unpaid principal amount of such Equipment Notes plus accrued but
unpaid interest on such Equipment Notes; provided, however, that no Make-Whole
Amount will be payable with respect to the Series A Equipment Notes or the
Series B Equipment Notes redeemed or purchased (i) upon the occurrence of one of
the events specified under "Description of the Equipment Notes -- Redemption --
Optional Purchase by Owner Trustee or Owner Participant" with respect to the
Leased Aircraft, or (ii) upon an Event of Loss with respect to an Aircraft if
United has elected not to replace such Aircraft under the applicable Lease
(Indentures, Sections 6.01 and 8.03).
"Break Amount" means, as of any date of payment, redemption or acceleration
for any Series of Equipment Notes (the "Applicable Date"), an amount determined
by the Calculation Agent on the date that is two LIBOR Business Days prior to
the Applicable Date pursuant to the formula set forth below.
61
<PAGE> 63
The Break Amount is calculated as follows:
Break Amount = Z-Y
Where:
X = with respect to any applicable interest period, the sum of (i) the
amount of the outstanding principal amount for such Series of Equipment
Notes as of the first day of the then applicable interest period plus
(ii) interest payable thereon during such entire interest period at
then effective Three-Month LIBOR.
Y = X, discounted to present value from the last day of the then applicable
interest period to the Applicable Date, using then effective
Three-Month LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then applicable
interest period to the Applicable Date, using a rate equal to the
applicable London interbank offered rate for a period commencing on the
Applicable Date and ending on the last day of the then applicable
interest period, determined by the Calculation Agent as of two LIBOR
Business Days prior to the Applicable Date as the discount rate.
No Break Amount is payable (x) if the Break Amount, as calculated pursuant
to the formula set forth above, is equal to or less than zero or (y) on or in
respect of any Applicable Date that is a Regular Distribution Date.
INTEREST RATE RESET ON FINAL EXPECTED DISTRIBUTION DATE
No later than 60 days prior to the Final Expected Distribution Date, United
will cause the Trustee to hire (and, if United does not so cause the Trustee,
the Trustee will, no later than 30 days prior to the Final Expected Distribution
Payment, hire) an independent investment banker (the "Reset Agent") of
recognized national standing (which may be an Initial Purchaser) to determine
the interest rate on each Series of the Equipment Notes relating to the Leased
Aircraft to an interest rate that, in the good faith determination of the Reset
Agent, after consideration of the then current rates for pass through
certificates of United and other comparable equipment lessees having similar
tenor, rating and other pricing terms, will enable each such Series of Equipment
Notes to be sold at 100% of the principal amount thereof on the Final Expected
Distribution Date. The Reset Agent will, for such reasonable fee payable by the
Trust as is mutually agreed by the Trustee and the Reset Agent, use its best
efforts to sell any such Equipment Notes with such new interest rates on the
Final Expected Distribution Date or as promptly as practicable thereafter.
No beneficial owner of any Certificates will have any rights or claims
under the Note Purchase Agreement or against United or the Reset Agent as a
result of the Reset Agent not providing a reset interest rate, the Reset Agent
not selling such Certificates or United not purchasing such Certificates.
REDEMPTION
Mandatory Redemption Upon Event of Loss
If an Event of Loss occurs with respect to any Aircraft and such Aircraft
is not replaced by United under the related Lease (in the case of the Leased
Aircraft) or under the related Owned Aircraft Indenture (in the case of the
Owned Aircraft), the Equipment Notes issued with respect to such Aircraft will
be redeemed in whole, in each case at a price equal to the aggregate unpaid
principal amount thereof, together with Additional Payments and accrued interest
thereon to, but not including, the date of redemption. (Indentures, Section
6.01(a))
Optional Redemption, Purchase or Refinancing by United
United or its designee may, at its option (or the Owner Trustee will,
pursuant to the applicable Indenture), redeem, purchase or refinance, in the
case of the Owned Aircraft, or purchase, in the case of the Leased Aircraft, (i)
the Equipment Notes of a Series with respect to one or more Aircraft, or (ii)
all
62
<PAGE> 64
Equipment Notes related to one or more Aircraft; provided, however, that, other
than as set forth in "-- Mandatory Redemption Upon Event of Loss" and "--
Redemption Related to Lease Terminations," the Series C Equipment Notes may not
be redeemed before December 2, 2002. (Owned Aircraft Indentures, Section
6.01(b); Note Purchase Agreement, Section 2(a))
The Series A and Series B Equipment Notes may be redeemed or purchased, in
each case as described above, at a price equal to the aggregate unpaid principal
amount of such Equipment Notes, together with any Additional Payment and accrued
interest thereon to, but not including, the date of redemption or purchase.
(Owned Aircraft Indentures, Section 6.01(b); Leased Aircraft Indentures, Section
6.02)
Redemption Related to Lease Terminations
If, with respect to the Leased Aircraft, United exercises its right to
terminate a Lease under Section 9(b) of such Lease or its purchase option under
Section 19(b) of such Lease, the Series A and Series B Equipment Notes relating
to the related Leased Aircraft will be redeemed, in whole, at a price equal to
the aggregate unpaid principal amount thereof, together with any Additional
Payment and accrued interest thereon to, but not including, the date of
redemption. (Leased Aircraft Indentures, Sections 6.01(b) and 6.02)
Optional Purchase by Owner Trustee or Owner Participant
If, with respect to the Leased Aircraft, (i) one or more Lease Events of
Default have occurred and are continuing for a period of 120 days or more and no
Indenture Event of Default (other than arising out of such Lease Event(s) of
Default) has occurred and is continuing, (ii) the Equipment Notes issued with
respect to such Leased Aircraft have become due and payable, (iii) the
applicable Owner Participant has received notice from the applicable Indenture
Trustee that it intends to foreclose the lien of the applicable Indenture or
(iv) the Indenture Trustee has elected to exercise remedies under the applicable
Indenture, then in each case the Equipment Notes issued with respect to such
Leased Aircraft may, upon 26 days' prior irrevocable notice to the Indenture
Trustee, be purchased by the Owner Trustee or the Owner Participants on the
applicable purchase date at a price equal to the aggregate unpaid principal
thereof, together with Break Amount, if any, and accrued interest thereon to,
but not including, the purchase date. (Leased Aircraft Indentures, Sections
6.01(b) and 8.03(e)(ii))
NOTICE OF REDEMPTION
Notice of redemption or purchase of the Equipment Notes relating to the
Leased Aircraft and the Owned Aircraft must be mailed to holders of such
Equipment Notes not less than 26 nor more than 60 days prior to the applicable
redemption date. Such notice will be irrevocable in the case of a redemption of
the Equipment Notes relating to the Owned Aircraft and become irrevocable 26
days prior to the applicable redemption date in the case of redemption of the
Equipment Notes relating to the Leased Aircraft; provided that in connection
with a redemption related to United's exercise of its option to terminate the
Leases relating to the Leased Aircraft, such notice will be revocable and will
be deemed revoked in the event such Lease does not terminate on the related
lease termination date. (Leased Aircraft Indentures, Section 6.03; Owned
Aircraft Indentures, Section 6.02)
MATURITY OF EQUIPMENT NOTES; FINAL DISTRIBUTION OF CERTIFICATES
The maturity date of the Equipment Notes relating to the Leased Aircraft
acquired by each Trust will occur after the Final Expected Distribution Date
applicable to the Certificates to be issued by such Trust. As a result, on the
Final Expected Distribution Date, the installments of principal and interest
then due and payable on the Equipment Notes will be insufficient to pay the
final expected distribution on the related Certificates. Under the Note Purchase
Agreement, the applicable Trustees will obtain the funds to pay the final
expected distribution on the Certificates on the Final Expected Distribution
Date from the payment by United at maturity in full of the principal and accrued
interest on the Equipment Notes issued with respect to the Owned Aircraft and by
selling, or permitting the refinancing of, the Equipment Notes issued with
respect to
63
<PAGE> 65
the Leased Aircraft for an amount equal to the principal thereof plus accrued
interest thereon. The maturity date of the Equipment Notes relating to the Owned
Aircraft is the Final Expected Distribution Date.
On the Final Expected Distribution Date, United or its designee may
purchase the Equipment Notes relating to the Leased Aircraft from the Trustees
for an amount sufficient to pay the Certificates in full, or United may arrange
for the purchase of the Equipment Notes by a third party for an amount equal to
the principal amount thereof plus accrued interest thereon. The interest rates
on each Series of Equipment Notes relating to the Leased Aircraft that remains
outstanding on or after the Final Expected Distribution Date will be reset on
the Final Expected Distribution Date as set forth under "Principal and Interest
Payments" above.
SECURITY
The Equipment Notes issued with respect to each Aircraft are secured by a
security interest in the related Aircraft. In the case of each Leased Aircraft,
the related Equipment Notes are secured by: (i) an assignment to the related
Leased Aircraft Indenture Trustee of the related Owner Trustee's rights, except
for certain limited rights, under the Lease with respect to the related Leased
Aircraft, including the right to receive specified payments of rent thereunder,
(ii) a mortgage to such Leased Aircraft Indenture Trustee of such Aircraft,
subject to the rights of United under such Lease, and (iii) an assignment to
such Leased Aircraft Indenture Trustee of certain of such Owner Trustee's rights
under the purchase agreement between United and the related manufacturer. Under
the terms of each Lease, United's obligations in respect of each Leased Aircraft
are those of a lessee under a "net lease." Accordingly, United is obligated,
among other things and at its expense, to cause each Leased Aircraft to be duly
registered, to pay all costs of operating such Aircraft and to maintain,
service, repair and overhaul (or cause to be maintained, serviced, repaired and
overhauled) such Aircraft.
Pursuant to the Granting Clause of the Leased Aircraft Indentures, the
Owner Trustee has assigned to the Indenture Trustee a first priority security
interest in the Owner Trustee's rights, powers and remedies under the Leases
(including the Owner Trustee's rights to receive any payments of rent under the
Leases), except for rights retained exclusively by the Owner Trustee and rights
shared by the Owner Trustee and the Indenture Trustee under the circumstances
described in the Leased Aircraft Indentures. The assignment by the Owner Trustee
to the Leased Aircraft Indenture Trustee of its rights under the related Lease
excludes rights of such Owner Trustee and the related Owner Participant relating
to indemnification by United for certain matters, insurance proceeds payable to
such Owner Trustee in its individual capacity and to such Owner Participant
under liability insurance maintained by United under such Lease or by such Owner
Trustee or such Owner Participant, insurance proceeds payable to such Owner
Trustee in its individual capacity or to such Owner Participant under certain
casualty insurance maintained by such Owner Trustee or such Owner Participant
under such Lease and certain reimbursement payments made by United to such Owner
Trustee. (Leased Aircraft Indentures, Granting Clause)
The Equipment Notes issued with respect to the Owned Aircraft are secured
by: (i) a mortgage to such Owned Aircraft Indenture Trustee of such Aircraft,
subject to the rights of United under the related Owned Aircraft Indenture, and
(ii) an assignment to such Owned Aircraft Indenture Trustee of certain of
United's rights under its purchase agreement with the related manufacturer.
Under the terms of each Owned Aircraft Indenture, United is obligated, among
other things and at its expense, to cause each Owned Aircraft to be duly
registered, to pay all costs of operating such Aircraft and to maintain,
service, repair and overhaul (or cause to be maintained, serviced, repaired and
overhauled) such Aircraft. (Owned Aircraft Indentures, Section 4.01)
The Equipment Notes are not cross-collateralized and, consequently, the
Equipment Notes issued in respect of any one Aircraft are not secured by any of
the other Aircraft or replacement Aircraft (as described in "-- The Leases and
Certain Provisions of the Owned Aircraft Indentures -- Events of Loss") or, in
the case of the Leased Aircraft, the Leases related thereto. There are no
cross-default provisions in the Indentures or, in the case of the Leased
Aircraft, in the Leases. Consequently, events resulting in an Indenture Default
under any particular Indenture may or may not result in an Indenture Default
occurring under any other Indenture, and, in the case of the Leased Aircraft, a
Lease Event of Default under any particular Lease will not constitute a Lease
Event of Default under any other Lease. If the Equipment Notes issued with
respect to
64
<PAGE> 66
one or more Aircraft are in default and the Equipment Notes issued with respect
to the remaining Aircraft are not in default, no remedies will be exercisable
under the Indentures with respect to such remaining Aircraft.
Funds, if any, held from time to time by the Indenture Trustee with respect
to any Aircraft, including funds held as the result of an Event of Loss to such
Aircraft or, in the case of a Leased Aircraft, termination of the Lease, if any,
relating thereto, will be invested and reinvested by such Indenture Trustee, at
the direction of United (acting as the agent of the Owner Trustee in the case of
the Leased Aircraft), in investments described in the related Indenture (so long
as no Lease Event of Default has occurred and is continuing, in the case of the
Leased Aircraft). Upon maturity, sale or disposition of such investments, United
(acting as agent of the Owner Trustee in the case of the Leased Aircraft), upon
demand by the Indenture Trustee, will pay to the Indenture Trustee the amount of
any loss realized therefrom, and will be entitled to receive from the Indenture
Trustee any profit, income, interest, dividend or gain realized therefrom (so
long as no Lease Event of Default has occurred and is continuing in the case of
the Leased Aircraft and so long as no Indenture Default has occurred and is
continuing in the case of the Owned Aircraft). (Leased Aircraft Indentures and
Owned Aircraft Indentures, Section 9.04)
LOAN TO AIRCRAFT VALUE RATIOS OF EQUIPMENT NOTES
The loan to Aircraft value ratios for the Equipment Notes issued in respect
of each Aircraft as of certain specified dates are set forth in a Appendix IV.
The loan to Aircraft value ratio for each Aircraft was obtained by dividing (i)
the outstanding balance (assuming no payment default) of such Equipment Notes
determined immediately after giving effect to the payments scheduled to be made
in each such month by (ii) the assumed value (the "Assumed Aircraft Value") of
the Aircraft securing such Equipment Notes.
The table is based on the assumption that the value of each Aircraft set
forth opposite December 23, 1997 depreciates by approximately 2% of the initial
appraised value per year until the fifteenth year after the year of delivery of
such Aircraft, by approximately 4% of the initial appraised value per year for
the next five years and by approximately 6% of the initial appraised value per
year thereafter. Other rates or methods of depreciation would result in
materially different loan to Aircraft value ratios and no assurance can be given
(i) that the depreciation rates and method assumed for the purposes of the table
are the ones most likely to occur or (ii) as to the actual value of any
Aircraft. Thus, the table should not be considered a forecast or prediction of
expected or likely loan to Aircraft value ratios but simply a mathematical
calculation based on one set of assumptions.
LIMITATION OF LIABILITY
The Equipment Notes issued with respect to the Leased Aircraft are not
direct obligations of, or guaranteed by, United, the Owner Participants or the
Owner Trustees in their individual capacities. None of the Owner Trustees, the
Owner Participants or the Indenture Trustees, or any affiliates thereof, will be
personally liable to any holder of an Equipment Note issued with respect to the
Leased Aircraft or, in the case of the Owner Trustees and the Owner
Participants, to the Indenture Trustees for any amounts payable under the
Equipment Notes or, except as provided in each Indenture, for any liability
under such Indenture. In the case of the Leased Aircraft Equipment Notes, all
payments of principal of, and any Additional Payments and interest on, such
Equipment Notes issued with respect to the Leased Aircraft (other than payments
made in connection with an optional redemption or purchase of Equipment Notes
issued with respect to a Leased Aircraft by the related Owner Trustee or the
related Owner Participant) will be made only from the income and proceeds
received by the related Indenture Trustee from the assets subject to the lien of
the Indenture with respect to such Aircraft, including rent payable by United
under the Lease with respect to such Aircraft. (Leased Aircraft Indentures,
Section 2.09)
Except as otherwise provided in the Leased Aircraft Indentures, each Owner
Trustee in its individual capacity is not answerable or accountable under the
Leased Aircraft Indentures or under the Equipment Notes under any circumstances
except for its own wilful misconduct or gross negligence. None of the Owner
Participants have any personal liability under any of the Leased Aircraft
Indentures or the Equipment Notes
65
<PAGE> 67
to the Leased Aircraft Indenture Trustees or to any holder of any Equipment
Note. (Leased Aircraft Indentures, Section 2.09)
The Equipment Notes issued with respect to the Owned Aircraft are direct
obligations of United.
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture include: (a) in the case of a
Leased Aircraft Indenture, the occurrence of any Lease Event of Default under
the related Lease (other than the failure to make certain indemnity payments and
other payments to the related Owner Trustee or Owner Participant unless a notice
is given by such Owner Trustee that such failure constitutes an Indenture
Default), (b) the failure by the Owner Trustee (other than as a result of a
Lease Event of Default), in the case of a Leased Aircraft Indenture, or United,
in the case of the Owned Aircraft Indentures, to pay any interest, Break Amount,
if any, or principal when due under such Indenture or under any Equipment Note
issued thereunder continued for more than 10 days, (c) the failure by the Owner
Trustee, in the case of the Leased Aircraft Indentures, or United, in the case
of the Owned Aircraft Indentures, to pay any amounts (other than interest,
principal or break amount) payable by the Owner Trustee or United, as
applicable, under such Indenture or under the Participation Agreement when due
and payable continued for more than 15 days (in the case of the Leased Aircraft
Indentures) or for more than 20 Business Days (in the case of the Owned Aircraft
Indentures) after receipt of written notice from the Indenture Trustee by United
(in the case of the Owned Aircraft Indentures) or by the Owner Trustee (in the
case of the Leased Aircraft Indentures), (d) the failure by the Owner
Participant or the Owner Trustee, in the case of a Leased Aircraft Indenture, to
discharge certain liens, continued after notice and specified cure periods, (e)
certain representations or warranties made by the related Owner Trustee or Owner
Participant in the related Participation Agreement (in the case of the Leased
Aircraft Indentures) or by United (in the case of the Owned Aircraft Indentures)
in any document or Equipment Note furnished to the Indenture Trustee pursuant
thereto being false or incorrect when made and continuing to be material and
remaining unremedied after notice and specified cure periods, (f) failure by
United (in the case of the Owned Aircraft Indentures) or the related Owner
Trustee or Owner Participant (in the case of the Leased Aircraft Indentures) to
perform or observe in any material respect any covenant or obligation for the
benefit of the Indenture Trustee or holders of Equipment Notes under such
Indenture or certain related documents, continued after notice and specified
cure periods, (g) with respect to the Owned Aircraft, the failure to carry or
maintain the insurance required under the Owned Aircraft Indenture, continued
for more than 30 days after written notice thereof to the Indenture Trustee or
the date that such lapse or cancellation is effective as to the Indenture
Trustee, (h) the occurrence of certain events of bankruptcy, reorganization or
insolvency of the related Owner Trustee or its parent or Owner Participant or
the Owner Participant Guarantor (as defined in the Leased Aircraft Indentures),
if any (in the case of the Leased Aircraft) or United (in the case of the Owned
Aircraft) or (i) the failure by United to maintain its status as a certificated
air carrier, which failure has continued for five consecutive business days).
(Leased Aircraft Indentures, Section 8.01; Owned Aircraft Indentures, Section
8.01) There are no cross-default provisions in the Indentures or, in the case of
the Leased Aircraft, the Leases. Consequently, events resulting in an Indenture
Default under any particular Indenture may or may not result in an Indenture
Default occurring under any other Indenture, and, in the case of the Leased
Aircraft, a Lease Event of Default under any particular Lease will not
constitute a Lease Event of Default under any other Lease. If the Equipment
Notes issued with respect to one or more Aircraft are in default and the
Equipment Notes issued with respect to the remaining Aircraft are not in
default, no remedies will be exercisable under the Indentures with respect to
such remaining Aircraft.
Under the Leased Aircraft Indentures, if United fails to make any basic
rental payment due under any Lease, within a specified period after such
failure, so long as no Indenture Event of Default (other than arising from a
Lease Event of Default not involving any failure to make any payments to which
the Indenture Trustee or any holder of Equipment Notes is entitled under the
Indenture) will have occurred and be continuing, the applicable Owner Trustee or
the Owner Participant may furnish to the Indenture Trustee the amount equal to
the full amount of such basic rental payment with respect to the related Leased
Aircraft, together with any interest thereon on account of the delayed payment
thereof, in which event the Indenture Trustee may not exercise any remedies
otherwise available under such Indenture or such Lease as the result of such
failure to
66
<PAGE> 68
make such rental payment; provided that if United has failed to make a rental
payment when due (or within the applicable cure period) on six or more
immediately preceding basic rental payment dates or on twelve or more previous
rental payment dates, the foregoing provision will not apply to such default. So
long as no Indenture Default will have occurred and be continuing (other than
such Lease Event of Default), the applicable Owner Trustee or the applicable
Owner Participant also may cure any other default by United in the performance
of its obligations under any Lease that can be cured with the payment of money.
(Leased Aircraft Indenture, Section 8.03(e)(i))
Subject to the provisions of the Intercreditor Agreement, the holders of a
majority in principal amount of the outstanding Equipment Notes issued with
respect to any Aircraft, by notice to the Indenture Trustee, may on behalf of
all the holders waive any existing Indenture Default and its consequences with
respect to such Aircraft, except a default in the payment of the principal of or
interest on any such Equipment Notes or a default in respect of any covenant or
provision of such Indenture that cannot be modified or amended without the
consent of each holder of Equipment Notes affected thereby. (Leased Aircraft
Indentures, Section 8.05; Owned Aircraft Indentures, Section 8.04)
REMEDIES
If certain bankruptcy, reorganization or insolvency Indenture Defaults
occur and are continuing, then the principal of the Equipment Notes, together
with accrued but unpaid interest and other amounts, will be immediately due and
payable. If any other Indenture Default occurs and is continuing under an
Indenture, the related Indenture Trustee or, subject to the provisions of the
Intercreditor Agreement, the holders of at least 25% in principal amount of the
Equipment Notes outstanding under such Indenture may, subject to the applicable
Owner Participant's or Owner Trustee's right to cure, as discussed above,
declare the principal of all such Equipment Notes issued thereunder immediately
due and payable, together with all accrued but unpaid interest thereon and any
Additional Payments. (Leased Aircraft Indentures, Section 8.02; Owned Aircraft
Indentures, Section 8.02) Subject to the provisions of the Intercreditor
Agreement, the holders of a majority in principal amount of Equipment Notes
outstanding under any Indenture (x) by notice to the Indenture Trustee, the
Lessee, the Owner Trustee and the Owner Participant, in the case of any Leased
Aircraft Indenture, and (y) by notice to the Indenture Trustee (which will give
notice to United), in the case of any Owned Aircraft Indenture, may rescind any
such declaration at any time prior to the sale or disposition of the related
indenture estate if (i) there has been paid to the related Indenture Trustee an
amount sufficient to pay all principal and interest on any such Equipment Notes,
to the extent such amounts have become due otherwise than by such declaration of
acceleration, and all sums due and payable to the Indenture Trustee, (ii) the
rescission would not conflict with any judgment or decree and (iii) all other
Indenture Defaults and incipient Indenture Defaults under such Indenture have
been cured or waived except nonpayment of principal of, or interest on, the
Equipment Notes solely because of such acceleration. (Leased Aircraft
Indentures, Section 8.02; Owned Aircraft Indentures, Section 8.02)
Each Indenture provides that if an Indenture Default under such Indenture
has occurred and is continuing, the related Indenture Trustee may exercise
certain rights or remedies available to it under such Indenture or under
applicable law, including (if, in the case of a Leased Aircraft, the
corresponding Lease has been declared in default) one or more of the remedies
under such Indenture or, in the case of a Leased Aircraft, under such Lease with
respect to the Aircraft subject to such Lease. The related Leased Aircraft
Indenture Trustee's right to exercise remedies under an Indenture is subject,
with certain exceptions, to its having proceeded to exercise one or more of the
dispossessory remedies under the Lease with respect to such Leased Aircraft;
provided that, in the case of the Leased Aircraft, the requirement to exercise
such remedies under such Lease will not apply in circumstances where such
exercise has been involuntarily stayed or prohibited by applicable law or court
order for a continuous period in excess of 60 days or such other period as may
be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy Code (the "U.S.
Bankruptcy Code") (plus an additional period, if any, resulting from (i) the
trustee or debtor-in-possession in such proceeding assuming, or agreeing to
perform its obligations under, such Lease with the approval of the applicable
court or such Leased Aircraft Indenture Trustee's consent to an extension of
such period, (ii) the extension of the Section 1110 Period with the consent of
the Indenture Trustee, (iii) such Leased Aircraft Indenture Trustee's
67
<PAGE> 69
failure to give any requisite notice, (iv) United's assumption of such Lease
with the approval of the relevant court or (v) a judicial stay pending the
resolution of litigation with respect to the applicability of Section 1110 of
the U.S. Bankruptcy Code (assuming there is no Lease Event of Default other than
one arising solely from United's bankruptcy or any such other Lease Event of
Default has been cured)). (Leased Aircraft Indenture, Section 8.03(e)(iii)) See
"-- The Leases and Certain Provisions of the Owned Aircraft Indentures -- Events
of Default under the Leases." Such remedies may be exercised by the related
Leased Aircraft Indenture Trustee to the exclusion of the related Owner Trustee,
subject to certain conditions specified in such Indenture, and United, subject
to the terms of such Lease. Any Aircraft sold in the exercise of such remedies
will be free and clear of any rights of those parties, including the rights of
United under the Lease with respect to such Aircraft; provided that no exercise
of any remedies by the related Leased Aircraft Indenture Trustee may affect the
rights of United under any Lease unless a Lease Event of Default has occurred
and is continuing. (Leased Aircraft Indenture, Section 8.03)
If the Equipment Notes issued in respect of one Aircraft are in default,
the Equipment Notes issued in respect of the other Aircraft may not be in
default, and, if not, no remedies will be exercisable under the applicable
Indentures with respect to such other Aircraft.
Section 1110 of the U.S. Bankruptcy Code provides that the right of
lessors, conditional vendors and holders of security interests (or the holders
of purchase money equipment security interests in the case of aircraft first
placed in service prior to October 22, 1994) with respect to "equipment" (as
defined in Section 1110 of the U.S. Bankruptcy Code) to take possession of such
equipment in compliance with the provisions of a lease, conditional sale
contract or security agreement, as the case may be, is not affected by (i) the
automatic stay provision of the U.S. Bankruptcy Code, which provision enjoins
repossessions by creditors for the duration of the reorganization period, (ii)
the provision of the U.S. Bankruptcy Code allowing the trustee in reorganization
to use property of the debtor during the reorganization period, (iii) Section
1129 of the U.S. Bankruptcy Code (which governs the confirmation of plans of
reorganization in Chapter 11 cases) and (iv) any power of the bankruptcy court
to enjoin a repossession. Section 1110 provides, however, that the right of a
lessor, conditional vendor or holder of a security interest to take possession
of an aircraft in the event of an event of default may not be exercised for 60
days following the date of commencement of the reorganization proceedings
(unless specifically permitted by the bankruptcy court) and may not be exercised
at all if, within such 60-day period (or such longer period consented to by the
lessor, conditional vendor or holder of a security interest), the trustee in
reorganization agrees to perform the debtor's obligations that become due on or
after such date and cures all existing defaults (other than defaults resulting
solely from the financial condition, bankruptcy, insolvency or reorganization of
the debtor). "Equipment" is defined in Section 1110 of the U.S. Bankruptcy Code,
in part, as "an aircraft, aircraft engine, propeller, appliance, or spare part
(as defined in section 40102 of title 49) that is subject to a security interest
granted by, leased to, or conditionally sold to a debtor that is a citizen of
the United States (as defined in section 40102 of title 49) holding an air
carrier operating certificate issued by the Secretary of Transportation pursuant
to chapter 447 of title 49 for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo."
Vedder, Price, Kaufman & Kammholz, special counsel to United, has advised:
(i) each Leased Aircraft Indenture Trustee that the related Owner Trustee, as
lessor under the related Lease, and the related Leased Aircraft Indenture
Trustee, as assignee of such Owner Trustee's rights under such Lease pursuant to
the related Leased Aircraft Indenture, are entitled to the benefits of Section
1110 of the U.S. Bankruptcy Code with respect to the related airframe and
engines; and (ii) each Owned Aircraft Indenture Trustee that it is entitled to
the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the
related airframe and engines as secured party under the related Owned Aircraft
Indenture. This opinion assumes that United is and will be 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 U.S. Code
for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more
of cargo. For a description of certain limitations on the Indenture Trustee's
exercise of rights contained in the Indenture, see "-- Indenture Defaults,
Notice and Waiver."
The opinion of Vedder, Price, Kaufman & Kammholz does not address the
possible replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Indenture Trustee's
68
<PAGE> 70
entitlement to Section 1110 benefits should not be diminished as a result of
such replacement. See "-- The Leases and Certain Provisions of the Owned
Aircraft Indentures -- Events of Loss." The opinion of Vedder, Price, Kaufman &
Kammholz also does not address the availability of Section 1110 with respect to
any possible sublessee of a Leased Aircraft subleased by United or to any
possible lessee of the Owned Aircraft leased by United.
If an Indenture Default under any Indenture occurs and is continuing, any
sums held or received by the related Indenture Trustee may be applied to
reimburse such Indenture Trustee or the Owner Trustee, in the case of the Owned
Aircraft, for any tax, expense or other loss incurred by it and to pay any other
amounts due to such Indenture Trustee prior to any payments to holders of the
Equipment Notes issued under such Indenture. (Leased Aircraft Indentures,
Section 3.05; Owned Aircraft Indentures, Section 3.03)
In the event of bankruptcy, insolvency, receivership or like proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Leased Aircraft is owned by the related Owner Trustee in trust, such
Leased Aircraft and the related Lease and Equipment Notes might become part of
such proceeding. In such event, payments under such Lease or on such Equipment
Notes might be interrupted and the ability of the related Leased Aircraft
Indenture Trustee to exercise its remedies under the related Leased Aircraft
Indenture might be restricted, although such Leased Aircraft Indenture Trustee
would retain its status as a secured creditor in respect of the related Lease
and the related Leased Aircraft.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and the related Lease, the Participation Agreement and the Trust
Agreement corresponding thereto may not be amended or modified, except to the
extent indicated below.
Certain provisions of any Leased Aircraft Indenture, and of the Lease (so
long as no Indenture Default has occurred and is continuing), the Participation
Agreement and the Trust Agreement related thereto, may be amended or modified by
the parties thereto without the consent of any holders of the Equipment Notes
outstanding under such Indenture. In the case of the Owned Aircraft Indentures,
United and the related Indenture Trustee may, without the consent of any holders
of the Equipment Notes, (a) enter into one or more supplemental agreements to
provide for the issuance of Series D Equipment Notes and Class D Certificates
issued by the Class D Trust in accordance with the related Participation
Agreement and to make changes relating thereto, and (b) provide for the
re-issuance of any Series of Equipment Notes that has previously been redeemed
pursuant to Section 6.01(b) of the related Owned Aircraft Indenture in
accordance with the terms of the Equipment Notes issued under such Owned
Aircraft Indentures. In addition, the Leased Aircraft Indentures and the Owned
Aircraft Indentures may be amended without the consent of the holders of
Equipment Notes, to, among other things, (a) correct any mistake or cure any
ambiguity, defect or inconsistency in such Indenture or the Equipment Notes
issued thereunder or to make any change not inconsistent with the provisions of
such Indenture, provided that such change does not adversely affect the
interests of any such holder, (b) to evidence the succession of another party as
Owner, in the case of the Owned Aircraft, or Owner Trustee, in the case of the
Leased Aircraft, or to evidence the succession of a new Indenture Trustee under
such Indenture, the removal of the Indenture Trustee under such Indenture or the
appointment of any co-trustee or co-trustees or any separate or additional
trustee or trustees, and (c) to add to the rights of the holders of the
Equipment Notes issued under such Indenture. (Leased Aircraft Indentures,
Section 11.01; Owned Aircraft Indenture, Section 11.01)
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby and, in the case of the Series A or Series B
Equipment Notes, the applicable Liquidity Provider, no amendment or modification
of such Indenture may, among other things, (a) reduce the principal amount of,
any Additional Payments or interest payable on, any Equipment Notes issued under
such Indenture or change the date on which any principal, any Additional
Payments or interest is due and payable, (b) create any security interest with
respect to the property subject to the lien of such Indenture prior to or pari
passu with the lien thereon created by such Indenture, except as provided in
such Indenture, or deprive any holder of an Equipment Note issued under such
Indenture of the lien of such Indenture upon the property subject thereto
69
<PAGE> 71
or (c) reduce the percentage in principal amount of outstanding Equipment Notes
issued under such Indenture necessary to modify or amend any provision of such
Indenture or to waive compliance therewith. (Leased Aircraft Indenture, Section
11.02; Owned Aircraft Indenture, Section 11.02)
INDEMNIFICATION
United must indemnify, among others, each Indenture Trustee, each Owner
Participant and each Owner Trustee for certain losses, claims and other matters.
Each Owner Participant must indemnify the related Indenture Trustee and the
holders of the Equipment Notes issued with respect to the Leased Aircraft in
which such Owner Participant has an interest for certain losses that may be
suffered as a result of the failure of such Owner Participant to discharge
certain liens or claims on or against the assets subject to the lien of the
related Indenture. (Leased Aircraft Participation Agreements, Section 7; Owned
Aircraft Participation Agreements, Section 5(b))
THE LEASES AND CERTAIN PROVISIONS OF THE OWNED AIRCRAFT INDENTURES
Each Leased Aircraft is leased to United by the relevant Owner Trustee
under the relevant lease agreement (each, a "Lease"). The Owned Aircraft is
owned by United.
Lease Rentals and Payments
Each Leased Aircraft has been leased separately by the relevant Owner
Trustee to United for a term commencing on the date on which the Aircraft was
acquired by the Owner Trustee and expiring on a date not earlier than the latest
maturity date of the related Equipment Notes, unless terminated prior to the
originally scheduled expiration date as permitted by the applicable Lease. The
basic rent payment under each Lease is payable by United on each related Lease
Payment Date (as defined below) (or, if such day is not a business day, on the
next business day), and has been assigned by the Owner Trustee under the
corresponding Indenture to provide the funds necessary to make payments of
principal and interest due from the Owner Trustee on the Equipment Notes issued
under such Indenture. In certain cases, the basic rent payments under the Leases
may be adjusted, but each Lease provides that under no circumstances will rent
payments by United be less than the scheduled payments on the related Equipment
Notes. In addition, inasmuch as the basic rent payments to be made by United
under each Lease have been calculated based on an assumed interest rate payable
on all of the related Equipment Notes and are increased or decreased by an
amount equal to the difference between the actual interest rate payable from
time to time on each Series of Equipment Notes and the assumed interest rate
payable on such Series, the basic rent payments to be made under such Lease will
adjust to take in account such rent differential amount arising as a result of
the resetting of the rate of interest on the Equipment Notes as required by the
terms thereof. See "Principal and Interest Payments" and "Exchange Offer --
General." Any balance of each such basic rent payment under each Lease, after
payment of amounts due on the Equipment Notes issued under the Indenture
corresponding to such Lease, will be paid over to the Owner Trustee. (Leases,
Section 3; Leased Aircraft Indentures, Section 3.03)
"Lease Payment Date" means March 2, June 2, September 2 or December 2
during the term of such Lease.
Maintenance
Under the terms of each Lease, United's obligations in respect of each
Leased Aircraft are those of a lessee under a "net lease." Accordingly, under
each Lease United is obligated, among other things and at its expense, to keep
each Leased Aircraft duly registered and insured, to pay all costs of operating
the Aircraft and to maintain, service, repair and overhaul the Leased Aircraft
so as to keep it in as good an operating condition as when leased to United,
ordinary wear and tear excepted, and in such condition as required to maintain
the airworthiness certificate for the Leased Aircraft in good standing at all
times, and to maintain all records and logs required by the FAA and the
applicable regulatory agency of any other jurisdiction in which each Leased
Aircraft may be registered. (Leases, Sections 7, 8 and 18) The Owned Aircraft
Indenture imposes comparable maintenance, service and repair obligations on
United with respect to the Owned Aircraft. (Owned Aircraft Indenture, Sections
4.01, 4.02 and 4.03)
70
<PAGE> 72
Possession, Sublease and Transfer
Each Aircraft may be operated by United or under lease, sublease or
interchange arrangements, subject to certain restrictions. Normal interchange
and pooling agreements with respect to any Engine (in each case customary to the
airline industry and entered into in the ordinary course of business) are
permitted. (Leases, Section 7(b)) In the case of a Leased Aircraft, United may,
at any time, in its sole discretion, enter into a sublease with (1) a U.S. air
carrier, (2) after the close of the calendar year in which there occurs the
seventh anniversary of the delivery date, certain foreign air carriers or (3)
after the close of the calendar year in which there occurs the seventh
anniversary of the delivery date, any other person approved in writing by the
Owner Trustee; provided, that no sublease will (A) extend beyond the date of the
expiration of the term of the lease or any renewal then in effect, unless United
has irrevocably committed to purchase the related Aircraft or renew the related
Lease at the end of the lease term or renewal term, as the case may be, to a
date at least beyond the latest permissible expiration date of such sublease,
and (B) be made to a sublessee which is not domiciled in a country which
maintains diplomatic relations with the United States. (Leases, Section
7(b)(vii)) With respect to the Owned Aircraft, so long as no payment or
bankruptcy default under the applicable Indenture and no Indenture Default
exists under the Owned Aircraft Indenture, United is permitted to lease the
Owned Aircraft or Engines to (a) any U.S. certificated air carrier, (b) certain
foreign air carriers or (c) any other person, provided that, with respect to
(c), the Indenture Trustee receives at the time of such lease an opinion of
counsel to the effect that there exists no possessory rights in favor of the
lessee under the laws of such lessee's country which would, upon bankruptcy or
insolvency of or other default by United or the lessee, prevent the return of
such Owned Aircraft or Engines to the Indenture Trustee; with respect to (b) and
(c), the U.S. and the country of the lessee's domicile maintain diplomatic
relations; and no lessee will be subject to any bankruptcy, insolvency, or
reorganization proceeding or order. (Owned Aircraft Indenture, Section
4.01(b)(viii)) It is uncertain to what extent the relevant Indenture Trustee's
security interest would be recognized in an Aircraft located in a country that
is not a party to the Convention on the International Recognition of Rights in
Aircraft (Geneva 1948) (the "Convention"), and to what extent such security
interest would be recognized in a jurisdiction adhering to the Convention if the
Aircraft is registered in a jurisdiction not a party to the Convention.
Moreover, in the case of an Indenture Default, the ability of the related
Indenture Trustee to realize upon its security interest in an Aircraft could be
adversely affected as a legal or practical matter if such Aircraft were
registered or located outside the United States.
Registration
United is required to keep each Aircraft duly registered under part A of
subtitle VII of title 49, United States Code (the "Transportation Code") with
the FAA (subject to United's right to cause the Aircraft to be reregistered
under the laws of another country, and, except (in the case of a Leased
Aircraft) if the relevant Owner Trustee or the relevant Owner Participant fails
to meet the applicable citizenship requirements), and, in the case of the Leased
Aircraft Indentures, to record each Indenture and certain other documents under
the Transportation Code. (Leases, Section 7(a); Owned Aircraft Indentures,
Section 4.01(a)) Such recordation of the Indenture and other documents with
respect to each Aircraft will give the relevant Indenture Trustee a
first-priority security interest in such Aircraft whenever it is located in the
United States or any of its territories and possessions.
United has the right to register the Leased Aircraft in a country other
than the United States at its own expense to certain specified foreign air
carriers, subject to certain conditions set forth in the related Indenture, and
so long as no payment or bankruptcy default under the Lease or any Lease Event
of Default exists. These conditions include a requirement that the applicable
Indenture Trustee will have received an opinion of counsel substantially to the
effect that (i) the country of registration will recognize the related Owner
Trustee's right of ownership with respect to the Aircraft and will give effect
to the priority of the lien of the applicable Indenture and (ii) the applicable
Indenture (and such Indenture Trustee's lien and right to repossession
thereunder) is valid and enforceable under the laws of such country. (Leases,
Section 7(a); Leased Aircraft Indentures, Section 7.02) The Owned Aircraft
Indentures contain comparable provisions with respect to registration of the
Owned Aircraft. (Owned Aircraft Indentures, Section 4.01(a); Participation
71
<PAGE> 73
Agreement, Section 6(a)) See "-- Possession, Sublease and Transfer" above for
risks relating to registration or location of an Aircraft outside the United
States.
Liens
United is required to maintain each Aircraft free of any liens, other than
the rights of the relevant Indenture Trustee, the holders of the related
Equipment Notes, United and, with respect to a Leased Aircraft, the Owner
Participant and Owner Trustee arising under the applicable Indenture, the Lease
(in the case of a Leased Aircraft) or the other operative documents related
thereto, and other than certain limited liens permitted under such documents,
including (i) liens for taxes either not yet due or being contested in good
faith by appropriate proceedings; (ii) materialmen's, mechanics' and other
similar liens arising in the ordinary course of business and securing
obligations that either are not overdue for a period of more than 30 days (in
the case of the Leased Aircraft) or 60 days (in the case of the Owned Aircraft),
or are being contested in good faith by appropriate proceedings; (iii) judgment
liens so long as such judgment is discharged or vacated within 45 days (in the
case of the Leased Aircraft) or 60 days (in the case of the Owned Aircraft) or
the execution of such judgment is stayed pending appeal and discharged, vacated
or reversed within 45 days (in the case of the Leased Aircraft) or 60 days (in
the case of the Owned Aircraft) after expiration of such stay; and (iv) any
other lien with respect to which United or any lessee (in the case of the Owned
Aircraft) or sublessee (in the case of the Leased Aircraft) has provided a bond
or other security in an amount and under terms reasonably satisfactory to the
Indenture Trustee or (in the case of a Leased Aircraft) the relevant Owner
Trustee; provided that in the case of each of the liens described in the
foregoing clauses (i), (ii) and (iii), such liens and proceedings do not involve
any material risk of the sale, forfeiture or loss of such Aircraft or the
related Engines or any interest therein (Leases, Section 6; Owned Aircraft
Indentures, Sections 1.01 and 5.02)
Replacement of Parts; Alterations
United is obligated to replace all parts at its expense that may from time
to time be incorporated or installed in, or attached to, any Aircraft and that
may become lost, damaged beyond repair, worn out, stolen, seized, confiscated or
rendered permanently unfit for use (other than severable parts added at the
option of United and obsolete or unsuitable parts that United is permitted to
remove to the extent described below). United is further obligated to make such
alterations and modifications as may be required to be made from time to time to
comply with any law, rule or regulation of any applicable regulatory body or
jurisdiction in which the Aircraft is registered. United or any permitted lessee
or sublessee has the right, at its own expense, to make such alterations,
modifications and additions with respect to each Aircraft as it deems desirable
in the proper conduct of its business and to remove parts which it deems to be
obsolete or no longer suitable or appropriate for use; provided that such
alteration, modification, addition or removal does not diminish the condition or
airworthiness of the related Airframe or Engine or materially diminish the
value, utility or, in regard to the Airframe, the remaining useful life of the
related Aircraft, Airframe or Engine, except that the value of the Aircraft may
be reduced by the removal of obsolete or unsuitable parts so long as the
aggregate original cost of all such parts removed from any one Aircraft and not
replaced does not, in the case of each Leased Aircraft, exceed $400,000 and does
not, in the case of each Owned Aircraft, exceed the specified limit (varying by
Aircraft) under the related Indenture. (Leases, Section 8; Owned Aircraft
Indentures, Section 4.02 and Exhibit C)
Insurance
United must, at its or any lessee's or sublessee's expense, maintain or
cause to be maintained all-risk aircraft hull insurance covering each Aircraft
and fire and extended coverage (including war risk, governmental confiscation
and hijacking insurance, if and to the extent the same is maintained by United
or any sublessee with respect to other aircraft owned or leased, and operated by
United or such sublessee on the same routes) at all times in an amount not less
than the agreed value of such Aircraft (which, in the case of each Leased
Aircraft, is the applicable stipulated loss value or in the case of each Owned
Aircraft, is an amount at least equal to the aggregate unpaid principal of the
outstanding Equipment Notes related to such Aircraft). During any period when an
Aircraft is on the ground and not in operation, United may carry or cause to be
carried in
72
<PAGE> 74
lieu of the insurance required by the previous sentence, insurance otherwise
conforming with the provisions of the previous sentence except that the scope of
the risks covered and the type of insurance must be the same as are from time to
time applicable to aircraft owned or leased by United of the same type as such
Aircraft similarly on the ground and not in operation, in an amount at least
equal to the stipulated loss value of such Aircraft. All policies covering loss
of or damage to an Aircraft have been made payable to the applicable Indenture
Trustee for any loss in excess of that certain amount specified in the
applicable Lease or Indenture, the highest of which under any Lease or Indenture
is $10,000,000. United may self-insure a portion of these risks, but in no case
will the self-insurance with respect to all of the aircraft in United's fleet
(including the Aircraft) exceed, for any calendar year, the lesser of (a) either
50% of the highest replacement value (in the case of each Leased Aircraft) or
100% of the highest replacement value (in the case of each Owned Aircraft) of
any single aircraft in United's fleet or 1 1/2% of the average aggregate
insurable value (during the preceding calendar year) of all aircraft on which
United carries insurance. (Leases, Section 11; Owned Aircraft Indentures,
Section 4.03)
In addition, United must, at its or any lessee's or sublessee's expense,
carry or cause to be carried comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury and property damage liability)
insurance (exclusive of manufacturer's product liability insurance) and cargo
liability insurance with respect to each Aircraft (i) in amounts that are not
less than the greater of the comprehensive airline liability insurance from time
to time applicable to aircraft owned or leased and operated by United of the
same type as such Aircraft, and not less than $300,000,000 per occurrence (in
the case of the Leased Aircraft) or either $300,000,000 or $400,000,000 per
occurrence (in the case of the Owned Aircraft), varying by Aircraft, (ii) of the
types and covering the same risks as are from time to time applicable to
aircraft owned or leased, and operated, by United of the same type as such
Aircraft and (iii) which is maintained in effect with insurers of recognized
reputation and responsibility; provided that United need not maintain cargo
liability insurance, or may maintain such insurance in an amount less than that
specified above for the respective Aircraft as long as the amount of cargo
liability insurance, if any, maintained with respect to such Aircraft is the
same as the cargo liability insurance, if any, maintained for other aircraft of
the same model as such Aircraft owned or leased, and operated by United. During
any period when an Aircraft is on the ground and not in operation, United may
carry or cause to be carried in lieu of the insurance required by the previous
sentence, insurance otherwise conforming with the provisions of the previous
sentence, except that the amounts of coverage will not be required to exceed the
amounts of comprehensive airline liability insurance, and the scope of risks
covered and type of insurance will be the same, as are from time to time
applicable to aircraft owned or leased by United of the same type as such
Aircraft similarly on the ground and not in operation. United may also
self-insure a portion of these risks subject to the same limitations described
above for insurance for risks of loss of or damage to the Aircraft. (Leases,
Section 11(a); Owned Aircraft Indentures, Section 4.03(a)) The Trustee, each
related Indenture Trustee, Owner Participant and Owner Trustee, in its
individual capacity and as owner of the Aircraft, and United will be named as
insured parties under all insurance policies required with respect to the
related Aircraft. (Leases, Sections 1 and 11; Owned Aircraft Indentures,
Sections 1.01 and 4.03)
In addition, the insurance policies maintained under the Lease with respect
to each Aircraft provide that, in respect of the respective interests of the
Trustee, the Indenture Trustee, the Owner Participant and the Owner Trustee
relating to such Aircraft, the insurance will not be invalidated by any action
or inaction of United or any sublessee or any other entity and will insure the
respective interests of the Trustee, the Indenture Trustee, the Owner
Participant and the Owner Trustee relating to such Aircraft, as they appear,
regardless of any breach or violation of any warranty, declaration or condition
contained in such policies by United (or any sublessee or any other entity).
(Leases, Section 11(h), Owned Aircraft Indentures, Section 4.03(g)) Subject to
certain limited exceptions, United may not operate or permit any sublessee or
any other entity to operate Aircraft in any area excluded from coverage by any
insurance required by the related Lease unless the United States government or
any agency or instrumentality thereof provides indemnification or insurance in
lieu of such insurance coverage. (Leases, Section 11(f); Owned Aircraft
Indentures, Section 4.03(f))
73
<PAGE> 75
Lease Termination
Unless a Lease Event of Default has occurred and is continuing, United may
terminate any Lease on any Lease Payment Date occurring after the seventh
anniversary of the date on which such Lease commenced, if it determines in good
faith that the Leased Aircraft subject to such Lease is economically obsolete or
surplus to its requirements. United is required to give notice of its intention
to exercise its right of termination described in this paragraph at least 180
days prior to the proposed date of termination (which notice will become
irrevocable (except in certain circumstances) 26 days prior to such proposed
date); provided that United may give only three such termination notices. In
such a situation, if the Owner Trustee elects (subject to the rights of United
to purchase the Aircraft as described below) to sell such Aircraft, United is
required to use reasonable efforts to sell such Aircraft as an agent for such
Owner Trustee. If the Owner Trustee elects to accept any bid, such Owner Trustee
must sell such Aircraft on the date of termination to the highest cash bidder.
If such sale occurs, the Equipment Notes related thereto are required to be
prepaid. The net proceeds of such sale are payable to the applicable Owner
Trustee. If the net proceeds to be received from such sale are less than the
termination value for such Aircraft (which is set forth in a schedule to each
Lease), United is required to pay to the applicable Owner Trustee an amount
equal to the excess, if any, of the applicable termination value for such
Aircraft over such net proceeds. Upon payment of termination value for such
Aircraft and an amount equal to any Additional Payments payable on such date of
payment, together with certain additional amounts and together with all accrued
and unpaid interest thereon, the lien of the relevant Indenture will be
released, the relevant Lease will terminate, and the obligation of United
thereafter to make scheduled rent payments under such Lease will cease. However,
certain payment obligations of United will survive the termination of the Lease.
If such Aircraft is not sold by the proposed termination date, such Lease,
including all of United's obligations thereunder, will continue in effect, and
the Equipment Notes related thereto will not be prepaid. (Leases, Section 9;
Leased Aircraft Indentures, Section 6.01(b))
The Owner Trustee has the option to retain title to the Leased Aircraft if
United has given a notice of termination under the Lease. In such event, such
Owner Trustee will pay to the applicable Indenture Trustee an amount sufficient
to prepay the outstanding Equipment Notes issued with respect to such Aircraft,
and United will pay to the Owner Trustee an amount equal to the excess, if any,
of the termination value of such Aircraft over the highest bona fide cash bid
made for such Aircraft, together with any Additional Payments on such Equipment
Notes and all other amounts due and payable to the Owner Trustee and Owner
Participant under such Lease, the related Participation Agreement or any other
related operative document. (Leases, Section 9; Leased Aircraft Indentures,
Section 6.01(b))
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
Engines of an Aircraft, United must elect within 60 days after such occurrence
to perform one of the following options: (a) not later than the first "Lease
Period Date" (as defined in the Leases) (in the case of the Leased Aircraft) or
the interest payment date (in the case of the Owned Aircraft) following the
100th day following the date of occurrence of such Event of Loss, or, if
earlier, the first Lease Period Date that is three business days following the
receipt of the insurance proceeds in respect of such Event of Loss (but not
earlier than the first business day following the 65th day following the
occurrence of such Event of Loss) (in the case of the Leased Aircraft) or the
interest payment date (in the case of the Owned Aircraft) following the receipt
of the insurance proceeds in respect of such Event of Loss, to pay the
applicable Owner Trustee (in the case of a Leased Aircraft) or to the Owned
Aircraft Trustee (in the case of the Owned Aircraft) the stipulated loss value
of such Aircraft, together with certain additional amounts (in the case of
Leased Aircraft) or an amount sufficient to redeem the Equipment Notes (in the
case of the Owned Aircraft) or (b) not later than the first business day (in the
case of the Leased Aircraft) or the interest payment date (in the case of the
Owned Aircraft) following the 100th day following the date of occurrence of such
Event of Loss, or, if earlier, the third business day following the receipt of
the insurance proceeds in respect of such Event of Loss (but not earlier than
the first business day following the 65th day following the occurrence of such
Event of Loss) (unless a Lease default or any Lease Event of Default involving
the bankruptcy of the Lessee or the failure by the Lessee to make certain
payments under the relevant Lease (in the case of a Leased Aircraft) or a
payment
74
<PAGE> 76
or bankruptcy default or Indenture Event of Default under the Owned Aircraft
Indenture (in the case of the Owned Aircraft) has occurred and is continuing),
substitute an aircraft (or airframe and one or more engines, as the case may be)
for the Aircraft, Airframe or Engine(s) that suffered such Event of Loss.
(Leases, Section 10(a); Leased Aircraft Indentures, Section 6.01(a); Owned
Aircraft Indenture, Section 5.01)
If United elects to replace an Aircraft (or Airframe or Airframe and one or
more Engines, as the case may be) that suffered such Event of Loss, it will, in
the case of a Leased Aircraft, convey to the related Owner Trustee title to an
aircraft (or airframe or airframe and one or more engines, as the case may be
or, in the case of an Owned Aircraft, subject to the lien of the applicable
Indenture), and such replacement airframe or airframe and engines must (i) be
free and clear of all liens except permitted liens and (ii) be the same model as
the Airframe or Airframe and Engines to be replaced or an improved model having
a value, utility and, in regard to the Airframe, remaining useful life at least
equal to, and in at least as good an operating condition as, the Airframe or
Airframe and Engines to be replaced (assuming that such Airframe and such
Engines were in the condition required by the terms of the related Lease,
immediately prior to the occurrence of such Event of Loss). In the case of the
Owned Aircraft, any replacement airframe and engines must have a value and
utility at least equal to, and be in as good operating condition and repair as,
the Airframe and Engines to be replaced (assuming such Airframe and Engines were
in the condition required by the terms of the Owned Aircraft Indenture). United
is also required to provide, among other things, to the relevant Indenture
Trustee, prior to any substitution, and (in the case of a Leased Aircraft) the
relevant Owner Trustee and Owner Participant (a) an FAA bill of sale and a full
warranty bill of sale, (b) a certification as to compliance with the foregoing
requirements from a qualified aircraft appraiser, together with a certified
report setting forth such appraiser's opinion as to the fair market value of
such replacement airframe or engine and (c) reasonably acceptable opinions of
counsel to the effect that (i) United or such Owner Trustee, as the case may be,
will acquire good title to such replacement airframe and, if applicable,
replacement engine, free and clear of all liens (other than permitted liens) (in
the case of the Leased Aircraft), (ii) such replacement airframe and, if
applicable, engine will be made subject to the applicable Indenture to the same
extent as the Airframe and, if applicable, Engine replaced thereby, (iii) in the
case of a Leased Aircraft, such Owner Trustee and Indenture Trustee (as assignee
of lessor's rights and interests under the Lease) or the Owned Aircraft
Indenture Trustee, in the case of the Owned Aircraft, will be entitled to
receive the benefits and protections of Section 1110 of the U.S. Bankruptcy Code
with respect to any such replacement airframe and (to the extent such opinion
can be rendered, in view of applicable law) such replacement engine and (iv)
such replacement airframe has been duly registered and each supplement to such
Lease or Indenture, as applicable, has been duly recorded. (Leases, Section
10(a); Owned Aircraft Indentures, Section 5.01(a))
If United elects not to replace such Aircraft, then upon payment of an
amount sufficient to redeem the Equipment Notes issued with respect to such
Aircraft (in the case of the Owned Aircraft) or the stipulated loss value for
such Aircraft and all additional amounts then due and unpaid with respect to
such Aircraft (in the case of a Leased Aircraft), which must be at least
sufficient to pay in full as of the date of payment thereof the aggregate unpaid
principal amount under such Equipment Notes together with accrued but unpaid
interest thereon and all other amounts due and owing in respect of such
Equipment Notes, the lien of the Indenture and (in the case of a Leased
Aircraft) the Lease relating to such Aircraft will terminate with respect to
such Aircraft, the obligation of United thereafter to make the scheduled rent
payments (in the case of a Leased Aircraft) or interest and principal payments
(in the case of the Owned Aircraft) with respect thereto will cease and (in the
case of a Leased Aircraft) the related Owner Trustee will transfer all of its
right, title and interest in and to the related Aircraft to United. The
stipulated loss value and other payments made under the Leases or the Owned
Aircraft Indenture, as the case may be, by United will be deposited with the
applicable Indenture Trustee. Amounts in excess of the amounts due and owing
under the Equipment Notes issued with respect to such Aircraft will be
distributed by such Indenture Trustee to the applicable Owner Trustee or to
United, as the case may be. (Leases, Section 10(a); Leased Aircraft Indentures,
Section 6.01(a); Owned Aircraft Indentures, Sections 5.01(a) and 6.01(a))
If an Event of Loss occurs with respect to an Engine alone, United will be
required to replace such Engine within 60 days after the occurrence of such
Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine will be the same make and
model as the
75
<PAGE> 77
Engine to be replaced, suitable for installation and use on the Aircraft, and
having performance and durability characteristics and a value and utility at
least equal to, and in at least as good an operating condition as, the Engine to
be replaced (assuming that such Engine was of the value and utility and in the
condition and repair required by the terms of the relevant Lease or the Owned
Aircraft Indenture, as the case may be, immediately prior to the occurrence of
the Event of Loss). (Leases, Section 10(a) and (b); Owned Aircraft Indentures,
Section 5.01(a) and (b))
An "Event of Loss" with respect to an Aircraft, Airframe or any Engine
means any of the following events, among others, with respect to such property:
(i) the destruction of such property, damage to such property beyond practical
or economic repair or rendition of such property permanently unfit for normal
use; (ii) any damage to such property which results in an insurance settlement
with respect to such property on the basis of a total loss or a constructive or
compromised total loss; (iii) any loss of such property or loss of use of such
property for a period of 90 consecutive days (in the case of the Leased
Aircraft) for 180 consecutive days in the case of the Owned Aircraft) or more as
a consequence of any theft, hijacking or disappearance of such property; (iv)
any seizure, condemnation, confiscation, taking or requisition of title to, or
use of, such property by any governmental or purported governmental entity
(other than a requisition for use by the U.S. government or any government of
registry of the Aircraft) resulting in the loss of title or loss of possession
of the aircraft for a period of 90 days (in the case of the Leased Aircraft) or
180 days (in the case of the Owned Aircraft) or more; (v) the requisition for
use by a governmental body (other than the U.S. government) which continues for
more than two years or, in the case of the Leased Aircraft, requisition by the
U.S. government, which extends beyond the Lease Term; or (vi) as a result of any
law, rule, regulation, order or other action by the FAA or any governmental
entity, the use of such property in the normal course of United's business of
passenger air transportation is prohibited for 180 days, unless United prior to
the end of such 180-day period diligently implements all steps which are
necessary or desirable to permit the normal use of such property by it and
United, within one year (in the case of the Leased Aircraft) or two years (in
the case of the Owned Aircraft), will have conformed at least one such aircraft
in its fleet to the requirements of any such law, rule, regulation, order or
other action, and commenced regular commercial use in such jurisdiction and,
unless, in the case of the Leased Aircraft, such grounding is applicable to
United's entire fleet of such model aircraft registered in such country, or for
a period expiring on the last day of the Lease term, whichever is earlier. An
Event of Loss with respect to an Airframe will constitute an Event of Loss with
respect to the Aircraft. (Leases, Section 1.01; Owned Aircraft Indenture,
Section 1.01)
Purchase Options under the Leases
United has the option to purchase any Leased Aircraft (a) upon notice to
the Owner Trustee at least 180 days prior to the relevant purchase date (which
notice will become irrevocable 120 days prior to the relevant purchase date), on
the last business day of the original Lease or on the last business day of any
renewal terms at a purchase price equal to the fair market sales value of such
Aircraft, (b) upon notice to the Owner Trustee at least 120 days prior to the
relevant purchase date (which notice will become irrevocable 20 days prior to
the relevant purchase date), on specified purchase option dates (the earliest of
which is January 1, 2006) at a purchase price equal to the greater of the fair
market sales value or the "Termination Value" (as defined in the Leases) or (c)
upon notice to the Owner Trustee at least 120 days prior to the relevant
purchase date (which notice will become irrevocable 20 days prior to the
relevant purchase date), on January 1, 2012 at the applicable EBO Percentage (as
defined in the Leases). The fair market sales value of such Aircraft will be
determined by mutual agreement of United and the Owner Trustee or, if they are
unable to agree, by an appraisal. Notwithstanding any other provision, the
purchase price under any purchase option will be sufficient to pay in full the
principal amount, any Additional Payments and accrued and unpaid interest on the
Equipment Notes outstanding, together with all other amounts payable by United.
Upon payment of the purchase price, all basic and supplemental rent due and all
other amounts due and payable by United under the relevant Lease, Participation
Agreement and any other related operative document, the Owner Trustee will
transfer title to such Aircraft to United. (Leases, Section 19(b) and (c);
Leased Aircraft Indentures, Section 10.01)
76
<PAGE> 78
The holder of the Equipment Notes issued under a Leased Aircraft Indenture
has no right to amounts payable by United in connection with its exercise of
purchase options for the related Leased Aircraft to the extent that all amounts
payable by the relevant Owner Trustee to such holder under such Equipment Notes,
such Indenture and related operative agreements have been paid in full.
Events of Default under the Leases
Lease Events of Default under each Lease include, among other things: (i)
failure by United to make any payment of basic rent, renewal rent, stipulated
loss value, EBO Percentage, any Additional Payments or termination value under
such Lease within 10 days after the same have become due, or failure by United
to pay any other amount due under such Lease or under any other related
operative document within 15 days from and after United's receipt of any written
demand therefor from the Owner Trustee; (ii) failure by United to carry and
maintain insurance on and in respect of the Aircraft subject to such Lease, in
accordance with the provisions of such Lease; (iii) failure by United to perform
or observe in any material respect any other covenant or agreement to be
performed or observed by it under such Lease or any other related operative
document, and such failure will continue unremedied for a period of 30 days
after written notice of such failure by the applicable Owner Trustee or
Indenture Trustee; provided however, that if United has undertaken to cure any
such failure and, nonetheless such failure is not cured within the prescribed
thirty-day period but is curable with future due diligence, there will be no
Lease Event of Default so long as United is proceeding with due diligence and
such failure is in fact cured within one year; (iv) (a) any representation or
warranty made by United in such Lease or the related Participation Agreement or
in any other related operative document (other than in the related tax indemnity
agreement) will prove to have been untrue, inaccurate or misleading in any
material respect at the time made, (b) such representation or warranty is
material at the time in question and (c) the same remains uncured for more than
30 days after the receipt of written notice thereof by United; (v) the
occurrence of certain voluntary events of bankruptcy, reorganization or
insolvency of United or the occurrence of involuntary events of bankruptcy,
reorganization or insolvency which continues undismissed or unstayed for a
period of 90 days; and (vi) failure to maintain its status as a U.S. air carrier
and such failure will continue for five consecutive days. (Leases, Section 14)
Indenture Events of Default under the Owned Aircraft Indenture are
discussed above under "--Indenture Defaults, Notice and Waiver."
Remedies Exercisable upon Events of Default under the Lease
If a Lease Event of Default has occurred and is continuing, the applicable
Owner Trustee may (or, so long as the Indenture is in effect, the applicable
Indenture Trustee may, subject to the terms of the Indenture) exercise one or
more of the remedies provided in such Lease with respect to the related
Aircraft. These remedies include the right to repossess and use or operate such
Aircraft, to rescind or terminate such Lease, to sell or release, or hold and
keep idle such Aircraft free and clear of United's rights, except as set forth
in the Lease, and retain the proceeds, and to require United to pay, as
liquidated damages any due and unpaid basic rent or renewal rent plus an amount
equal to the excess of the stipulated loss value for such Aircraft (specified in
schedules to such Lease) over, (i) the discounted fair market rental value of
such Aircraft for the remainder of the term of the Lease relating to such
Aircraft (using a discount rate equal to the overdue rate), (ii) the fair market
sales value of such Aircraft or (iii) if such Aircraft has been sold, the net
sales proceeds from the sale of such Aircraft. (Leases, Section 15; Leased
Aircraft Indentures, Section 8.03).
Remedies under the Owned Aircraft Indenture are discussed above under "--
Remedies."
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary describes the principal U.S. federal income tax
consequences of the acquisition, ownership and disposition of the New
Certificates acquired in the Exchange Offer by holders of Old Certificates.
Except as otherwise specified, the summary is addressed to beneficial owners of
New Certificates
77
<PAGE> 79
("U.S. Certificateholders") that are citizens or residents of the United States,
corporations, partnerships or other entities created or organized in or under
the laws of the United States or any State, or estates or trusts the income of
which is subject to U.S. federal income taxation regardless of its source or
trusts if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of the trust
("U.S. Persons") that will hold the New Certificates as capital assets. This
summary does not address the tax treatment of U.S. Certificateholders that may
be subject to special tax rules, such as banks, insurance companies, dealers in
securities or commodities, tax-exempt entities, holders that will hold New
Certificates as part of a straddle or holders that have a "functional currency"
other than the U.S. Dollar, nor does it address the tax treatment of U.S.
Certificateholders that do not acquire New Certificates pursuant to the Exchange
Offer. The summary does not purport to be a comprehensive description of all of
the tax considerations that may be relevant to a decision to acquire New
Certificates. This summary does not describe any tax consequences arising under
the laws of any State, locality or taxing jurisdiction other than the United
States. The Trusts are not indemnified for any federal income taxes that may be
imposed upon them, and the imposition of any such taxes could result in a
reduction in the amounts available for distribution to the New
Certificateholders of the affected Trust.
The summary is based upon the tax laws and practice of the United States as
in effect on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. All of the foregoing are subject to change, which change could apply
retroactively. HOLDERS OF OLD CERTIFICATES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW CERTIFICATES.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Old Certificate for a New Certificate pursuant to the
Exchange Offer will not be taxable to an exchanging Holder for U.S. federal
income tax purposes. As a result (i) an exchanging Holder will not recognize any
gain or loss on the exchange; (ii) the holding period for the New Certificate
will include the holding period for the Old Certificate; and (iii) the basis of
the New Certificate will be the same as the basis for the Old Certificate.
The Exchange Offer will result in no U.S. federal income tax consequences
to a non-exchanging holder of Old Certificates.
TAX STATUS OF THE TRUSTS
In the opinion of Mayer, Brown & Platt, special tax counsel to United ("Tax
Counsel"), each Trust will be classified as a grantor trust and not as an
association taxable as a corporation for U.S. federal income tax purposes.
Accordingly, each U.S. Certificateholder will be subject to federal income
taxation as if it owned directly a pro rata undivided interest in each asset
owned by the corresponding Trust and paid directly its share of fees and
expenses paid by such Trust.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
A U.S. Certificateholder will be treated as owning its pro rata undivided
interest in each of the Equipment Notes and any other property held by the
related Trust. Accordingly, each Certificateholder should be required to report
on its federal income tax return its pro rata share of the entire income from
the Equipment Notes or any other property held by the related Trust, in
accordance with such Certificateholder's method of accounting. Each U.S.
Certificateholder's share of interest paid on the Equipment Notes will be
taxable as ordinary income, as it is paid or accrued, in accordance with such
owner's method of accounting for U.S. federal income tax purposes and a U.S.
Certificateholder's share of any Additional Payments, paid on the Equipment
Notes will be treated as capital gain. Any amounts received by a Trust from
Interest Drawings
78
<PAGE> 80
under the relevant Primary Liquidity Facility will be treated for U.S. federal
income tax purposes as having the same characteristics as the payments they
replace.
The treatment of interest described above is based in part upon United's
determination that, as of the date of issuance of the Old Certificates, the
possibility that additional amounts would be paid to Certificateholders as a
result of the failure of a Registration Event to occur timely or the expiration
of a Shelf Registration Statement was remote. The Internal Revenue Service (the
"Service") may take a different position, which could affect the timing and
character of interest income reported by Certificateholders. While not free from
doubt, if such additional amounts are in fact paid, United believes that these
amounts will be taxable to a Certificateholder as ordinary income in accordance
with such holder's method of accounting.
Each U.S. Certificateholder will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Code.
Certain fees and expenses, including fees paid to the Trustee and the Liquidity
Providers, will be borne by parties other than the Certificateholders. It is
possible that such fees and expenses will be treated as constructively received
by the Trust, in which event a U.S. Certificateholder will be required to
include in income and will be entitled to deduct its pro rata share of such fees
and expenses. If a U.S. Certificateholder is an individual, estate or trust, the
deduction for such holder's share of such fees or expenses will be allowed only
to the extent that all of such holder's miscellaneous itemized deductions,
including such holder's share of such fees and expenses, exceed 2% of such
holder's adjusted gross income. In addition, in the case of U.S.
Certificateholders who are individuals, certain otherwise allowable itemized
deductions will be subject generally to additional limitations on itemized
deductions under the applicable provisions of the Code.
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATEHOLDERS
If the Class B Trust receives less than the full amount of the receipts of
principal or interest paid with respect to the Equipment Notes held by it (any
shortfall in such receipts being the "Shortfall Amounts") because of the
subordination of the Equipment Notes held by such Trust under the Intercreditor
Agreement, the corresponding owners of beneficial interests in the Class B
Certificates (the "Subordinated Certificateholders") would probably be treated
for federal income tax purposes as if they had (1) received as distributions
their full share of such receipts, (2) paid over to the Class A
Certificateholders an amount equal to their share of such Shortfall Amount and
(3) retained the right to reimbursement of such amounts to the extent of future
amounts payable to such Subordinated Certificateholders with respect to such
Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest or
other income of the Class B Trust that was a component of the Shortfall Amount,
even though such amount was in fact paid to the Class A Certificateholders, (2)
a loss would only be allowed to such Subordinated Certificateholders when their
right to receive reimbursement of such Shortfall Amount became worthless (i.e.,
when it becomes clear that funds will not be available from any source to
reimburse such loss) and (3) reimbursement of such Shortfall Amount prior to
such a claim of worthlessness would not be taxable income to Subordinated
Certificateholders because such amount was previously included in income. These
results should not significantly affect the inclusion of income for Subordinated
Certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to Subordinated Certificateholders on the cash method of
accounting by, in effect, placing them on the accrual method.
SALE OR OTHER DISPOSITION OF THE NEW CERTIFICATES
Upon the sale, exchange or other disposition of a New Certificate, a U.S.
Certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition (other than any amount
attributable to accrued interest which will be taxable as ordinary income) and
the U.S. Certificateholder's adjusted tax basis in the related Equipment Notes
and any other assets held by the corresponding Trust. A U.S. Certificateholder's
adjusted tax basis will equal the holder's cost for its New Certificate. Any
gain or loss will be capital gain or loss if the New Certificate was held as a
capital asset. In the
79
<PAGE> 81
case of non-corporate taxpayers, capital gains recognized on New Certificates
held (i) one year or less will be treated as short-term capital gains and taxed
at ordinary income tax rates, (ii) more than one year but 18 months or less will
be treated as mid-term capital gains and taxed at a rate of 28% and (iii) more
than 18 months will be treated as long-term capital gains and taxed at a maximum
rate of 20%. Capital gains recognized by corporate taxpayers are subject to tax
at the ordinary income tax rates applicable to corporations.
FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of a New Certificate that is not a U.S. Person (a "Non-U.S.
Certificateholder") will not be subject to U.S. federal withholding tax;
provided, in the case of interest, that (i) such Non-U.S. Certificateholder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of the stock of any Owner Participant or United or any
transferee of an Owner Participant's interest, (ii) such Non-U.S.
Certificateholder is not a controlled foreign corporation for U.S. tax purposes
that is related, directly or indirectly, to any Owner Participant or United
through stock ownership and (iii) either (A) the Non-U.S. Certificateholder
certifies, under penalties of perjury, that it is not a U.S. Person and provides
its name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the New Certificate
certifies, under penalties of perjury, that such statement has been received
from the Non-U.S. Certificateholder by it or by another financial institution
and furnishes the payor with a copy thereof.
Final withholding regulations published by the Internal Revenue Service on
October 14, 1997 (the "1997 Final Regulations") apply to "reportable payments"
(such as interest) made after December 31, 1998, regardless of the issue date of
the instrument with respect to which the payments are made. The 1997 Final
Regulations provide, among other things, new documentation procedures designed
to simplify compliance by withholding agents and may require non-U.S.
Certificateholders to furnish new certification of their foreign status after
December 31, 1998. Foreign investors should consult their tax advisors regarding
the applicability and effect of the 1997 Final Regulations to payments made with
respect to the New Certificates.
The Trustee will, where required, report to the Certificateholders and the
Service the amount of any "reportable payments" and any amount withheld with
respect to the New Certificates during the taxable year.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a New Certificate or upon receipt of any Additional Payments paid
on an Equipment Note by a Non-U.S. Certificateholder will not be subject to U.S.
federal income or withholding taxes if (i) such gain is not effectively
connected with a U.S. trade or business of the holder and (ii) in the case of an
individual, such holder is not present in the United States for 183 days or more
in the taxable year of the sale, exchange, retirement or other disposition or
receipt, and is not subject to Code provisions applicable to certain
expatriates.
BACKUP WITHHOLDING
Payments made on the New Certificates and proceeds from the sale of New
Certificates will not be subject to a backup withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
or otherwise fails to establish an exemption from such tax under applicable
provisions of the Code and the regulations thereunder (including the 1997 Final
Regulations).
Backup withholding is not an additional tax. Any amount withheld under
backup withholding rules may be refunded or credited against a
Certificateholder's federal income tax liability, if any, provided that the
required information is provided to the IRS.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, ACQUIRERS OF NEW
CERTIFICATES SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE TAX CONSEQUENCES OF
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
80
<PAGE> 82
THE NEW CERTIFICATES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
ERISA CONSIDERATIONS
ERISA imposes certain requirements on employee benefit plans subject to
ERISA ("ERISA Plans"), and on those persons who are fiduciaries with respect to
ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including, but not limited to, the requirement of investment
prudence and diversification and the requirement that an ERISA Plan's
investments be made in accordance with the documents governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans that
are not subject to ERISA but which are subject to Section 4975 of the Code, such
as individual retirement accounts (together with ERISA Plans, "Plans")) and
certain persons (referred to as "parties in interest" or "disqualified persons")
having certain relationships to such Plans, unless a statutory or administrative
exemption is applicable to the transaction. A party in interest or disqualified
person who engages in a prohibited transaction may be subject to excise taxes
and other penalties and liabilities under ERISA and the Code.
The Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets
of a Plan with respect to the Plan's investment in an entity for purposes of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests (directly or indirectly) in a Certificate, the Plan's assets will
include both the Certificate and an undivided interest in each of the underlying
assets of the corresponding Trust, including the Equipment Notes held by such
Trust, unless it is established that equity participation in the Trust by
employee benefit plans (including Plans and entities whose underlying assets
include plan assets by reason of an employee benefit plan's investment in the
entity) is not "significant" within the meaning of the Plan Asset Regulation. In
this regard, the extent to which there is equity participation in a particular
Trust by, or on behalf of, employee benefit plans will not be monitored. If the
assets of a Trust are deemed to constitute the assets of a Plan, transactions
involving the assets of such Trust could be subject to the prohibited
transaction provisions of ERISA and Section 4975 of the Code unless a statutory
or administrative exemption is applicable to the transaction.
The fiduciary of a Plan that proposes to purchase and hold any Certificates
should consider, among other things, whether such purchase and holding may
involve (i) the direct or indirect extension of credit to a party in interest or
a disqualified person, (ii) the sale or exchange of any property between a Plan
and a party in interest or a disqualified person and (iii) the transfer to, or
use by or for the benefit of, a party in interest or a disqualified person, of
any Plan assets. In addition, whether or not the assets of a Trust are deemed to
be Plan assets under the Plan Asset Regulation, if Certificates are purchased by
a Plan and Certificates of a subordinate Class are held by a party in interest
or a disqualified person with respect to such Plan, the exercise by the holder
of the subordinate Class of Certificates of its right to purchase the senior
Classes of Certificates upon the occurrence and during the continuation of a
Triggering Event could be considered to constitute a prohibited transaction
unless a statutory or administrative exemption were applicable. Depending on the
identity of the Plan fiduciary making the decision to acquire or hold
Certificates on behalf of a Plan, Prohibited Transaction Class Exemption
("PTCE") 91-38 (relating to investments by bank collective investment funds),
PTCE 84-14 (relating to transactions effected by a "qualified professional asset
manager"), PTCE 95-60 (relating to investments by an insurance company general
account), PTCE 96-23 (relating to transactions directed by an in-house
professional asset manager) or PTCE 90-1 (relating to investments by insurance
company pooled separate accounts) (collectively, the "Class Exemptions") could
provide an exemption from the prohibited transaction provisions of ERISA and
Section 4975 of the Code. However, there can be no assurance that any of these
Class Exemptions or any other exemption will be available with respect to any
particular transaction involving the Certificates.
81
<PAGE> 83
By its acceptance of a Certificate (including upon exchange of an Old
Certificate for a New Certificate pursuant to the Exchange Offer), each
Certificateholder will be deemed to have represented and warranted that either
(i) no Plan assets have been used to purchase such Certificate or (ii) the
purchase and holding of such Certificate is exempt from the prohibited
transaction restrictions of ERISA and the Code pursuant to an administrative
class exemption. See "Transfer Restrictions."
Each Plan fiduciary (and each fiduciary for a governmental or church plan
subject to rules similar to those imposed on Plans under ERISA) should consult
with its legal advisor concerning an investment in any of the Certificates.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the Expiration Date and ending on the close of business
180 days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until such date all broker-dealers effecting transactions
in the New Certificates may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Certificates
by broker-dealers. New Certificates received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Certificates or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Certificates. Any
broker-dealer that resells New Certificates that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Certificates may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit of any
such resale of New Certificates and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Starting on the Expiration Date, the Company will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offer other than
commissions or concessions of any brokers or dealers, fees of counsel to the
Holders and certain transfer taxes, and will indemnify the Holders of the New
Certificates (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Certificates is being passed upon for United by
Mayer, Brown & Platt.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and schedule of United as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, incorporated by reference in this Prospectus, have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report,
with respect thereto, incorporated herein by reference, in reliance upon the
authority of said firm as experts in giving said reports.
82
<PAGE> 84
EXPERTS
The references to AISI, BK and AvSolutions, and to their respective
appraisal reports, each dated as of November 6, 1997, are included herein in
reliance upon the authority of each such firm as an expert with respect to the
matters contained in its appraisal report.
83
<PAGE> 85
APPENDIX I -- INDEX OF TERMS
<TABLE>
<S> <C>
1997 Final Regulations...................................... 80
Above-Cap Account........................................... 23
Above-Cap Collateral Amount................................. 23, 52
Above-Cap Interest Payments................................. 22, 52
Above-Cap Liquidity Facility................................ 22, 52
Above-Cap Liquidity Provider................................ 1, 39
Additional Payment.......................................... 61
Adjusted Expected Distributions............................. 57
Administration Expenses..................................... 56
Agent's Message............................................. 32
Aggregate LTV Collateral Amount............................. 57
Aircraft.................................................... 2
AISI........................................................ 11
Applicable Date............................................. 61
Appraised Current Market Value.............................. 57
Appraisers.................................................. 11
Assumed Aggregate Aircraft Value............................ 11
Assumed Aircraft Value...................................... 65
Aviation Act................................................ 45
AvSolutions................................................. 11
Base Rate................................................... 51
Basic Pass Through Trust Agreement.......................... 1
BK.......................................................... 11
Book-Entry Confirmation..................................... 32
Book-Entry Transfer Facility................................ 33
Break Amount................................................ 61
Business Day................................................ 42
Calculation Agent........................................... 39
Capped Interest Rate........................................ 20
Capped LIBOR................................................ 20
Cash Account................................................ 23
Cash Collateral Account..................................... 21
Cede........................................................ 14
Certificate Account......................................... 41
Certificate Owners.......................................... 26
Certificateholders.......................................... 14
Certificates................................................ 1
Class A Certificates........................................ 8
Class A Initial Purchasers.................................. 3
Class A Trust............................................... 1
Class B Certificates........................................ 8
Class B Initial Purchaser................................... 5
Class B Trust............................................... 1
Class C Certificates........................................ 8
Class C Trust............................................... 1
Class D Certificates........................................ 8
Class D Trust............................................... 1
Class Exemptions............................................ 81
Code........................................................ 26
Commission.................................................. 5, 30
Company..................................................... 1
</TABLE>
I-1
<PAGE> 86
<TABLE>
<S> <C>
Controlling Party........................................... 24
Convention.................................................. 71
Current Distribution Date................................... 55
Current Interest Rate....................................... 19
Distribution Date........................................... 24
Downgrade Drawing........................................... 21
DTC......................................................... 14
DTC Participants............................................ 26
Eligible Institution........................................ 33
Equipment................................................... 68
Equipment Notes............................................. 2
ERISA....................................................... 26
ERISA Plans................................................. 81
Event of Loss............................................... 76
Exchange Act................................................ 4
Exchange Agent.............................................. 8
Exchange Offer.............................................. 1
Expected Distributions...................................... 55
Expiration Date............................................. 1, 32
Final Distributions......................................... 25
Final Drawing............................................... 50
Final Expected Distribution Date............................ 2
Final Maturity Date......................................... 15
Global Certificate.......................................... 48
Indenture Default........................................... 11, 44
Indenture Trustees.......................................... 8
Indentures.................................................. 8
Initial Purchasers.......................................... 5
Intercreditor Agreement..................................... 24
Interest Drawings........................................... 19, 49
Issuance Date............................................... 5, 30
Lease....................................................... 70
Lease Event of Default...................................... 43
Lease Payment Date.......................................... 70
Lease Period Date........................................... 74
Leased Aircraft............................................. 2
Leased Aircraft Indenture................................... 8
Leased Aircraft Indenture Trustees.......................... 8
Letter of Transmittal....................................... 1
LIBOR Business Day.......................................... 39
Liquidity Event of Default.................................. 51
Liquidity Expenses.......................................... 54
Liquidity Facilities........................................ 22, 52
Liquidity Obligations....................................... 20
Liquidity Provider.......................................... 39
London Reference Banks...................................... 39
LTV Appraisals.............................................. 57
LTV Collateral Amount....................................... 57
LTV Ratio................................................... 57
LTVs........................................................ 11
Make-Whole Amount........................................... 61
Maximum Commitment Amount................................... 19
Moody's..................................................... 21
</TABLE>
I-2
<PAGE> 87
<TABLE>
<S> <C>
Morgan Stanley.............................................. 3
New Certificates............................................ 1
Non-Performing Equipment Notes.............................. 57
Non-U.S. Certificateholder.................................. 80
Note Purchase Agreement..................................... 9, 60
Notice of Guaranteed Delivery............................... 35
NYSE........................................................ 35
Old Certificates............................................ 1
Old Class A Certificates.................................... 1
Old Class B Certificates.................................... 1
Operative Agreements........................................ 37
Owned Aircraft.............................................. 2
Owned Aircraft Indenture.................................... 8
Owned Aircraft Indenture Trustee............................ 8
Owner Participant........................................... 59
Owner Trustee............................................... 2
Participating Broker-Dealer................................. 3, 6, 31
Pass Through Trust Agreement................................ 1, 9
Performing Equipment Note................................... 20
Plan Asset Regulation....................................... 81
Plans....................................................... 26, 81
Pool Balance................................................ 42
Pool Factor................................................. 42
Primary Liquidity Facility.................................. 19
Primary Liquidity Provider.................................. 1, 39
PTC Events of Default....................................... 15
PTCE........................................................ 81
Rating Agencies............................................. 21
Record Date................................................. 14
Registration Event.......................................... 31
Registration Rights Agreement............................... 5
Regular Distribution Date................................... 14, 39
Replacement Primary Liquidity Facility...................... 50
Reset Agent................................................. 62
Rule 144A................................................... 2
Scheduled Payments.......................................... 39
Section 1110 Period......................................... 20
Securities Act.............................................. 1
Series...................................................... 2
Series A Equipment Notes.................................... 2
Series B Equipment Notes.................................... 2
Series C Equipment Notes.................................... 2
Series D Equipment Notes.................................... 2
Service..................................................... 79
Shelf Registration Statement................................ 31
Shortfall Amounts........................................... 79
Special Distribution Date................................... 14
Special Payment............................................. 41
Special Payments Account.................................... 41
Standard & Poor's........................................... 21
Stated Interest Rate........................................ 19
Subordinated Certificateholders............................. 79
Subordination Agent......................................... 8
</TABLE>
I-3
<PAGE> 88
<TABLE>
<S> <C>
Tax Counsel................................................. 78
Termination Notice.......................................... 51
Termination Value........................................... 76
Three-Month LIBOR........................................... 39
Three Month LIBOR Reference Date............................ 39
Threshold Rating............................................ 50
Transportation Code......................................... 71
Triggering Event............................................ 15
Trust....................................................... 8
Trust Indenture Act......................................... 36
Trust Property.............................................. 8
Trust Supplement............................................ 1
Trustee..................................................... 1
Trusts...................................................... 1, 8
U.S. Bankruptcy Code........................................ 67
U.S. Certificateholders..................................... 78
U.S. Persons................................................ 78
United...................................................... 1
</TABLE>
I-4
<PAGE> 89
[AIRCRAFT INFORMATION SERVICES, INC. LOGO] APPENDIX II - APPRAISAL LETTERS
06 November 1997
Mr. John Springer
United Airlines Inc.
WHQ-FT
1200 E. Algonquin Road
Elk Grove Township, IL 60007
Subject: Half Life Base Market Value Opinion, 14 Aircraft Fleet
AISI File number: A7S042BVO
Reference: (a) United Airlines Facsimile Message, 27 October 1997
Dear Mr. Springer:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to offer our opinion to United Airlines, Inc. ("United") of the half
life base market values of the 14 aircraft fleet as identified in Table 1 of
this report (the "Aircraft").
1. METHODOLOGY AND DEFINITIONS
The historical standard term of reference for commercial aircraft value has
been "half-life fair market value" of an "average" aircraft. However, "fair
market value" could mean a fair value in the given market or a value in a
hypothetical "fair" or balanced market, and the two definitions are not
equivalent. Recently, the term "base value" has been created to describe the
theoretical balanced market condition and to avoid the potentially misleading
term "fair market value" which has now become synonymous with the term
"current market value" or a "fair" value in the actual current market. AISI
value definitions are consistent with those of the International Society of
Transport Aircraft Trading (ISTAT) of 01 January 1994; AISI is a member of that
organization and employs an ISTAT Certified Senior Aircraft Appraiser.
AISI defines a "base value" as that of a transaction between equally willing
and informed buyer and seller, neither under compulsion to buy or sell, for a
single unit cash transaction with no hidden value or liability, and with
supply and demand of the sale item roughly in balance. Base values are
typically given for aircraft in "new" condition, "average half-life" condition,
or in a specifically described condition unique to a single aircraft at a
specific time. An "average" aircraft is an operable airworthy aircraft in
average physical condition and with average accumulated flight hours and
cycles, with clear title and standard unrestricted certificate of
airworthiness, and registered in an authority which does not represent a
penalty to aircraft
II-1
<PAGE> 90
APPENDIX II - APPRAISAL LETERS
06 November 1997 [LOGO]
AISI File No. A7S042BVO
Page -2-
value or liquidity, with no damage history and with inventory configuration and
level of modification which is normal for its intended use and age.
AISI assumes average condition unless otherwise specified in this report.
"Half-life" condition assumes that every component or maintenance service which
has a prescribed interval that determines its service life, overhaul interval
or interval between maintenance services, is at a condition which is one-half
of the total interval. It should be noted that AISI and ISTAT value definitions
apply to a transaction involving a single aircraft, and that transactions
involving more than one aircraft are often executed at considerable and highly
variable discounts to a single aircraft price, for a variety of reasons
relating to an individual buyer or seller.
AISI defines a "current market value" or "fair market value" as that value
which reflects the real market conditions, whether at, above or below the base
value conditions. Assumption of a single unit sale and definitions of aircraft
condition, buyer/seller qualifications and type of transaction remain unchanged
from that of base value. Current market value takes into consideration the
status of the economy in which the aircraft is used, the status of supply and
demand for the particular aircraft type, the value of recent transactions and
the opinions of informed buyers and sellers. Current market value assumes that
there is no short term time constraint to buy or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future
value considerations, or to consider how actual market values vary from
theoretical base values. Base values are less volatile than current market
values and tend to diminish regularly with time. Base values are normally
inappropriate to determine near term values. AISI encourages the use of current
market values to consider the probable near term value of an aircraft.
No physical inspection of the Aircraft or their essential records was made by
AISI for the purposes of this report, nor has any attempt been made to verify
information provided to us, which is assumed to be correct and applicable to
the Aircraft.
2. HALF LIFE BASE MARKET VALUATION
Our opinion of the half life base market value of the Aircraft is derived from
information and specifications supplied by United in reference (a) facsimile
message.
It is our considered opinion that the half life base market values are as
follows in Table 1 subject to the assumptions, definitions, and disclaimers
herein.
II-2
<PAGE> 91
APPENDIX II - APPRAISAL LETTERS
06 November 1997 [LOGO]
AISI File No. A7S042BVO
Page -3-
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good
faith. Such conclusions and opinions are judgments that reflect conditions and
values which are current at the time of this report. The values and conditions
reported upon are subject to any subsequent change. AISI shall not be liable to
any party for damages arising out of reliance or alleged reliance on this
report, or for any parties action or failure to act as a result of reliance or
alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ Fred E. Bearden
Fred E. Bearden
President
FEB/JMC/jm
II-3
<PAGE> 92
APPENDIX II - APPRAISAL LETTER
[LOGO]
Table 1 - AISI File A7S041BVO - 06 November 1997
AIRCRAFT PORTFOLIO - UNITED AIRLINES
Half Life Base Valuation
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Half Life Base
Serial Registration Value
No Aircraft Model Number Number Nose Number Date of Delivery Engine MTOW (Lbs.) Million US$
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 A320-232 589 N433UA 4233 Jun-96 IAE2527-A5 169,754 $41.34
- ------------------------------------------------------------------------------------------------------------------------------------
2 A320-232 592 N434UA 4234 Jun-96 IAE2527-A5 169,754 $41.34
- ------------------------------------------------------------------------------------------------------------------------------------
3 A320-232 613 N435UA 4235 Sep-96 IAE2527-A5 169,754 $41.34
- ------------------------------------------------------------------------------------------------------------------------------------
4 A320-232 638 N436UA 4236 Dec-96 IAE2527-A5 169,754 $41.34
- ------------------------------------------------------------------------------------------------------------------------------------
CFM56-3B1 (1 Each)
5 B737-322 24673 N398UA 9398 Sep-90 CFM56-3C1 (1 Each) 130,000 $23.37
- ------------------------------------------------------------------------------------------------------------------------------------
6 B737-322 24674 N399UA 9399 Oct-90 CFM56-3B1 130,000 $23.17
- ------------------------------------------------------------------------------------------------------------------------------------
7 B737-322 24717 N202UA 9002 Oct-90 CFM56-3B1 130,000 $23.17
- ------------------------------------------------------------------------------------------------------------------------------------
8 B737-322 24718 N203UA 9003 Oct-90 CFM56-3B1 130,000 $23.17
- ------------------------------------------------------------------------------------------------------------------------------------
9 B747-422 26890 N193UA 8193 Aug-96 PW4056 875,000 $142.76
- ------------------------------------------------------------------------------------------------------------------------------------
10 B747-422 26892 N194UA 8594 Sep-96 PW4056 875,000 $142.76
- ------------------------------------------------------------------------------------------------------------------------------------
11 B777-222 26937 N776UA 2076 Apr-96 PW4077 545,000 $112.25
- ------------------------------------------------------------------------------------------------------------------------------------
12 B777-222 26940 N778UA 2078 Jul-96 PW4077 545,000 $112.25
- ------------------------------------------------------------------------------------------------------------------------------------
13 B777-222 26944 N780UA 2080 Aug-96 PW4077 545,000 $112.25
- ------------------------------------------------------------------------------------------------------------------------------------
14 B777-222IGW 26938 N786UA 2286 Apr-97 PW4090 624,700 $123.94
- ------------------------------------------------------------------------------------------------------------------------------------
---------
Total: $1,004.45
=========
</TABLE>
II-4
<PAGE> 93
APPENDIX II - APPRAISAL LETTER
BK ASSOCIATES, INC.
1295 NORTHERN BOULEVARD
MANHASSET, NEW YORK 11030
(516) 365-6272 FAX * (516) 365-6287
November 6, 1997
UNITED AIR LINES
1200 E. Algonquin Road
Elk Grove Township, IL 60007
ATTN: Mr. John Springer
Gentlemen:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion on the current Base Value (BV) as of November 1997 on each of two
B747-422, four A320-232, three B777-222, one B777-222IGW, and four B737-222
aircraft (Aircraft). The Aircraft are further identified in the "Conclusions"
section of this appraisal.
Set forth below is a summary of the methodology, considerations and assumptions
utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of fair market value, to which BK Associates subscribes, the quoted
fair market value is the Appraiser's opinion of the most likely trading price
that may be generated for an aircraft under the market circumstances that are
perceived to exist at the time in question. The fair market value assumes that
the aircraft is valued for its highest and best use, that the parties to the
hypothetical sale transaction are willing, able, prudent and knowledgeable, and
under no unusual pressure for a prompt sale, and that the transaction would be
negotiated in an open and unrestricted market on an arm's length basis, for
cash or equivalent consideration, and given an adequate amount of time for
effective exposure to prospective buyers, which BK Associates considers to be 12
to 18 months.
BASE VALUE
Base value is the Appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest
and best use". An aircraft's base value is founded in the historical trend of
values and in the projection of future value trends and presumes an arm's
length, cash transaction between willing, able and
II-5
<PAGE> 94
APPENDIX II - APPRAISAL LETTER
[BK ASSOCIATES, INC. LOGO]
United Air Lines
November 6, 1997
Page 2
knowledgeable parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing.
VALUE METHODOLOGY
Fair market valuations are determined based upon one of three methods:
comparable recent sales, replacement cost or rate of return to investor. In
this appraisal, BK used the comparable sales method, which is the most common
method, and the replacement cost method, in determining the fair market values
of the Aircraft. The comparable sales method uses industry data to ascertain
the prices realized in recent sales of comparable models. The fair market
value of the base Aircraft is based on BK's familiarity with the aircraft type,
its earnings potential in commercial service, its knowledge of its capabilities
and the uses to which it will be put worldwide, its knowledge of the marketing
of used aircraft, and the factors affecting the fair market value of such
aircraft, and on its knowledge of the asking, offered and transaction prices
for similar competitive, and alternative equipment, as will as transactions and
negotiations involving basically identical aircraft. These realizations,
however, which reflect the market supply and demand at the time of sale, are
subject to minor adjustments for other conditions existing at the time of the
appraisal. In this respect, we consider the market for the Aircraft to be in
reasonable balance at this time, and thus, the fair market value is equal to
the base value. In addition, values were adjusted for engine type and maximum
gross takeoff weights (MGTOW). In arriving at the values, BK considered the
impact of many factors affecting the market for used aircraft, including: the
suitability and operating economics of the aircraft, regulatory factors, and
recent sales experience. In the absence of relevant recent comparable sales,
the replacement cost methodology is also considered. In this approach, which
is especially suitable for nearly new aircraft, the new price or replacement
cost is used and an allowance is deducted to account for the estimated hours and
cycles accumulated on the aircraft to date.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft not their maintenance records but relied
upon information supplied by you and from BK's own database. In determining the
market value of a used aircraft, the following assumptions apply to the base
aircraft:
II-6
<PAGE> 95
APPENDIX II - APPRAISAL LETTERS
[BK ASSOCIATES, INC. LOGO]
United Air Lines
November 6, 1997
Page 3
1. Unless it is new, the aircraft has half-time remaining to its next major
overhauls or scheduled shop visit on its airframe, engines, landing gear and
auxiliary power unit.
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness directives,
mandatory modifications and applicable service bulletins currently up to
industry standard.
3. The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the types
and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The Aircraft is in average or better condition.
7. There is no accident damage.
CONCLUSIONS
Based on the above methodology, considerations and assumptions, it is our
opinion that the current fair market value of each aircraft is as follows:
<TABLE>
<CAPTION>
Date of Registration Engine Base
Model Delivery Number Type Value
-------- --------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
B747-422 08/07/96 N193UA PW4056 $138,100,000
B747-422 09/19/96 N194UA PW4056 138,100,000
A320-232 06/03/96 N433UA IAE2527-A5 37,800,000
A320-232 06/10/96 N434UA IAE2527-A5 37,800,000
A320-232 09/03/96 N435UA IAE2527-A5 38,250,000
A320-232 12/11/96 N436UA IAE2527-A5 38,650,000
B777-222 04/11/96 N776UA PW4077 105,000,000
B777-222 07/18/96 N778UA PW4077 107,000,000
B777-222 08/07/96 N780UA PW4077 107,000,000
B777-222IGW 04/04/97 N786UA PW4090 121,000,000
</TABLE>
II-7
<PAGE> 96
APPENDIX II - APPRAISAL LETTERS
[BK ASSOCIATES, INC. LOGO]
United Air Lines
November 6, 1997
Page 4
<TABLE>
<CAPTION>
Date of Registration Engine Base
Model Delivery Number Type Value
-------- --------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
B737-322 10/12/90 N202UA CFM56-3B1 $ 25,300,000
B737-322 10/24/90 N203UA CFM56-3B1 25,300,000
B737-322 09/24/90 N398UA CFM56-3B1/C1 25,300,000
B737-322 10/09/90 N399UA CFM56-3B1 25,300,000
</TABLE>
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It
is not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal,
the addressee agrees that BK Associates, Inc. shall bear no such responsibility
or legal liability. This appraisal is prepared for the use of the addressee
and shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ John F. Keitz
John F. Keitz
President
ISTAT Senior Certified Appraiser
JFK/kf
II-8
<PAGE> 97
APPENDIX II - APPRAISAL LETTERS
AvSOLUTIONS
November 6, 1997
John M. Springer
Staff Specialist - Treasury
United Airlines
World Headquarters
P.O. Box 66100
Chicago, IL 60666-0100
Dear Mr. Springer:
AvSOLUTIONS is pleased to provide this opinion on the base value, as of
November 1997, of two Boeing 747-422, four Airbus A320-232, three Boeing
777-222, one Boeing 777-222 IGW and four Boeing 737-322 aircraft (the
aircraft). The Boeing 747-422 aircraft are powered by Pratt and Whitney 4056
engines, the Airbus A320-232 aircraft are powered by IAE 2527-A5 engines, the
Boeing 777-222 aircraft are powered by Pratt and Whitney 4077 engines, the
Boeing 777-222 IGW aircraft is powered by Pratt and Whitney 4090 engines, and
the Boeing 737-322 aircraft are powered by the CFM56-3-B1/C1. A complete
listing of the aircraft is enclosed as Attachment 1.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
BASE VALUE
Base value is the appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest
and best use". An aircraft's base value is founded in the historical trend of
values and in the projection of future value trends and presumes an arm's
length, cash transaction between willing, able and knowledge parties, acting
prudently, with an absence of duress and with a reasonable period of time
available for marketing.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's
(ISTAT) definition of Fair Market Value (FMV), to which AvSOLUTIONS subscribes,
the quoted FMV is the appraiser's opinion of the most likely trading price that
may be generated for an aircraft under the market circumstances that are
perceived to exist at the time in question. The fair market value assumes that
the aircraft is valued for its highest and best use, that the parties to the
hypothetical sales transaction are willing, able, prudent and knowledgeable,
and under no unusual pressure for
II-9
7518-B Diplomat Drive, Manassas, Virginia 20109
Telephone 703-330-0461 Fax 703-330-0581
<PAGE> 98
APPENDIX II - APPRAISAL LETTERS
AvSOLUTIONS
- --------------------------------------------------------------------------------
Page 2
United Airlines
a prompt sale, and that the transaction would be negotiated in an open and
unrestricted market on an arm's length basis, for cash equivalent
consideration, and given an adequate amount of time for effective market
exposure to perspective buyers, which AvSOLUTIONS considers to be ten to twenty
months.
APPRAISAL METHODOLOGY
The method employed by AvSOLUTIONS to appraise the current and future
values of aircraft and the associated equipment addresses the factors that
influence the market value of an aircraft, such as its age, condition,
configuration, the population of similar aircraft, similar aircraft on the
market, operating costs, cost to acquire a new aircraft, and the state of demand
for transportation services.
To achieve this objective, cross-sectional data concerning the values of
aircraft in each of several general categories is collected and analyzed.
Cross-sectional data is then postulated and compared to reported market values
at a specified point in time. Such data impounds the effect of deterioration
in aircraft performance due to usage and exposure to the elements, as well as
the effect of obsolescence due to the evolutionary development and
implementation of new designs and materials.
The product of the analysis identifies the relationship between the value
of each aircraft and its characteristics, such as age, model designation,
service configuration and engine type. Once the relationship is identified,
one can then postulate the effects of the difference between the economic
circumstances at the time when the cross-sectional data were collected and the
current situation. Therefore, if one can determine the current value of all
aircraft in one category, it is possible to estimate the current values of all
aircraft in that category.
The manufacturer and size of the aircraft usually determine the specific
category to which it is assigned. Segregating the world airplane fleet in
this manner accommodates the potential effects of difference size and different
design philosophies.
The variability of the data used by AvSOLUTIONS to determine the current
and future market values implies that the actual value realized will fall
within a range of values. Therefore, if a contemplated value falls within the
specified confidence range, AvSOLUTIONS cannot reject the hypothesis that it
is a reasonable representation of the current market situation.
LIMITING CONDITIONS AND ASSUMPTIONS
In order to conduct this valuation, AvSOLUTIONS is solely relying on
information as supplied by United Airlines, and from data within AvSOLUTIONS'
own database. In determining
II-10
<PAGE> 99
APPENDIX II - APPRAISAL LETTERS
AvSOLUTIONS
- --------------------------------------------------------------------------------
Page 3
United Airlines
the base value on the aircraft, the following assumptions have been researched
and determined:
1. AvSOLUTIONS has not inspected these aircraft or their maintenance records;
accordingly, AvSOLUTIONS cannot attest to the physical presence, condition or
current maintenance status.
2. The aircraft and its major components are in "half-time" condition. That
means that half of the flying hours and/or cycles between major maintenance
events on the airframe, engines and other components are available to be flown.
3. The aircraft is certified, maintained and currently being operated under
United States Federal Aviation Regulation (FAR) part 121.
4. All mandatory inspections and Airworthiness Directives have been complied
with.
5. The aircraft have no damage history.
6. A 3% annual rate of inflation is anticipated.
7. The aircraft are in average or better condition.
8. The aircraft are sold for cash without seller financing.
Based upon the above methodology, considerations and assumptions, it is
AvSOLUTIONS' opinion that the base values of each aircraft are as listed in
Attachment 1.
II-11
<PAGE> 100
APPENDIX II - APPRAISAL LETTERS
AvSOLUTIONS
- --------------------------------------------------------------------------------
Page 4
United Airlines
STATEMENT OF INDEPENDENCE
This appraisal report represents the opinion of AvSOLUTIONS, and is
intended to be advisory only in nature. Therefore, AvSOLUTIONS assumes no
responsibility or legal liability for actions taken or not taken by the Client
or any other party with regard to the subject aircraft. By accepting this
report, the Client agrees that AvSOLUTIONS shall bear no responsibility or
legal liability regarding this report. Further, this report is prepared for
the exclusive use of the Client and shall not be provided to their parties
without the Client's express consent.
Aviation Solutions Inc. (AvSOLUTIONS) hereby states that this valuation
report has been independently prepared and fairly represents the subject
aircraft and AvSOLUTIONS' opinion of their values. Aviation Solutions Inc.
(AvSOLUTIONS) further states that it has no present or contemplated future
interest or association with the subject aircraft.
Signed,
/s/ Quentin Brasie
Quentin Brasie
Vice-President
II-12
<PAGE> 101
APPENDIX II - APPRAISAL LETTERS
AvSOLUTIONS
- --------------------------------------------------------------------------------
ATTACHMENT 1
EETC COLLATERAL SUMMARY
<TABLE>
<CAPTION>
Tail Number Aircraft Nose # S/N Year Engines MGTOW Base Value
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
N193UA 747-422 8193 26890 Aug-96 PW 4056 875,000 142.8
N194UA 747-422 8594 26892 Sep-96 PW 4056 875,000 142.8
N433UA A320-232 4233 589 Jun-96 IAE2527-A5 169,754 37
N434UA A320-232 4234 592 Jun-96 IAE2527-A5 169,754 37
N435UA A320-232 4235 613 Sep-96 IAE2527-A5 169,754 37.5
N436UA A320-232 4236 638 Dec-96 IAE2527-A5 169,754 38.1
N776UA B777-222 2076 26937 Apr-96 PW4077 545,000 99.1
N778UA B777-222 2078 26940 Jul-96 PW4077 545,000 99.1
N780UA B777-222 2080 26944 Aug-96 PW4077 545,000 99.7
N786UA B777-222IGW 2286 26938 Apr-97 PW4090 624,700 128.6
N202UA B737-322 9002 24717 Oct-90 CFM56-3B1 130,000 22.9
N203UA B737-322 9003 24718 Oct-90 CFM56-3B1 130,000 22.9
N398UA B737-322 9398 24673 Sep-90 CFM56-3B1/C1 130,000 22.7
N399UA B737-322 9399 24674 Oct-90 CFM56-3B1 130,000 22.9
</TABLE>
II-13
<PAGE> 102
APPENDIX III -- EQUIPMENT NOTES PRINCIPAL PAYMENT SCHEDULE
SERIES A
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ---------------------- -----------------------------------------------------------------------------------------------
N193UA N194UA N433UA N434UA N435UA N436UA N776UA
------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 1998......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
June 2, 1998.......... 1,683,856 1,683,856 450,714 450,714 456,079 98,012 1,251,983
September 2, 1998..... 0 0 0 0 0 0 0
December 2, 1998...... 358,117 358,117 95,857 95,857 96,998 460,849 266,268
June 2, 1999.......... 1,683,856 1,683,856 450,714 450,714 456,079 98,012 1,251,983
December 2, 1999...... 358,117 358,117 95,857 95,857 96,998 460,849 266,268
June 2, 2000.......... 1,683,856 1,683,856 450,714 450,714 456,079 98,012 1,251,983
December 2, 2000...... 358,117 358,117 95,857 95,857 96,998 460,849 266,268
June 2, 2001.......... 1,683,856 1,683,856 450,714 450,714 456,079 98,012 1,251,983
December 2, 2001...... 358,117 358,117 95,857 95,857 96,998 460,849 266,268
June 2, 2002.......... 1,683,856 1,683,856 450,714 450,714 456,079 98,012 1,251,983
December 2, 2002...... 55,109,251 55,109,251 14,751,005 14,751,005 14,926,612 15,445,544 40,975,013
December 2, 2003...... 0 0 0 0 0 0 0
December 2, 2004...... 0 0 0 0 0 0 0
December 2, 2005...... 0 0 0 0 0 0 0
December 2, 2006...... 0 0 0 0 0 0 0
December 2, 2007...... 0 0 0 0 0 0 0
December 2, 2008...... 0 0 0 0 0 0 0
December 2, 2009...... 0 0 0 0 0 0 0
December 2, 2010...... 0 0 0 0 0 0 0
December 2, 2011...... 0 0 0 0 0 0 0
December 2, 2012...... 0 0 0 0 0 0 0
December 2, 2013...... 0 0 0 0 0 0 0
December 2, 2014...... 0 0 0 0 0 0 0
December 2, 2015...... 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ---------------------- -----------------------------------------------------------------------------------------------
N778UA N780UA N786UA N202UA N203UA N398UA N399UA
------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 1998......... $ 0 $ 0 $ 0 $ 139,008 $ 137,884 $ 0 $ 139,008
June 2, 1998.......... 1,265,294 1,267,678 1,454,544 0 0 0 0
September 2, 1998..... 0 0 0 108,657 109,781 0 108,657
December 2, 1998...... 269,096 269,604 314,296 247,865 247,865 249,804 247,865
June 2, 1999.......... 1,265,294 1,267,678 1,454,544 0 0 0 0
December 2, 1999...... 269,096 269,604 314,296 247,865 247,865 250,005 247,865
June 2, 2000.......... 1,265,294 1,267,678 1,454,544 0 0 0 0
December 2, 2000...... 269,096 269,604 314,296 247,865 247,865 250,004 247,865
June 2, 2001.......... 1,265,294 1,267,678 1,454,544 0 0 0 0
December 2, 2001...... 269,096 269,604 314,296 247,865 247,865 250,004 247,865
June 2, 2002.......... 1,265,294 1,267,678 1,454,544 0 0 0 0
December 2, 2002...... 41,410,145 41,488,193 48,482,096 247,865 247,865 250,005 247,865
December 2, 2003...... 0 0 0 247,865 247,865 250,004 247,865
December 2, 2004...... 0 0 0 247,865 247,865 250,005 247,865
December 2, 2005...... 0 0 0 495,730 495,730 250,004 495,730
December 2, 2006...... 0 0 0 495,731 495,731 500,009 495,731
December 2, 2007...... 0 0 0 495,730 495,730 500,009 495,730
December 2, 2008...... 0 0 0 495,730 495,730 500,009 495,730
December 2, 2009...... 0 0 0 495,731 495,731 500,009 495,731
December 2, 2010...... 0 0 0 743,595 743,595 500,009 743,595
December 2, 2011...... 0 0 0 743,596 743,596 750,014 743,596
December 2, 2012...... 0 0 0 832,312 832,879 856,793 832,312
December 2, 2013...... 0 0 0 654,879 654,312 643,235 654,879
December 2, 2014...... 0 0 0 743,596 743,596 1,342,656 743,596
December 2, 2015...... 0 0 0 2,478,650 2,478,650 2,657,422 2,478,650
</TABLE>
III-1
<PAGE> 103
SERIES B
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ---------------------- -----------------------------------------------------------------------------------------------
N193UA N194UA N433UA N434UA N435UA N436UA N776UA
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 1998......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
June 2, 1998.......... 317,024.... 317,024 84,857 84,857 85,867 0 235,714
December 2, 1998...... 0 0 0 0 0 86,765 0
June 2, 1999.......... 317,024 317,024 84,857 84,857 85,867 0 235,714
December 2, 1999...... 0 0 0 0 0 86,765 0
June 2, 2000.......... 317,024 317,024 84,857 84,857 85,867 0 235,714
December 2, 2000...... 0 0 0 0 0 86,765 0
June 2, 2001.......... 317,024 317,024 84,857 84,857 85,867 0 235,714
December 2, 2001...... 0 0 0 0 0 86,765 0
June 2, 2002.......... 317,024 317,024 84,857 84,857 85,867 0 235,714
December 2, 2002...... 13,948,878 13,948,878 3,733,714 3,733,714 3,777,663 3,903,939 10,371,429
December 2, 2003...... 0 0 0 0 0 0 0
December 2, 2004...... 0 0 0 0 0 0 0
December 2, 2005...... 0 0 0 0 0 0 0
December 2, 2006...... 0 0 0 0 0 0 0
December 2, 2007...... 0 0 0 0 0 0 0
December 2, 2008...... 0 0 0 0 0 0 0
December 2, 2009...... 0 0 0 0 0 0 0
December 2, 2010...... 0 0 0 0 0 0 0
December 2, 2011...... 0 0 0 0 0 0 0
December 2, 2012...... 0 0 0 0 0 0 0
December 2, 2013...... 0 0 0 0 0 0 0
December 2, 2014...... 0 0 0 0 0 0 0
December 2, 2015...... 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ---------------------- -----------------------------------------------------------------------------------------------
N778UA N780UA N786UA N202UA N203UA N398UA N399UA
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 1998......... $ 0 $ 0 $ 0 $ 128,521 $ 128,521 $ 0 $ 128,521
June 2, 1998.......... 238,221 238,670 272,668 0 0 0 0
December 2, 1998...... 0 0 0 46,972 46,708 129,637 46,972
June 2, 1999.......... 238,221 238,670 272,668 0 0 0 0
December 2, 1999...... 0 0 0 1,624 1,888 40,659 1,624
June 2, 2000.......... 238,221 238,670 272,668 0 0 0 0
December 2, 2000...... 0 0 0 59,272 59,272 8,355 59,272
June 2, 2001.......... 238,221 238,670 272,668 0 0 0 0
December 2, 2001...... 0 0 0 59,272 59,272 59,784 59,272
June 2, 2002.......... 238,221 238,670 272,668 0 0 0 0
December 2, 2002...... 10,481,895 10,501,650 12,269,660 59,272 59,272 59,784 59,272
December 2, 2003...... 0 0 0 59,272 59,272 59,784 59,272
December 2, 2004...... 0 0 0 59,272 59,272 59,784 59,272
December 2, 2005...... 0 0 0 150,268 157,191 103,133 150,268
December 2, 2006...... 0 0 0 86,820 79,898 76,218 86,820
December 2, 2007...... 0 0 0 118,544 118,544 119,567 118,544
December 2, 2008...... 0 0 0 118,544 118,544 119,567 118,544
December 2, 2009...... 0 0 0 258,685 258,655 119,567 258,685
December 2, 2010...... 0 0 0 193,827 193,909 283,772 193,827
December 2, 2011...... 0 0 0 21,665 21,612 15,147 21,665
December 2, 2012...... 0 0 0 89,100 88,533 72,572 89,100
December 2, 2013...... 0 0 0 266,533 267,099 601,850 266,533
December 2, 2014...... 0 0 0 598,143 592,027 640,820 598,143
December 2, 2015...... 0 0 0 172,394 178,511 0 172,394
</TABLE>
III-2
<PAGE> 104
SERIES C
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ------------------------ ------------------------------------------------------------------------------------------
N193UA N194UA N433UA N434UA N435UA N436UA N776UA
---------- ----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
June 2, 1998............ $ 0 $ 374,665 $ 100,286 $ 100,286 $ 101,480 $ 0 $ 278,571
December 2, 1998........ 0 0 0 0 0 102,541 0
June 2, 1999............ 0 374,665 100,286 100,286 101,480 0 278,571
December 2, 1999........ 0 0 0 0 0 102,541 0
June 2, 2000............ 0 374,665 100,286 100,286 101,480 0 278,571
December 2, 2000........ 0 0 0 0 0 102,541 0
June 2, 2001............ 0 374,665 100,286 100,286 101,480 0 278,571
December 2, 2001........ 0 0 0 0 0 102,541 0
June 2, 2002............ 0 374,665 100,286 100,286 101,480 0 278,571
December 2, 2002........ 2,362,000 16,485,673 4,412,571 4,412,571 4,465,602 4,614,837 12,257,143
December 2, 2003........ 0 0 0 0 0 0 0
December 2, 2004........ 0 0 0 0 0 0 0
December 2, 2005........ 0 0 0 0 0 0 0
December 2, 2007........ 0 0 0 0 0 0 0
December 2, 2008........ 0 0 0 0 0 0 0
December 2, 2009........ 0 0 0 0 0 0 0
December 2, 2012........ 0 0 0 0 0 0 0
December 2, 2013........ 0 0 0 0 0 0 0
December 2, 2014........ 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ---------------------------- -----------------------------------------------------------------------------------
N778UA N780UA N786UA N202UA N203UA N398UA N399UA
----------- ----------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
June 2, 1998................ $ 281,534 $ 282,065 $ 322,244 $ 0 $ 0 $ 0 $ 0
December 2, 1998............ 0 0 0 82,349 82,613 0 82,349
June 2, 1999................ 281,534 282,065 322,244 0 0 0 0
December 2, 1999............ 0 0 0 127,697 127,433 89,779 127,697
June 2, 2000................ 281,534 282,065 322,244 0 0 0 0
December 2, 2000............ 0 0 0 70,049 70,049 122,082 70,049
June 2, 2001................ 281,534 282,065 322,244 0 0 0 0
December 2, 2001............ 0 0 0 70,049 70,049 70,653 70,049
June 2, 2002................ 281,534 282,065 322,244 0 0 0 0
December 2, 2002............ 12,387,330 12,410,677 14,501,780 70,049 70,049 70,654 70,049
December 2, 2003............ 0 0 0 70,049 70,049 70,653 70,049
December 2, 2004............ 0 0 0 180,747 184,656 604,957 180,747
December 2, 2005............ 0 0 0 390,560 383,720 683,383 390,560
December 2, 2007............ 0 0 0 184,229 184,409 178,959 184,229
December 2, 2008............ 0 0 0 253,576 349,167 388,413 253,576
December 2, 2009............ 0 0 0 327,875 235,102 326,689 327,875
December 2, 2010............ 0 0 0 0 0 153,675 0
December 2, 2012............ 0 0 0 63,990 63,923 55,900 63,990
December 2, 2013............ 0 0 0 479,021 473,122 222,203 479,021
December 2, 2014............ 0 0 0 641,760 647,659 0 641,760
</TABLE>
III-3
<PAGE> 105
SERIES D
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ------------------------------- --------------------------------------------------------------------------
N193UA N194UA N433UA N434UA N435UA N436UA N776UA
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 1998.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
December 2, 1998............... 0 0 0 0 0 0 0
December 2, 1999............... 0 0 0 0 0 0 0
December 2, 2000............... 0 0 0 0 0 0 0
December 2, 2001............... 0 0 0 0 0 0 0
December 2, 2002............... 0 0 0 0 0 0 0
December 2, 2003............... 0 0 0 0 0 0 0
December 2, 2004............... 0 0 0 0 0 0 0
December 2, 2013............... 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION
DATES AIRCRAFT REGISTRATION NUMBER
- ------------------------------- --------------------------------------------------------------------------
N778UA N780UA N786UA N202UA N203UA N398UA N399UA
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 1998.................. $ 0 $ 0 $ 0 $ 61,503 $ 62,297 $329,049 $ 61,503
December 2, 1998............... 0 0 0 82,122 81,060 186,857 82,122
December 2, 1999............... 0 0 0 342,442 342,499 339,205 342,442
December 2, 2000............... 0 0 0 386,338 386,399 383,136 386,338
December 2, 2001............... 0 0 0 436,134 436,199 432,885 436,134
December 2, 2002............... 0 0 0 487,011 487,080 483,762 487,011
December 2, 2003............... 0 0 0 540,288 540,361 537,040 540,288
December 2, 2004............... 0 0 0 486,116 482,284 59,259 486,116
December 2, 2013............... 0 0 0 68,442 73,012 0 68,442
</TABLE>
III-4
<PAGE> 106
APPENDIX IV -- LOAN TO AIRCRAFT VALUE RATIOS
The table is based on the assumption that the value of each Aircraft set
forth opposite December 23, 1997 depreciates by approximately 2% of the initial
appraised value per year until the fifteenth year after the year of delivery of
such Aircraft, by approximately 4% of the initial appraised value per year for
the next five years and by approximately 6% of the initial appraised value per
year thereafter. Other rates or methods of depreciation would result in
materially different loan to Aircraft value ratios and no assurance can be given
(i) that the depreciation rates and method assumed for the purposes of the table
are the ones most likely to occur or (ii) as to the actual value of any
Aircraft. Thus the table should not be considered a forecast or prediction of
expected or likely loan to Aircraft value ratios but simply a mathematical
calculation based on one set of assumptions.
<TABLE>
<CAPTION>
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION
NUMBER N193UA NUMBER N194UA
---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
December 23, 1997.... $ 82.86 $ 141.22 58.7% $ 98.85 $ 141.22 70.0%
December 2, 1998..... 80.50 138.34 58.2 96.12 138.34 69.5
December 2, 1999..... 78.14 135.46 57.7 93.39 135.46 68.9
December 2, 2000..... 75.78 132.57 57.2 90.65 132.57 68.4
December 2, 2001..... 73.42 129.69 56.6 87.92 129.69 67.8
December 2, 2002..... 0.00 126.81 NA 0.00 126.81 NA
<CAPTION>
AIRCRAFT REGISTRATION
NUMBER N433UA
----------------------------------
EQUIPMENT
NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- -----
<S> <C> <C> <C>
December 23, 1997.... $ 26.46 $ 37.80 70.0%
December 2, 1998..... 25.73 37.03 69.5
December 2, 1999..... 25.00 36.26 68.9
December 2, 2000..... 24.26 35.49 68.4
December 2, 2001..... 23.53 34.71 67.8
December 2, 2002..... 0.00 33.94 NA
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION
NUMBER N434UA NUMBER N435UA
---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
December 23, 1997.... $ 26.46 $ 37.80 70.0% $ 26.78 $ 38.25 70.0%
December 2, 1998..... 25.73 37.03 69.5 26.03 37.47 69.5
December 2, 1999..... 25.00 36.26 68.9 25.29 36.69 68.9
December 2, 2000..... 24.26 35.49 68.4 24.55 35.91 68.4
December 2, 2001..... 23.53 34.71 67.8 23.81 35.13 67.8
December 2, 2002..... 0.00 33.94 NA 0.00 34.35 NA
<CAPTION>
AIRCRAFT REGISTRATION
NUMBER N436UA
----------------------------------
EQUIPMENT
NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- -----
<S> <C> <C> <C>
December 23, 1997.... $ 27.06 $ 38.65 70.0%
December 2, 1998..... 26.31 37.86 69.5
December 2, 1999..... 25.56 37.07 68.9
December 2, 2000..... 24.81 36.28 68.4
December 2, 2001..... 24.06 35.49 67.8
December 2, 2002..... 0.00 34.71 NA
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION
NUMBER N776UA NUMBER N778UA
---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
December 23, 1997.............................. $ 73.50 $ 105.00 70.0% $ 74.28 $ 106.12 70.0%
December 2, 1998............................... 71.47 102.86 69.5 72.23 103.95 69.5
December 2, 1999............................... 69.43 100.71 68.9 70.17 101.79 68.9
December 2, 2000............................... 67.40 98.57 68.4 68.12 99.62 68.4
December 2, 2001............................... 65.37 96.43 67.8 66.06 97.45 67.8
December 2, 2002............................... 0.00 94.29 NA 0.00 95.29 NA
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION
NUMBER N780UA NUMBER N786UA
---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
December 23, 1997.............................. $ 74.42 $ 106.32 70.0% $ 86.76 $ 123.94 70.0%
December 2, 1998............................... 72.36 104.15 69.5 84.39 121.46 69.5
December 2, 1999............................... 70.30 101.98 68.9 82.03 118.98 68.9
December 2, 2000............................... 68.25 99.81 68.4 79.67 116.50 68.4
December 2, 2001............................... 66.19 97.64 67.8 77.30 114.02 67.8
December 2, 2002............................... 0.00 95.47 NA 0.00 111.55 NA
</TABLE>
IV-1
<PAGE> 107
<TABLE>
<CAPTION>
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION
NUMBER N202UA NUMBER N203UA
---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
December 23, 1997.......................... $ 19.11 $ 23.17 82.5% $ 19.11 $ 23.17 82.5%
December 2, 1998........................... 18.21 22.63 80.5 18.21 22.63 80.5
December 2, 1999........................... 17.49 22.09 79.2 17.49 22.09 79.2
December 2, 2000........................... 16.73 21.55 77.6 16.73 21.55 77.6
December 2, 2001........................... 15.91 21.01 75.7 15.92 21.01 75.7
December 2, 2002........................... 15.05 20.48 73.5 15.05 20.48 73.5
December 2, 2003........................... 14.13 19.94 70.9 14.13 19.94 70.9
December 2, 2004........................... 13.16 19.40 67.8 13.16 19.40 67.8
December 2, 2005........................... 12.12 18.86 64.3 12.12 18.86 64.3
December 2, 2006........................... 11.54 17.78 64.9 11.55 17.78 64.9
December 2, 2007........................... 10.74 16.70 64.3 10.75 16.70 64.3
December 2, 2008........................... 9.87 15.63 63.2 9.79 15.63 62.6
December 2, 2009........................... 8.79 14.55 60.4 8.80 14.55 60.5
December 2, 2010........................... 7.85 13.47 58.3 7.86 13.47 58.3
December 2, 2011........................... 7.09 11.85 59.8 7.09 11.85 59.8
December 2, 2012........................... 6.10 10.24 59.6 6.11 10.24 59.7
December 2, 2013........................... 4.63 8.62 53.8 4.64 8.62 53.8
December 2, 2014........................... 2.65 7.00 37.8 2.66 7.00 37.9
December 2, 2015........................... 0.00 5.39 NA 0.00 5.39 NA
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION
NUMBER N398UA NUMBER N399UA
---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN NOTE ASSUMED LOAN
OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO
BALANCE VALUE VALUE BALANCE VALUE VALUE
DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO
---- ----------- ---------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
December 23, 1997.......................... $ 19.11 $ 23.37 81.8% $ 19.11 $ 23.17 82.5%
December 2, 1998........................... 18.21 22.83 79.8 18.21 22.63 80.5
December 2, 1999........................... 17.49 22.28 78.5 17.49 22.09 79.2
December 2, 2000........................... 16.73 21.74 77.0 16.73 21.55 77.6
December 2, 2001........................... 15.92 21.20 75.1 15.91 21.01 75.7
December 2, 2002........................... 15.05 20.65 72.9 15.05 20.48 73.5
December 2, 2003........................... 14.14 20.11 70.3 14.13 19.94 70.9
December 2, 2004........................... 13.16 19.57 67.3 13.16 19.40 67.8
December 2, 2005........................... 12.13 19.02 63.7 12.12 18.86 64.3
December 2, 2006........................... 11.55 17.94 64.4 11.54 17.78 64.9
December 2, 2007........................... 10.75 16.85 63.8 10.74 16.70 64.3
December 2, 2008........................... 9.74 15.76 61.8 9.87 15.63 63.2
December 2, 2009........................... 8.80 14.67 59.9 8.79 14.55 60.4
December 2, 2010........................... 7.86 13.59 57.8 7.85 13.47 58.3
December 2, 2011........................... 7.09 11.96 59.3 7.09 11.85 59.8
December 2, 2012........................... 6.11 10.33 59.2 6.10 10.24 59.6
December 2, 2013........................... 4.64 8.70 53.4 4.63 8.62 53.8
December 2, 2014........................... 2.66 7.07 37.6 2.65 7.00 37.8
December 2, 2015........................... 0.00 5.43 NA 0.00 5.39 NA
</TABLE>
IV-2
<PAGE> 108
======================================================
NO OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF
TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THE
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 4
Reports of Certificateholders........ 4
Incorporation of Certain Documents by
Reference.......................... 4
Prospectus Summary................... 5
Risk Factors......................... 27
Use of Proceeds...................... 30
The Exchange Offer................... 30
Summary of New Certificates and
Certain Agreements................. 37
Description of the New
Certificates....................... 38
Description of the Liquidity
Facilities......................... 49
Description of the Intercreditor
Agreement.......................... 53
Description of the Aircraft and the
Appraisals......................... 58
Description of the Equipment Notes... 59
Federal Income Tax Consequences...... 77
ERISA Considerations................. 81
Plan of Distribution................. 82
Legal Matters........................ 82
Independent Public Accountants....... 82
Experts.............................. 83
Index of Terms....................... I-1
Appraisal Letters.................... II-1
Equipment Notes Principal Payment
Schedule........................... III-1
Loan to Aircraft Value Ratios........ IV-1
</TABLE>
======================================================
======================================================
UNITED AIRLINES LOGO
OFFER TO EXCHANGE
ENHANCED PASS THROUGH CERTIFICATES
SERIES 1997-1A AND
SERIES 1997-1B
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED,
FOR ANY AND ALL OUTSTANDING
ENHANCED PASS THROUGH CERTIFICATES,
SERIES 1997-1A AND
SERIES 1997-1B
--------------------
PROSPECTUS
--------------------
, 1998
======================================================
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
United's Restated Certificate of Incorporation provides that no director of
United will be personally liable to United or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director, except
for liability (i) for any breach of the director's duty of loyalty to United or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law ("DGCL") or (iv) for any
transaction from which the director derived an improper personal benefit.
The above provision is intended to afford directors additional protection
and limit their potential liability from suits alleging a breach of the duty of
care by a director. As a result of the inclusion of such a provision,
stockholders may be unable to recover monetary damages against directors for
actions taken by them that constitute negligence or gross negligence or that are
otherwise in violation of their fiduciary duty of care, although it may be
possible to obtain injunctive or other equitable relief with respect to such
actions. If equitable, remedies are found not to be available to stockholders in
any particular situation, stockholders may not have an effective remedy against
a director in connection with such conduct.
United's Restated Certificate of Incorporation also provides that directors
and officers of United shall be indemnified against liabilities arising from
their service as directors and officers to the full extent permitted by law.
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Section
145 empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or another enterprise if serving at the request of the corporation. Depending on
the character of the proceeding, a corporation may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if the person indemnified acted in good faith and in a manner he
reasonably believed to be in or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
by or in the right of the corporation, no indemnification may be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 further provides that to the extent a director or officer of
a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
ITEM 21. EXHIBITS
The Index to Exhibits to this Registration Statement is incorporated herein
by reference.
II-1
<PAGE> 110
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether or not
such indemnification is against public policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt
II-2
<PAGE> 111
means. This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Elk Grove Township, Illinois on
February 24, 1998.
UNITED AIR LINES, INC.
By: /s/ DOUGLAS A. HACKER
------------------------------------
Douglas A. Hacker
Senior Vice President and Chief
Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Gerald Greenwald and Douglas A. Hacker, and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GERALD GREENWALD Chairman and Chief Executive February 24, 1998
- --------------------------------------------- Officer
Gerald Greenwald
/s/ DOUGLAS A. HACKER Senior Vice President and Chief February 24, 1998
- --------------------------------------------- Financial Officer (Principal
Douglas A. Hacker Financial Officer)
/s/ FREDERIC F. BRACE Vice President -- Financial February 24, 1998
- --------------------------------------------- Analysis and Controller (Principal
Frederic F. Brace Accounting Officer)
/s/ JOHN A. EDWARDSON Director February 24, 1998
- ---------------------------------------------
John A. Edwardson
/s/ JAMES E. GOODWIN Director February 24, 1998
- ---------------------------------------------
James E. Goodwin
/s/ WILLIAM P. HOBGOOD Director February 24, 1998
- ---------------------------------------------
William P. Hobgood
/s/ STUART I. ORAN Director February 24, 1998
- ---------------------------------------------
Stuart I. Oran
/s/ ANDREW P. STUDDERT Director February 24, 1998
- ---------------------------------------------
Andrew P. Studdert
</TABLE>
II-4
<PAGE> 113
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.1 Form of New Three-Month LIBOR + 0.22% United Airlines
Enhanced Pass Through Certificate, Series 1997-1A (included
in Exhibit 4.4)
4.2 Form of New Three-Month LIBOR + 0.325% United Airlines
Enhanced Pass Through Certificate, Series 1997-1B (included
in Exhibit 4.5)
4.3 Pass Through Trust Agreement, dated as of December 23, 1997,
between United Air Lines, Inc. and First Security Bank,
National Association, as Trustee
4.4 Trust Supplement No. 1997-1A-1 to Pass Through Trust
Agreement, dated as of December 23, 1997, between United Air
Lines, Inc. and First Security Bank, National Association,
relating to the formation of the United Airlines 1997-1A
Pass Through Trust
4.5 Trust Supplement No. 1997-1B-1 to Pass Through Trust
Agreement, dated as of December 23, 1997, between United Air
Lines, Inc. and First Security Bank, National Association,
relating to the formation of the United Airlines 1997-1B
Pass Through Trust
4.6 Revolving Credit Agreement, dated as of December 23, 1997,
between First Security Bank, National Association, as
Subordination Agent, as agent and trustee for the United
Airlines 1997-1A Pass Through Trust, as Borrower, and
Kreditanstalt fur Wiederaufbau, as Liquidity Provider
4.7 Revolving Credit Agreement, dated as of December 23, 1997,
between First Security Bank, National Association, as
Subordination Agent, as agent and trustee for the United
Airlines 1997-1B Pass Through Trust, as Borrower, and
Kreditanstalt fur Wiederaufbau, as Liquidity Provider
4.8 ISDA Master Agreement, together with Schedule and Credit
Support Annex, among United Air Lines, Inc. and Credit
Suisse Financial Products
4.9 Above-Cap Liquidity Facility Confirmation among United Air
Lines, Inc. and Credit Suisse Financial Products (relating
to ISDA Master Agreement among United Air Lines, Inc. and
Credit Suisse Financial Products)
4.10 ISDA Master Agreement, together with Schedule, among Credit
Suisse Financial Products and First Security Bank, National
Association
4.11 Above-Cap Liquidity Facility Confirmation among Credit
Suisse Financial Products and First Security Bank, National
Association
4.12 Intercreditor Agreement, dated as of December 23, 1997,
among First Security Bank, National Association, as Trustee
under the United Airlines 1997-1A Pass Through Trust, United
Airlines 1997-1B Pass Through Trust, United Airlines 1997-1C
Pass Through Trust and United Airlines 1997-1D Pass Through
Trust, Kreditanstalt fur Wiederaufbau, as Class A Primary
Liquidity Provider and Class B Primary Liquidity Provider,
Credit Suisse Financial Products, as Class A Above-Cap
Liquidity Provider and Class B Above-Cap Liquidity Provider,
and First Security Bank, National Association, as
Subordination Agent and Trustee
4.13 Registration Rights Agreement, dated as of December 23,
1997, between United Air Lines, Inc., First Security Bank,
National Association, as Trustee under the United Airlines
Pass Through Trust 1997-1A and United Airlines Pass Through
Trust 1997-1B, Morgan Stanley & Co. Incorporated, BT Alex.
Brown Incorporated, Citicorp Securities, Incorporated,
Credit Suisse First Boston Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Kreditanstalt fur
Wiederaufbau
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.14 Note Purchase Agreement, dated as of December 23, 1997,
between United Air Lines, Inc., State Street Bank and Trust
Company of Connecticut, National Association, as Pass
Through Trustee under each of the United Airlines 1997-1
Pass Through Trust Agreements, First Security Bank, National
Association, as Subordination Agent, and First Security
Bank, National Association, as Indenture Trustee
4.15 Amended and Restated Trust Indenture and Security Agreement
(1994 737 B), dated as of December 23, 1997, between State
Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee, and First Security Bank,
National Association, as Indenture Trustee (this instrument
is substantially the same for each Aircraft leased by United
Air Lines, Inc.)
4.16 Participation Agreement (1994 737 B), dated as of September
1, 1994, among United Air Lines, Inc., as Lessee, MS
Financing Inc., as Owner Participant, The Mitsubishi Trust
and Banking Corporation, New York Branch, as Original Loan
Participant, First Security Bank of Utah, National
Association, as Owner Trustee, and State Street Bank and
Trust Company, in its individual capacity and as Indenture
Trustee (this instrument is substantially the same for each
Aircraft leased by United Air Lines, Inc.)
4.17 First Amendment to Participation Agreement (1994 737 B),
dated January 26, 1996, among United Air Lines, Inc., as
Lessee, MS Financing Inc., as Owner Participant, The
Mitsubishi Trust and Banking Corporation, acting through its
New York Branch, and National Westminster Bank PLC, acting
through its New York or Nassau Branch, as Original Loan
Participants, First Security Bank, National Association, as
Owner Trustee, and State Street Bank and Trust Company, in
its individual capacity and as Indenture Trustee (this
instrument is substantially the same for each Aircraft
leased by United Air Lines, Inc.)
4.18 Second Amendment to Participation Agreement (1994 737 B),
dated December 23, 1997, among United Air Lines, Inc., as
Lessee, MS Financing Inc., as Owner Participant, State
Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee, First Security Bank, National
Association, in its individual capacity and as Indenture
Trustee, First Security Bank, National Association, in its
capacity as Pass Through Trustee under each of the four
separate Pass Through Trust Agreements, and First Security
Bank, National Association, as Subordination Agent (this
instrument is substantially the same for each Aircraft
leased by United Air Lines, Inc.)
4.19 Lease Agreement (1994 737 B), dated as of September 1, 1994,
between First Security Bank of Utah, National Association,
in its capacity as Owner Trustee, as Lessor, and United Air
Lines, Inc., as Lessee (this instrument is substantially the
same for each Aircraft leased by United Air Lines, Inc.)
4.20 First Amendment to Lease Agreement (1994 737 B), dated
January 26, 1996, between First Security Bank of Utah,
National Association, in its capacity as Owner Trustee, as
Lessor, and United Air Lines, Inc., as Lessee (this
instrument is substantially the same for each Aircraft
leased by United Air Lines, Inc.)
4.21 Second Amendment to Lease Agreement (1994 737 B), dated
January 26, 1996, between First Security Bank, National
Association, in its capacity as Owner Trustee, as Lessor,
and United Air Lines, Inc., as Lessee (this instrument is
substantially the same for each Aircraft leased by United
Air Lines, Inc.)
4.22 Third Amendment to Lease Agreement (1994 737 B), dated as of
December 23, 1997, between State Street Bank and Trust
Company of Connecticut, National Association, in its
capacity as Owner Trustee, as Lessor, and United Air Lines,
Inc., as Lessee (this instrument is substantially the same
for each Aircraft leased by United Air Lines, Inc.)
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.23 Trust Agreement (1994 737 B), dated as of September 1, 1994,
between MS Financing Inc., as Owner Participant, and First
Security Bank of Utah, National Association, as Owner
Trustee (this instrument is substantially the same for each
Aircraft leased by United Air Lines, Inc.)
4.24 First Amendment to Trust Agreement (1994 737 B), dated as of
December 23, 1997, between MS Financing Inc., as Owner
Participant, and State Street Bank and Trust Company of
Connecticut, National Association, as Owner Trustee (this
instrument is substantially the same for each Aircraft
leased by United Air Lines, Inc.)
4.25 Series A Equipment Note due December 2, 2015 issued in
connection with the Boeing Model 737-322 Aircraft Bearing
United Stated Registration Number N398UA (this instrument is
substantially the same for each Aircraft leased by United
Air Lines, Inc.)
4.26 Series B Equipment Note due December 2, 2014 issued in
connection with the Boeing Model 737-322 Aircraft Bearing
United Stated Registration Number N398UA (this instrument is
substantially the same for each Aircraft leased by United
Air Lines, Inc.)
4.27 Participation Agreement (1997 747-1), dated as of December
23, 1997, among United Air Lines, Inc., as Owner, First
Security Bank, National Association, as Pass Through Trustee
under each of the Pass Through Trust Agreements, First
Security Bank, National Association, as Subordination Agent,
and First Security Bank, National Association, in its
individual capacity and as Indenture Trustee (this
instrument is substantially the same for each Aircraft owned
by United Air Lines, Inc.)
4.28 Trust Indenture and Mortgage (1997 747-1), dated as of
December 23, 1997, between United Air Lines, Inc., Owner,
and First Security Bank, National Association, as Indenture
Trustee (this instrument is substantially the same for each
Aircraft owned by United Air Lines, Inc.)
4.29 Series A Equipment Note due December 2, 2002 issued in
connection with the Boeing Model 747-422 Aircraft Bearing
United Stated Registration Number N193UA (this instrument is
substantially the same for each Aircraft owned by United Air
Lines, Inc.)
4.30 Series B Equipment Note due December 2, 2002 issued in
connection with the Boeing Model 747-422 Aircraft Bearing
United Stated Registration Number N193UA (this instrument is
substantially the same for each Aircraft owned by United Air
Lines, Inc.)
4.31 Purchase Agreement, between Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Citicorp
Securities, Inc., Credit Suisse First Boston Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated
4.32 Certificate Purchase Agreement, Enhanced Pass Through
Certificates, Series 1997-1B, dated as of December 23, 1997
between First Security Bank, National Association, as
Trustee for the United Airlines 1997-1B Pass Through Trust,
United Air Lines, Inc., and Kreditanstalt fur Wiederaufbau
5.1 Opinion of Mayer, Brown & Platt relating to the validity of
the New Certificates
23.1 Consent of Arthur Andersen
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 5.1)
23.3 Consent of Aircraft Information Services, Inc.
23.4 Consent of BK Associates, Inc.
23.5 Consent of AvSolutions Inc.
23.6 Consent of Vedder, Price, Kaufman & Kammholz
24.1 Powers of Attorney (included on the signature page in Part
II of the Registration Statement)
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
25.1 Statement of Eligibility of First Security Bank, National
Association for the Enhanced Pass Through certificates,
Series 1997-1, on Form T-1
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letter to Clients
</TABLE>
<PAGE> 1
EXHIBIT 4.3
PASS THROUGH TRUST AGREEMENT
Dated as of December 23, 1997
between
UNITED AIR LINES, INC.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS....................................................... 2
Section 1.01 Definitions.......................................................................... 2
Section 1.02 Compliance Certificates and Opinions................................................. 13
Section 1.03 Form of Documents Delivered to Trustee............................................... 14
Section 1.04 Directions of Certificateholders..................................................... 14
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES............................................. 15
Section 2.01 Amount Unlimited; Issuable in Series................................................. 15
Section 2.02 Issuance of Certificates; Acquisition of Equipment Notes............................. 17
Section 2.03 Acceptance by Trustee................................................................ 19
Section 2.04 Limitation of Powers................................................................. 20
ARTICLE III
THE CERTIFICATES.................................................... 20
Section 3.01 Form, Denomination and Execution of Certificates..................................... 20
Section 3.02 Restrictive Legends.................................................................. 21
Section 3.03 Authentication of Certificates....................................................... 23
Section 3.04 Transfer and Exchange................................................................ 24
Section 3.05 Book-Entry Provisions for U.S. Global Certificate and Offshore Global
Certificates......................................................................... 24
Section 3.06 Special Transfer Provisions.......................................................... 26
Section 3.07 Mutilated, Destroyed, Lost or Stolen Certificates.................................... 29
Section 3.08 Persons Deemed Owners................................................................ 29
Section 3.09 Cancellation......................................................................... 29
Section 3.10 Temporary Certificates............................................................... 29
Section 3.11 Limitation of Liability for Payments................................................. 30
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS.................................... 30
Section 4.01 Certificate Account and Special Payments Account..................................... 30
Section 4.02 Distributions from Certificate Account and Special Payments Account.................. 31
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.03 Statements to Certificateholders..................................................... 32
Section 4.04 Investment of Special Payment Moneys................................................. 33
ARTICLE V
THE COMPANY....................................................... 33
Section 5.01 Maintenance of Corporate Existence................................................... 33
Section 5.02 Consolidation, Merger, etc........................................................... 33
ARTICLE VI
DEFAULT........................................................ 35
Section 6.01 Events of Default.................................................................... 35
Section 6.02 Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit................... 37
Section 6.03 Control by Certificateholders........................................................ 37
Section 6.04 Waiver of Past Defaults.............................................................. 38
Section 6.05 Right of Certificateholders to Receive Payments Not to Be Impaired................... 38
Section 6.06 Certificateholders May Not Bring Suit Except Under Certain Conditions................ 38
Section 6.07 Remedies Cumulative.................................................................. 39
ARTICLE VII
THE TRUSTEE....................................................... 39
Section 7.01 Certain Duties and Responsibilities.................................................. 39
Section 7.02 Notice of Defaults................................................................... 40
Section 7.03 Certain Rights of Trustee............................................................ 40
Section 7.04 Not Responsible for Recitals or Issuance of Certificates............................. 41
Section 7.05 May Hold Certificates................................................................ 42
Section 7.06 Money Held in Trust.................................................................. 42
Section 7.07 Compensation and Reimbursement....................................................... 42
Section 7.08 Corporate Trustee Required; Eligibility.............................................. 43
Section 7.09 Resignation and Removal; Appointment of Successor.................................... 43
Section 7.10 Acceptance of Appointment by Successor............................................... 45
Section 7.11 Merger, Conversion, Consolidation or Succession to Business.......................... 45
Section 7.12 Maintenance of Agencies.............................................................. 46
Section 7.13 Money for Certificate Payments to Be Held in Trust................................... 47
Section 7.14 Registration of Equipment Notes in Name of Subordination Agent....................... 47
Section 7.15 Representations and Warranties of Trustee............................................ 47
Section 7.16 Withholding Taxes; Information Reporting............................................. 49
Section 7.17 Trustee's Liens...................................................................... 49
Section 7.18 Preferential Collection of Claims.................................................... 49
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE.................................. 49
Section 8.01 The Company to Furnish Trustee with Names and
Addresses of Certificateholders...................................................... 49
Section 8.02 Preservation of Information; Communications to Certificateholders.................... 50
Section 8.03 Reports by Trustee................................................................... 50
Section 8.04 Reports by the Company............................................................... 50
ARTICLE IX
SUPPLEMENTAL AGREEMENTS................................................. 51
Section 9.01 Supplemental Agreements Without Consent of Certificateholders........................ 51
Section 9.02 Supplemental Agreements with Consent of Certificateholders........................... 52
Section 9.03 Documents Affecting Immunity or Indemnity............................................ 53
Section 9.04 Execution of Supplemental Agreements................................................. 53
Section 9.05 Effect of Supplemental Agreements.................................................... 53
Section 9.06 Conformity with Trust Indenture Act.................................................. 53
Section 9.07 Reference in Certificates to Supplemental Agreements................................. 53
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS................................. 54
Section 10.01 Amendments and Supplements to Indentures and Other Note Documents................... 54
ARTICLE XI
TERMINATION OF TRUSTS................................................. 55
Section 11.01 Termination of the Trusts........................................................... 55
ARTICLE XII
MISCELLANEOUS PROVISIONS............................................... 56
Section 12.01 Limitation on Rights of Certificateholders.......................................... 56
Section 12.02 Certificates Nonassessable and Fully Paid........................................... 56
Section 12.03 Notices............................................................................. 56
Section 12.04 Governing Law....................................................................... 57
Section 12.05 Severability of Provisions.......................................................... 57
Section 12.06 Trust Indenture Act Controls........................................................ 58
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 12.07 Effect of Headings and Table of Contents............................................ 58
Section 12.08 Successors and Assigns.............................................................. 58
Section 12.09 Benefits of Agreement............................................................... 58
Section 12.10 Legal Holidays...................................................................... 58
Section 12.11 Counterparts........................................................................ 58
Section 12.12 Intention of Parties................................................................ 58
Section 12.13 Registration of Equipment Notes in Name of Subordination Agent...................... 58
Section 12.14 Communication by Certificateholders with other Certificateholders................... 58
Schedule 1 - Indentures
Schedule 2 - Note Purchase Agreement
Exhibit A - Form of Certificate
Exhibit B - Form of Certificate for Unlegended Certificates
Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers
Pursuant to Regulation S
Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers to Non-
QIB Accredited Investors
</TABLE>
iv
<PAGE> 6
Reconciliation and tie between United Air Lines Pass Through Trust Agreement,
dated as of December 23, 1997, and the Trust Indenture Act of 1939. This
reconciliation does not constitute part of the Pass Through Trust Agreement.
<TABLE>
<CAPTION>
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
------------------- ------------------
<S> <C>
310(a)(1) 7.08
(a)(2) 7.08
(b) 7.09
311(a) 7.18
(b) 7.18
312(a) 8.01; 8.02
(b) 12.14
(c) 12.14
313(a) 8.03
(c) 8.04
314(a)(1) 8.04(a)
(a)(2) 8.04(b)
(a)(3) 8.04(c)
(a)(4) 8.04(d)
(c)(1) 1.02
(c)(2) 1.02
(e) 1.02
315(a)(1) 7.01
(a)(2) 7.03
(b) 7.02
(c) 7.01(b)
(d) 7.01
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.02
(a)(1)(B) 6.04
(b) 6.05
(c) 1.04(d)
317(a)(1) 6.02
(b) 7.13
318(a) 12.06
</TABLE>
v
<PAGE> 7
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of December 23,
1997, between UNITED AIR LINES, INC., a Delaware corporation, and FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as
Trustee, is made with respect to the formation from time to time of separate
United Air Lines Pass Through Trusts and the issuance from time to time of
separate classes of Certificates representing fractional undivided interests in
the respective Trusts.
WHEREAS, from time to time the Company (this and certain
other defined terms used herein are defined in Section 1.01) may enter into a
Trust Supplement with the Trustee named therein pursuant to which such Trustee
shall declare the creation of a separate Trust for the benefit of the Holders
of the class of Certificates to be issued in respect of such Trust, and the
initial Holders of the Certificates of such class, as the grantors of such
Trust, by their respective acceptances of the Certificates of such class, shall
join in the creation of such Trust with the Trustee;
WHEREAS, all Certificates to be issued in respect of each
separate Trust shall be issued and designated as Class A, Class B, Class C or
Class D pursuant to this Agreement, shall evidence fractional undivided
interests in the Trusts of the same class and shall have no rights, benefits or
interests in respect of any separate Trust of any other class or the property
held therein, subject, however, to the provisions of the Intercreditor
Agreement.
WHEREAS, from time to time, pursuant to the terms and
conditions of this Agreement with respect to each separate Trust formed
hereunder, the Trustee on behalf of such Trust shall purchase one or more
issues of Equipment Notes having the same interest rate as the class of
Certificates issued in respect of such Trust and, subject to the terms of the
Intercreditor Agreement, shall hold such Equipment Notes in trust for the
benefit of the Certificateholders of such Trust;
WHEREAS, to facilitate the sale of Equipment Notes to, and
the purchase of Equipment Notes by, the Trustee on behalf of each Trust created
from time to time pursuant to this Agreement, the Company has duly authorized
the execution and delivery of this Basic Agreement and each Trust Supplement as
the "issuer," as such term is defined in and solely for purposes of the
Securities Act of 1933, as amended, of the Certificates to be issued in respect
of each Trust and as the "obligor," as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended, with respect to all
such Certificates and is undertaking to perform certain administrative and
ministerial duties hereunder and is also undertaking to pay the fees and
expenses of the Trustee; and
WHEREAS, this Basic Agreement, as amended or supplemented
from time to time, shall, upon effectiveness of the Exchange Offer Registration
Statement and/or the Shelf Registration Statement described in the Registration
Rights Agreement, be subject to the provisions of the Trust Indenture Act of
1939, as amended, and shall, to the extent applicable, be governed by such
provisions;
<PAGE> 8
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, and of other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For all purposes of this Basic
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms used herein that are defined in this Article I
have the meanings assigned to them in this Article I, and include the
plural as well as the singular;
(b) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, or by
the rules promulgated under the Trust Indenture Act, have the meanings
assigned to them therein;
(c) all references in this Basic Agreement to designated
"Articles," "Sections," "Subsections" and other subdivisions are to
the designated Articles, Sections, Subsections and other subdivisions
of this Basic Agreement;
(d) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Basic Agreement as whole and not
to any particular Article, Section, Subsection or other subdivision;
and
(e) unless the context otherwise requires, whenever the words
"including," "include" or "includes" are used herein, it shall be
deemed to be followed by the phrase "without limitation".
Additional Payments: Means a payment of Make-Whole Amount
and/or Break Amount, if any.
Affiliate: With respect to any specified Person, means any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such Person. For the
purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Agent Members: Has the meaning specified in Section 3.05(a).
2
<PAGE> 9
Agreement: Means, unless the context otherwise requires, this
Basic Agreement as supplemented by the Trust Supplement creating a
particular Trust and establishing the class of Certificates issued or
to be issued in respect thereof, with reference to such Trust and each
class of Certificates, as this Basic Agreement as so supplemented may
be further supplemented with respect to such Trust and such class of
Certificates.
Aircraft: Means an aircraft, including engines therefor, owned
by or leased to the Company and securing one or more Equipment Notes.
Authorized Agent: With respect to the Certificates of any
class, means any Paying Agent or Registrar for the Certificates of such
class.
Avoidable Tax: Means a state or local tax (i) upon (w) the
Trust, (x) the Trust Property, (y) Certificateholders or (z) the
Trustee for which the Trustee is entitled to seek reimbursement from
the Trust Property, and (ii) which would be avoided if the Trustee
were located in another state, or jurisdiction within a state, within
the United States. A tax shall not be an Avoidable Tax if the Company
or any Owner Trustee shall agree to pay, and shall pay, such tax.
Basic Agreement: Means this Pass Through Trust Agreement, as
the same may from time to time be supplemented, amended or modified,
but does not include any Trust Supplement.
Break Amount: Has the meaning specified therefor in the
Indentures.
Business Day: With respect to the Certificates of any class,
means any day (x) other than a Saturday or Sunday or a day on which
commercial banks are required or authorized to close in Chicago,
Illinois, New York, New York, Frankfurt, Germany, or, so long as any
such Certificate is outstanding, a city and state in which the Trustee
or any related Indenture Trustee maintains its Corporate Trust Office
or receives and disburses funds and (y) on which dealings are carried
on in the London interbank market.
Cedel: Means Cedel Bank, societe anonyme.
Certificate: Means any one of the Initial Certificates or
Exchange Certificates and any such Certificates issued in exchange
therefor or replacement thereof pursuant to this Agreement.
Certificate Account: With respect to the Certificates of any
class, means the account or accounts created and maintained for such
class pursuant to Section 4.01(a).
Certificateholder or Holder: With respect to the Certificates
of any class, means the Person in whose name a Certificate of such
class is registered in the Register for Certificates of such class.
3
<PAGE> 10
Class A Certificates: Means Certificates designated as "Class
A Certificates" in the Trust Supplement pursuant to which such
Certificates are issued.
Class B Certificates: Means Certificates designated as "Class
B Certificates" in the Trust Supplement pursuant to which such
Certificates are issued.
Class C Certificates: Means Certificates designated as "Class
C Certificates" in the Trust Supplement pursuant to which such
Certificates are issued.
Class D Certificate: Means Certificates designated as "Class
D Certificates" in the Trust Supplement pursuant to which such
Certificates are issued.
Company: Means United Air Lines, Inc., a Delaware
corporation, or its successor in interest pursuant to Section 5.02, or
(only in the context of provisions hereof, if any, when such reference
is required for purposes of compliance with the Trust Indenture Act)
any other obligor (within the meaning of the Trust Indenture Act) with
respect to the Certificates.
Controlling Party: Means the Person entitled to act as such
pursuant to the terms of the Intercreditor Agreement.
Corporate Trust Office: With respect to the Trustee or any
Indenture Trustee, means the office of such trustee in the city at
which at any particular time its corporate trust business shall be
principally administered.
Cut-off Date: With respect to the Certificates of a Trust of
any class, means the date designated as such in the related Trust
Supplement.
Depositary: Means The Depository Trust Company, its nominees
and their respective successors.
Direction: Has the meaning specified in Section 1.04(a).
Distribution Date: With respect to the Certificates of any
class, means any Regular Distribution Date or Special Distribution
Date.
Eligible Account: Means an account established by and with an
Eligible Institution at the request of the Trustee, which institution
agrees, for all purposes of the applicable Uniform Commercial Code
("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 credited to such account shall be treated as a "financial
asset" (as defined in Section 8-102(9) of the UCC), (c) the Trustee
shall be the "entitlement holder" (as defined in Section 8-102(7) of
the UCC) in respect of such account, (d) such Eligible Institution
shall comply with all entitlement orders issued by the Trustee to the
exclusion of any other Person and (e) the
4
<PAGE> 11
"securities intermediary jurisdiction" (under Section 8-110(e) of the
UCC) shall be the State of Illinois.
Eligible Institution: Means the corporate trust department of
(a) First Security Bank, National Association, acting solely in its
capacity as a "securities intermediary" (as defined in Section
8-102(14) of the applicable Uniform Commercial Code, 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 Investors Service, Inc. and
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., of at least "A-3" or its equivalent.
Equipment Note: With respect to the Certificates of any class,
has the meaning given to "Equipment Note" in the related Indenture.
ERISA: Means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor federal statute.
Escrow Account: With respect to the Certificates of any class,
has the meaning specified in Section 2.02(b).
Escrowed Funds: With respect to the Trusts of any class, has
the meaning specified in Section 2.02(b).
Euroclear: Means the Euroclear System.
Event of Default: Means, in respect of any Trusts of a class,
an Indenture Default under any Indenture pursuant to which Equipment
Notes held by such Trusts were issued.
Exchange Certificate: Means any of the certificates,
substantially in the form of Exhibit A, issued in exchange for an
Initial Certificate pursuant to the Registration Rights Agreement and
authenticated under this Agreement.
Exchange Offer Registration Statement: Means the Exchange
Offer Registration Statement defined in the Registration Rights
Agreement.
Financing Documents: With respect to any Equipment Note,
means (i) the related Participation Agreement and Indenture and (ii)
in the case of any Equipment Note related to a Leased Aircraft, the
Lease relating to such Leased Aircraft.
Fractional Cumulative Interest: Means, with respect to any
outstanding Certificate of a class, the principal amount of such
Certificate divided by the aggregate principal amount of all
Certificates of such class issued pursuant to all Trust Supplements
creating Trusts of such class.
5
<PAGE> 12
Fractional Undivided Interest: Means the fractional undivided
interest in a Trust that is evidenced by a Certificate relating to such
Trust.
Global Certificates: Has the meaning assigned to such term in
Section 3.01(d).
Indenture: With respect to any Trust, means each of the one
or more separate trust indenture and security agreements or trust
indentures and mortgages or similar agreements described on Schedule 1
attached to this Agreement which relates to an issue of Equipment
Notes to be held in such Trust; as each such indenture may be amended
or supplemented in accordance with its respective terms; and
Indentures means all of such agreements.
Indenture Default: With respect to any Indenture, means any
Indenture Event of Default (as such term is defined in such Indenture).
Indenture Trustee: With respect to any Equipment Note or the
Indenture applicable thereto, means the bank or trust company
designated as indenture trustee under such Indenture, together with
any successor to such Indenture Trustee appointed pursuant thereto.
Initial Certificate: Means any of the certificates issued and
authenticated, under this Agreement, substantially in the form of
Exhibit A, other than an Exchange Certificate.
Initial Purchasers: Means, collectively, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Citicorp Securities, Inc.,
Credit Suisse First Boston Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
Initial Regular Distribution Date: With respect to the
Certificates of any class, means the first Regular Distribution Date on
which a Scheduled Payment is to be made.
Institutional Accredited Investor: Means an institutional
investor that is an "accredited investor" within the meaning set forth
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act.
Intercreditor Agreement: Means the Intercreditor Agreement,
dated as of the date hereof, by and among First Security Bank, National
Association, as Trustee, Kreditanstalt fur Wiederaufbau, as Class A
Primary Liquidity Provider and Class B Primary Liquidity Provider,
Credit Suisse Financial Products, as Class A Above-Cap Liquidity
Provider and Class B Above-Cap Liquidity Provider, and First Security
Bank, National Association, as Subordination Agent thereunder, as
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
Issuance Date: With respect to the Certificates of a Trust of
any class, means the date of the issuance of the Initial Certificates
of such Trust.
6
<PAGE> 13
Lease: Means, with respect to each Leased Aircraft, the lease
between an Owner Trustee, as the lessor, and the Company, as the
lessee, referred to in the related Indenture, as such lease may be
amended, supplemented or otherwise modified in accordance with its
terms.
Leased Aircraft: Has the meaning specified in the
Intercreditor Agreement.
Liquidity Facility: Has the meaning specified in the
Intercreditor Agreement.
Liquidity Provider: Has the meaning specified in the
Intercreditor Agreement.
Make-Whole Amount: Has the meaning specified therefor in the
Indentures.
Non-U.S. Person: Means a Person that is not a "U.S. person,"
as defined in Regulation S.
Note Documents: With respect to the Certificates of any class,
the Equipment Notes with respect to such Certificates and, with respect
to such Equipment Notes, the related Financing Documents.
Note Purchase Agreement: Means the Note Purchase Agreement,
dated as of December 23, 1997, among the Company, the Owner Trustees,
the Trustee, the Subordination Agent and the Indenture Trustees, as
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
Officer's Certificate: Means a certificate signed, (a) in the
case of the Company, by the Chairman of the Board of Directors, the
President, any Vice President, the Secretary or the Treasurer, or (b)
in the case of an Owner Trustee or an Indenture Trustee, a Responsible
Officer of such Owner Trustee or such Indenture Trustee, as the case
may be.
Offshore Certificates Exchange Date: With respect to the
Certificates of any class, has the meaning specified in Section
3.01(d).
Offshore Global Certificates: Has the meaning specified in
Section 3.01(d).
Offshore Physical Certificates: Has the meaning specified in
Section 3.01(e).
Opinion of Counsel: Means a written opinion of legal counsel
who (a) in the case of counsel for the Company may be (i) an attorney
of the Company, (ii) Vedder, Price, Kaufman & Kammholz, (iii) Mayer,
Brown & Platt or (iv) such other counsel designated by the Company and
reasonably acceptable to the Trustee and (b) in the case of counsel for
any Owner Trustee or any Indenture Trustee may be such counsel as may
be designated by any of them whether or not such counsel is an employee
of any of them, and who shall be reasonably acceptable to the Trustee.
7
<PAGE> 14
Outstanding: With respect to Certificates of any class,
means, as of the date of determination, all Certificates of such class
theretofore authenticated and delivered under this Agreement, except:
(i) Certificates of such class theretofore canceled
by the Registrar or delivered to the Trustee or the Registrar
for cancellation;
(ii) All of the Certificates of such class if money
in the full amount required to make the final distribution
with respect to such class pursuant to Section 11.01 has been
theretofore deposited with the Trustee in trust for the
Holders of the Certificates of such class as provided in
Section 4.01 pending distribution of such money to such
Certificateholders pursuant to such final distribution
payment; and
(iii) Certificates of such class in exchange for or
in lieu of which other Certificates of such class have been
authenticated and delivered pursuant to this Basic Agreement.
Owned Aircraft: Has the meaning specified in the Intercreditor
Agreement.
Owner Participant: With respect to any Equipment Note relating
to a Leased Aircraft, means the "Owner Participant" as referred to in
the Indenture pursuant to which such Equipment Note is issued and any
permitted successor or assign of such Owner Participant; and Owner
Participants at any time of determination means all of the Owner
Participants thus referred to in the Indentures.
Owner Trustee: With respect to any Equipment Note relating to
a Leased Aircraft, means the "Owner Trustee," as referred to in the
Indenture pursuant to which such Equipment Note is issued, not in its
individual capacity but solely as trustee; and Owner Trustees means
all of the Owner Trustees party to any of the Indentures.
Participation Agreement: With respect to any Aircraft, means
the Participation Agreement referred to in the related Indenture.
Paying Agent: With respect to the Certificates of any class,
means the paying agent maintained and appointed for the Certificates of
such class pursuant to Section 7.12.
Permanent Offshore Global Certificates: Has the meaning
specified in Section 3.01(d).
Permitted Investments: Means obligations of the United States
of America or agencies or instrumentalities thereof the payment of
which is backed by the full faith and credit of the United States of
America and which mature in not more than 60 days after the date of
acquisition thereof or such lesser time as is required for the
distribution of any
8
<PAGE> 15
Special Payments on a Special Distribution Date. All Permitted
Investments held by the Trustee pursuant to Section 4.04 shall either
be (a) registered in the name of, payable to the order of, or
specially endorsed to the Trustee, or (b) held in an Eligible Account.
Person: Means any person, including any individual,
corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, trustee, unincorporated
organization, or government or any agency or political subdivision
thereof.
Physical Certificates: Has the meaning specified in Section
3.01(e).
Pool Balance: With respect to the Certificates issued
pursuant to the Trusts of the same class, means, as of any date, (i)
the original aggregate face amount of the Certificates of such class
less (ii) the aggregate amount of all payments made in respect of such
Certificates of such class other than payments made in respect of
interest or Additional Payments thereon or reimbursement of any costs
or expenses incurred in connection therewith. The Pool Balance as of
any Distribution Date, with respect to the Certificates of such
Trusts, shall be computed after giving effect to the payment of
principal, if any, on the Equipment Notes or other Trust Property held
in such Trusts and the distribution thereof to be made on such
Distribution Date.
Pool Factor: With respect to the Certificates issued pursuant
to the Trusts of the same class, means, as of any date, the quotient
(rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance of such class as at such date by (ii) the original
aggregate face amount of the Certificates of such Trusts. The Pool
Factor as of any Distribution Date, with respect to such Trusts, shall
be computed after giving effect to the payment of principal, if any,
on the Equipment Notes or other Trust Property held in such Trusts and
the distribution thereof to be made on such Distribution Date.
Postponed Notes: Means the Equipment Notes to be held in the
Trust as to which a Postponement Notice shall have been delivered
pursuant to Section 2.02(b).
Postponement Notice: Means, with respect to any Trust or the
related class of Certificates, an Officer's Certificate of the Company
(1) requesting that the Trustee temporarily postpone the purchase of
the related Equipment Notes to a date which is later than the Issuance
Date of such class of Certificates, (2) identifying the amount of the
purchase price of each such Equipment Note and the aggregate purchase
price for all such Equipment Notes, (3) setting forth the reasons for
such postponement and (4) with respect to each such Equipment Note,
either (a) setting or resetting a new Transfer Date (which shall be on
or prior to the applicable Cut-off Date) for payment by the Trustee of
such purchase price and issuance of the related Equipment Note, or (b)
indicating that such new Transfer Date (which shall be on or prior to
the applicable Cut-off Date) shall be set by subsequent written notice
not less than one Business Day prior to such new Transfer Date.
Private Placement Legend: Has the meaning specified in Section
3.02(a).
9
<PAGE> 16
QIB: Means a "qualified institutional buyer" as defined in
Rule 144A.
Record Date: With respect to any Trust or the related class
of Certificates, means (i) for Scheduled Payments to be distributed on
any Regular Distribution Date, other than the final distribution, with
respect to such class of Certificates, the 15th day (whether or not a
Business Day) preceding such Regular Distribution Date, and (ii) for
Special Payments to be distributed on any Special Distribution Date,
other than the final distribution, with respect to such class of
Certificates, the 15th day (whether or not a Business Day) preceding
such Special Distribution Date.
Register and Registrar: With respect to the Certificates of
any class, means the register maintained and the registrar appointed
for such class pursuant to Sections 3.04 and 7.12.
Registration Rights Agreement: Means the Registration Rights
Agreement, dated as of the date hereof, between the Initial
Purchasers, the Trustee and the Company, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
Registration Statement: Means the Registration Statement
defined in the Registration Rights Agreement.
Regular Distribution Date: With respect to distributions of
Scheduled Payments in respect of any class of Certificates, means each
date designated as a Regular Distribution Date in this Agreement;
provided, however, that, if any such day shall not be a Business Day,
the related distribution shall be made on the next Business Day
together with additional interest accrued to such next Business Day at
the rate applicable to such class of Certificates.
Regulation S: Means Regulation S under the Securities Act or
any successor regulation thereto.
Responsible Officer: With respect to any Trustee, any
Indenture Trustee and any Owner Trustee, means any officer in the
Corporate Trust Department of the Trustee, Indenture Trustee or Owner
Trustee or any other officer customarily performing functions similar
to those performed by the persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with a particular
subject.
Rule 144A: Means Rule 144A under the Securities Act and any
successor rule thereto.
Scheduled Payment: With respect to any Equipment Note, means
(i) any payment of principal or interest on such Equipment Note (other
than any such payment that is not in fact received by the
Subordination Agent within five days of the date on which such payment
10
<PAGE> 17
is scheduled to be made) due from the obligor thereon or (ii) any
payment of interest on the Class A Certificates or Class B
Certificates with funds drawn under the Liquidity Facility for such
class, which payment represents the installment of principal on such
Equipment Note at the stated maturity of such installment of
principal, the payment of regularly scheduled interest accrued on the
unpaid principal amount of such Equipment Note, or both; provided,
however, that any payment of principal, Additional Payment or interest
resulting from the redemption or purchase of any Equipment Note shall
not constitute a Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as from
time to time constituted or created under the Securities Exchange Act
of 1934, as amended, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties
now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
Securities Act: Means the United States Securities Act of
1933, as amended from time to time, or any successor thereto.
Special Distribution Date: With respect to the Certificates
of any class, means each date on which a Special Payment is to be
distributed as specified in this Agreement; provided, however, that,
if any such day shall not be a Business Day, the related distribution
shall be made on the next Business Day together with additional
interest accrued to such next Business Day at the rate applicable to
such class of Certificates.
Special Payment: With respect to the Certificates of any
class, means (i) any payment (other than a Scheduled Payment) in
respect of, or any proceeds of, any Equipment Note or Trust Indenture
Estate (as defined in each Indenture), (ii) the amounts required to be
distributed pursuant to the last paragraph of Section 2.02(b) or (iii)
the amounts required to be distributed pursuant to the penultimate
paragraph of Section 2.02(b).
Special Payments Account: With respect to the Certificates of
any class, means the account or accounts created and maintained for
such class pursuant to Section 4.01(b).
Specified Investments: With respect to any Trust, means,
unless otherwise specified in the related Trust Supplement, each of
(i) obligations of, or guaranteed by, the United States Government or
agencies thereof, (ii) open market commercial paper of any corporation
incorporated under the laws of the United States of America or any
State thereof rated at least P-1 or its equivalent by Moody's
Investors Service, Inc. or at least A-1 or its equivalent by Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc., (iii) certificates of deposit issued by commercial banks
organized under the laws of the United States or of any political
subdivision thereof having a combined capital and surplus in excess of
$500,000,000 which banks or their holding companies have a rating of A
or its equivalent by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc.;
11
<PAGE> 18
provided, however, that the aggregate amount at any one time so
invested in certificates of deposit issued by any one bank shall not
exceed 5% of such bank's capital and surplus, (iv) U.S. dollar
denominated offshore certificates of deposit issued by, or offshore
time deposits with, any commercial bank described in clause (iii) or
any subsidiary thereof and (v) repurchase agreements with any
financial institution having combined capital and surplus of at least
$500,000,000 with any of the obligations described in clauses (i)
through (iv) as collateral; and, provided further, that if all of the
above investments are unavailable, the entire amount to be invested
may be used to purchase federal funds from an entity described in
clause (iii) above. All Specified Investments held by the Trustee
pursuant to Section 2.02(b) shall either be (a) registered in the name
of, payable to the order of, or specially endorsed to the Trustee, or
(b) held in an Eligible Account.
Subordination Agent: Has the meaning specified therefor in the
Intercreditor Agreement.
Temporary Offshore Global Certificates: Has the meaning
specified in Section 3.01(d).
Transfer Date: Has the meaning assigned to the term Closing
Date in the Note Purchase Agreement.
Triggering Event: Has the meaning specified therefor in the
Intercreditor Agreement.
Trust: With respect to the Certificates of any class, means
any trust of such class under this Agreement.
Trustee: Means First Security Bank, National Association, or
its successor-in-interest, and any successor or other trustee
appointed as provided in the Trust Agreements; provided, however, that
if the same institution is not acting as Trustee in respect of all
classes of Certificates, the phrase "the Trustee" shall, unless the
context otherwise requires, mean, as to any Class of Certificates, the
institution acting as the Trustee in respect of such class.
Trust Indenture Act: Except as otherwise provided in Section
9.06, means the United States Trust Indenture Act of 1939 as in force
at the date as of which this Basic Agreement was executed.
Trust Property: With respect to any Trust, means (i) the
Equipment Notes held as the property of such Trust and all monies at
any time paid thereon and all monies due and to become due thereunder,
(ii) funds from time to time deposited in the related Escrow Account,
the related Certificate Account and the related Special Payments
Account, (iii) all rights of such Trust and the Trustee, on behalf of
such Trust, under the Intercreditor Agreement, the Registration Rights
Agreement and the Note Purchase Agreement, including
12
<PAGE> 19
all rights to receive certain payments thereunder and all monies paid
to such Trustee on behalf of such Trust pursuant to the Intercreditor
Agreement, the Registration Rights Agreement or the Note Purchase
Agreement and (iv) for the Trusts relating to the Class A Certificates
and the Class B Certificates, all monies receivable by the
Subordination Agent under the Liquidity Facilities for such Trusts.
Trust Supplement: Means an agreement supplemental hereto
pursuant to which (i) a separate Trust is created for the benefit of
the Holders of the Certificates of a class, (ii) the issuance of the
Certificates of such class representing fractional undivided interests
in such Trust is authorized and (iii) the terms of the Certificates of
such class are established.
Trustee's Lien: Has the meaning specified in Section 7.17.
U.S. Global Certificate: Has the meaning specified in Section
3.01(e).
U.S. Physical Certificates: Has the meaning specified in
Section 3.01(e).
Section 1.02 Compliance Certificates and Opinions. Upon any
application or request (except with respect to matters set forth in Article II)
by the Company, any Owner Trustee or any Indenture Trustee to the Trustee to
take any action under any provision of this Basic Agreement or, in respect of
the Certificates of any class, this Agreement, the Trustee may request that the
Company, such Owner Trustee or such Indenture Trustee, as the case may be,
furnish to the Trustee (i) an Officer's Certificate stating that, in the
opinion of the signers, all conditions precedent, if any, provided for in this
Basic Agreement or this Agreement relating to the proposed action have been
complied with and (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Basic Agreement or this Agreement relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Basic Agreement or, in respect of
the Certificates of any class, this Agreement (other than a certificate
provided pursuant to Section 8.04(d)) or any Trust Supplement shall include:
(i) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions in this Basic Agreement or this Agreement
relating thereto;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
individual, he has made such examination or investigation as
is necessary to enable him to express an
13
<PAGE> 20
informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether, in the opinion of
each such individual, such condition or covenant has been
complied with.
Section 1.03 Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters and any such Person may certify or give an
opinion as to such matters in one or several documents.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Basic Agreement or, in respect of the Certificates
of any class, this Agreement, they may, but need not, be consolidated and form
one instrument.
Section 1.04 Directions of Certificateholders. (a) Any
direction, consent, request, demand, authorization, notice, waiver or other
action provided by this Agreement in respect of the Certificates of any class
to be given or taken by Certificateholders (a "Direction") may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Certificateholders in person or by an agent or proxy duly appointed in
writing; and, except as otherwise expressly provided herein, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required pursuant to this Agreement,
to the Company or any Indenture Trustee. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Company and any Indenture Trustee, if made in the manner provided
in this Section 1.04.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the certificate of any notary
public or other officer of any jurisdiction authorized to take acknowledgments
of deeds or administer oaths that the Person executing such instrument
acknowledged to him the execution thereof, or by an affidavit of a witness to
such execution sworn to before any such notary or such other officer and where
such execution is by an officer of a corporation or association or a member of
a partnership, on behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other reasonable manner which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the
requisite Fractional Cumulative Interests of Certificates of any class
Outstanding have given any Direction under this Agreement, Certificates owned
by the Company or any Affiliate thereof shall be disregarded and
14
<PAGE> 21
deemed not to be Outstanding for purposes of any such determination. In
determining whether the Trustee shall be protected in relying upon any such
Direction, only Certificates which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of
the Certificates of any class Outstanding, such Certificates shall not be so
disregarded, and (ii) if any amount of Certificates of such class so owned by
any such Person have been pledged in good faith, such Certificates shall not be
disregarded if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and that the
pledgee is not the Company or any Affiliate thereof.
(d) The Company may at its option, by delivery of an
Officer's Certificate to the Trustee, set a record date to determine the
Certificateholders in respect of the Certificates of any class entitled to give
any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's Certificate,
which shall be a date not more than 30 days prior to the first solicitation of
Certificateholders of the applicable class in connection therewith. If such a
record date is fixed, such Direction may be given before or after such record
date, but only the Certificateholders of record of the applicable class at the
close of business on such record date shall be deemed to be Certificateholders
for the purposes of determining whether Certificateholders of the requisite
proportion of outstanding Certificates of such class have authorized or agreed
or consented to such Direction, and for that purpose the Outstanding
Certificates of such class shall be computed as of such record date. No such
Direction by the Certificateholders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Basic Agreement not later than one year after such record date.
(e) Any Direction by the Holder of any Certificate shall bind
the Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Direction is made
upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c),
Certificates of any class owned by or pledged to any Person shall have an equal
and proportionate benefit under the provisions of this Agreement, without
preference, priority or distinction as among all of the Certificates of such
class.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01 Amount Unlimited; Issuable in Classes. (a) The
aggregate principal amount of Certificates which may be authenticated and
delivered under this Basic Agreement is unlimited. The Certificates may be
issued from time to time in one or more class and shall be designated generally
as the "Pass Through Certificates," with such further designations added or
incorporated in such title for the Certificates of each class as specified in
the related Trust Supplement. Each Certificate shall bear upon its face the
designation so selected for the class to
15
<PAGE> 22
which it belongs. All Certificates of the same class shall be substantially
identical except that the Certificates of a class may differ as to denomination
and as may otherwise be provided in the Trust Supplement establishing the
Certificates of such class. Each class of Certificates issued pursuant to this
Agreement shall evidence fractional undivided interests in the related Trust
and Fractional Cumulative Interests in all Trusts of such class and shall have
no rights, benefits or interests in respect of any Trust of any other class or
the Trust Property held therein. All Certificates of the same class shall be in
all respects equally and ratably entitled to the benefits of this Agreement
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Agreement.
(b) The following matters shall be established with respect
to the Certificates of each class issued hereunder by a Trust Supplement
executed and delivered by and between the Company and the Trustee:
(i) the formation of the Trust as to which the
Certificates of such class represent fractional undivided
interests and its class designation (which designation shall
distinguish such Trust from each other Trust of any other
class created under this Basic Agreement and a Trust
Supplement);
(ii) the specific title of the Certificates of such
class (which title shall distinguish the Certificates of such
class from each other class of Certificates created under
this Basic Agreement and a Trust Supplement);
(iii) any limit upon the aggregate principal amount
of the Certificates of such class which may be authenticated
and delivered (which limit shall not pertain to Certificates
authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Certificates of the
class pursuant to Sections 3.04, 3.07 and 3.10);
(iv) the Cut-off Date with respect to the
Certificates of such class;
(v) the Regular Distribution Dates applicable to the
Certificates of such class;
(vi) the Special Distribution Dates applicable to the
Certificates of such class and the related Trust;
(vii) if other than as provided in Section 7.12(b),
the Registrar or the Paying Agent for the Certificates of
such class, including any Co-Registrar or additional Paying
Agent;
(viii) if other than as provided in Section 3.01,
the denominations in which the Certificates of such class
shall be issuable;
16
<PAGE> 23
(ix) the specific form of the Certificates of such
class (including the interest rate applicable thereto) and
whether or not Certificates of such class are to be issued as
Initial Certificates or Exchange Certificates;
(x) a description of the Equipment Notes to be
acquired and held in the related Trust and of the related
Aircraft and the other Note Documents;
(xi) provisions with respect to the terms for which
the definitions set forth in Article I permit or require
further specification in the related Trust Supplement;
(xii) any restrictions (including legends) in respect
of ERISA;
(xiii) whether such class will have the benefit of
Liquidity Facilities and, if so, any terms appropriate
thereto; and
(xiv) any other terms of the Certificates of such
class (which terms shall not be inconsistent with the
provisions of the Trust Indenture Act), including any terms
which may be required or advisable under United States laws
or regulations or advisable in connection with the marketing
of Certificates of the class.
(c) At any time and from time to time after the execution and
delivery of this Basic Agreement and a Trust Supplement forming a Trust and
establishing the terms of Certificates of a class, Certificates of such class
shall be executed, authenticated and delivered by the Trustee to the Person or
Persons specified by the Company upon request of the Company and upon
satisfaction of any conditions precedent set forth in such Trust Supplement or
in any other document to which the Trustee is a party relating to the issuance
of the Certificates of such class.
Section 2.02 Issuance of Certificates; Acquisition of
Equipment Notes. (a) Unless otherwise specified in the related Trust
Supplement, the Trustee is hereby directed to execute and deliver the
Intercreditor Agreement, the Registration Rights Agreement and the Note
Purchase Agreement on or prior to the Issuance Date of the Certificates of a
class, each in the form delivered to the Trustee by the Company, and is hereby
directed to and shall, subject to the respective terms thereof, perform its
obligations thereunder. Upon request of the Company and the satisfaction of the
closing conditions specified in the Note Purchase Agreement, the Trustee shall
execute, deliver and authenticate such Certificates equaling in the aggregate
the aggregate principal amount of the Equipment Notes to be purchased by the
Trustee pursuant to the Note Purchase Agreement on the Transfer Date, and
evidencing the entire ownership interest in the related Trust. The Trustee
shall issue and sell such Certificates, in authorized denominations and in such
Fractional Undivided Interests, so as to result in the receipt by the Trustee
of consideration in an amount equal to the aggregate principal amount of such
Equipment Notes and, concurrently therewith, the Trustee shall purchase,
pursuant to the terms and conditions of the Note Purchase Agreement, the
Equipment Notes at a purchase price equal to the amount of such consideration
so received. Except as provided in Sections 3.04 and 3.07, the Trustee shall
not execute, authenticate or deliver Certificates of any
17
<PAGE> 24
class in excess of the aggregate amount specified in this Section 2.02(a). The
provisions of this Section 2.02(a) are subject to the provisions of Section
2.02(b) below.
(b) On or prior to the Issuance Date with respect to a class
of Certificates, the Company may deliver to the Trustee a Postponement Notice
relating to one or more Postponed Notes, which Postponement Notice may be given
by the Company only if one or more conditions to the purchase of such Postponed
Notes by the Trustee shall not have been satisfied or waived pursuant to the
Note Purchase Agreement. The Trustee shall postpone the purchase of the
Postponed Notes from the consideration received from the sale of such
Certificates and shall promptly deposit funds in an amount equal to the
purchase price of such Postponed Notes (the "Escrowed Funds") into an escrow
account (the "Escrow Account") with the Trustee to be maintained as a part of
the related Trust. The Escrowed Funds so deposited shall be invested by the
Trustee at the direction and risk of, and for the benefit of, the Company in
Specified Investments (i) maturing no later than any scheduled Transfer Date
relating to the Postponed Notes or (ii) if no such Transfer Date has been
scheduled, maturing on the next Business Day, or (iii) if the Company has given
notice to the Trustee that any Postponed Notes shall not be issued or be
available for purchase, with respect to the portion of the Escrowed Funds
relating to such Postponed Notes, maturing on the next applicable Special
Distribution Date, if such investments are reasonably available for purchase.
The Trustee shall make withdrawals from the Escrow Account only as provided in
this Agreement. Upon request of the Company on one or more occasions and the
satisfaction or waiver of the closing conditions specified in the Note Purchase
Agreement on or prior to the Cut-off Date, the Trustee shall purchase the
applicable Postponed Notes with the Escrowed Funds withdrawn from the Escrow
Account. The purchase price shall equal the principal amount of such Postponed
Notes.
The Trustee shall hold all Specified Investments until the
maturity thereof and shall not sell or otherwise transfer Specified
Investments. If Specified Investments held in an Escrow Account mature prior to
any applicable Transfer Date, any proceeds received on the maturity of such
Specified Investments (other than any earnings thereon) shall be reinvested by
the Trustee at the direction and risk of, and for the benefit of, the Company
in Specified Investments maturing as provided in the preceding paragraph.
On the Initial Regular Distribution Date in respect of the
Certificates of any class, the Company shall pay (in immediately available
funds) to the Trustee an amount equal to (i) the sum of (A) the interest that
would have accrued on any Postponed Notes purchased on or prior to the Initial
Regular Distribution Date if such Postponed Notes had been purchased on the
Issuance Date, from and including the Issuance Date to but excluding the date
of such purchase and (B) the interest that would have accrued on any Postponed
Notes not purchased on or prior to the Initial Regular Distribution Date (other
than any Postponed Notes for which a Special Distribution Date specified in the
next paragraph has occurred on or prior to the Initial Regular Distribution
Date) if such Postponed Notes had been purchased on the Issuance Date, from and
including the Issuance Date to but excluding the Initial Regular Distribution
Date, minus (ii) the earnings on Specified Investments received by the Trustee
from and including the later of the Issuance Date or the date preceding the
Initial Regular Distribution Date on which an amount has been paid pursuant to
the next paragraph to but excluding the Initial Regular Distribution Date. On
the second Regular
18
<PAGE> 25
Distribution Date, the Company shall pay (in immediately available funds) to
the Trustee an amount equal to (i) the interest that would have accrued on any
Postponed Notes purchased after the Initial Regular Distribution Date and on or
prior to the Cut-off Date if such Postponed Notes had been purchased on the
Initial Regular Distribution Date, from and including the Initial Regular
Distribution Date to but excluding the date of such purchase, minus (ii) the
earnings on Specified Investments received by the Trustee from and including
the later of the Initial Regular Distribution Date or the date preceding the
second Regular Distribution Date on which an amount has been paid pursuant to
either of the next two paragraphs to but excluding the second Regular
Distribution Date. The Company shall pay to the Trustee for deposit to the
relevant Escrow Account an amount equal to any losses on such Specified
Investments as incurred.
If, in respect of the Certificates of any class, the Company
notifies the Trustee prior to the Cut-off Date that any Postponed Notes shall
not be issued or be available for purchase on or prior to the Cut-off Date for
any reason, on the next Special Distribution Date for such Certificates
occurring more than 20 days following the date of such notice (i) the Company
shall pay to the Trustee for deposit in the related Special Payments Account,
in immediately available funds, an amount equal to the interest that would have
accrued on the Postponed Notes designated in such notice at a rate equal to the
interest rate applicable to such Certificates from and including the Issuance
Date (if such Special Distribution Date shall occur on or prior to the Initial
Regular Distribution Date) or the Initial Regular Distribution Date (if such
Special Distribution Date occurs after the Initial Regular Distribution Date)
to but excluding such Special Distribution Date and (ii) the Trustee shall
transfer an amount equal to that amount of Escrowed Funds that would have been
used to purchase the Postponed Notes designated in such notice plus the amount
paid by the Company pursuant to the preceding clause (i) to the related Special
Payments Account for distribution as a Special Payment in accordance with the
provisions hereof.
If, on the Cut-off Date, an amount equal to less than all of
the Escrowed Funds (other than Escrowed Funds referred to in the preceding
paragraph) has been used to purchase Postponed Notes, on the next Special
Distribution Date occurring more than 20 days following the Cut-off Date (i)
the Company shall pay to the Trustee for deposit in the Special Payments
Account, in immediately available funds, an amount equal to the interest that
would have accrued on the Postponed Notes originally contemplated to be
purchased with such unused Escrowed Funds (other than Escrowed Funds referred
to in the preceding paragraph) but not so purchased at a rate equal to the
interest rate applicable to the Certificates from and including the Initial
Regular Distribution Date to but excluding such Special Distribution Date and
(ii) the Trustee shall transfer such unused Escrowed Funds and the amount paid
by the Company pursuant to the preceding clause (i) to such Special Payments
Account for distribution as a Special Payment in accordance with the provisions
hereof.
Section 2.03 Acceptance by Trustee. The Trustee, upon the
execution and delivery of a Trust Supplement creating a Trust and issuing a
class of Certificates, acknowledges its acceptance of all right, title and
interest in and to the Equipment Notes acquired pursuant to Section 2.02 and
the Note Purchase Agreement and declares that the Trustee holds and shall hold
such right, title and interest, together with all other property constituting
the Trust Property of such Trust, for
19
<PAGE> 26
the benefit of all then present and future Certificateholders of such class,
upon the trusts herein and in such Trust Supplement set forth. Subject to
Section 7.14, the Trustee shall take all actions reasonably necessary to effect
the registration of all such Equipment Notes in the name of the Subordination
Agent. By its payment for and acceptance of each Certificate of such class
issued to it under this Agreement, each initial Certificateholder of such class
as grantor of such Trust thereby joins in the creation and declaration of such
Trust and grants to the Trustee the powers conferred by this Agreement.
Section 2.04 Limitation of Powers. Each Trust is constituted
solely for the purpose of making the investment in the Equipment Notes provided
for in the related Trust Supplement, and, except as set forth herein or in this
Agreement, the Trustee shall not be authorized or empowered to acquire any
other investments or engage in any other activities and, in particular, the
Trustee shall not be authorized or empowered to do anything that would cause
such Trust to fail to qualify as a "grantor trust" for federal income tax
purposes (including as subject to this restriction, acquiring any Aircraft (as
defined in the respective related Indentures) by bidding such Equipment Notes
or otherwise, or taking any action with respect to any such Aircraft once
acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01 Form, Denomination and Execution of
Certificates. (a) Each Certificate shall represent a fractional undivided
interest in a Trust and shall be substantially in the form set forth as Exhibit
A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Certificates, as evidenced by their execution of the
Certificates. Any portion of the text of any Certificate may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Certificate.
(b) Except as otherwise provided in the related Trust
Supplement, the Initial Certificates of each class shall be issued only in
fully registered form without coupons and only in denominations of $100,000 or
integral multiples of $1,000 in excess thereof. Except as otherwise provided in
the related Trust Supplement, the Exchange Certificates of each class shall be
issued in denominations of $100,000 or integral multiples of $1,000 in excess
thereof. Each Certificate shall be dated the date of its authentication.
(c) Initial Certificates of any class offered and sold in
reliance on Rule 144A shall be issued initially in the form of a single
permanent global Certificate of such class in registered form, substantially in
the form set forth as Exhibit A (the "U.S. Global Certificate"), duly executed
and authenticated by the Trustee as hereinafter provided. The U.S. Global
Certificate for each class shall be registered in the name of Cede & Co., as
nominee for the Depositary, and
20
<PAGE> 27
deposited with the Trustee, as custodian for the Depositary. The aggregate
principal amount of the U.S. Global Certificate for any class may from time to
time be increased or decreased by adjustments made on the records of the
Depositary or its nominee, or of the Trustee, as custodian for the Depositary
or its nominee, as hereinafter provided.
(d) Initial Certificates of any class offered and sold in
offshore transactions in reliance on Regulation S shall be issued initially in
the form of a single, temporary global Certificate of such class in registered
form, substantially in the form set forth as Exhibit A (the "Temporary Offshore
Global Certificate") duly executed and authenticated by the Trustee as
hereinafter provided. The Temporary Offshore Global Certificate for each class
shall be registered in the name of a nominee of the Depositary for credit to
the account of the Agent Members acting as depositaries for Euroclear and Cedel
and deposited with the Trustee as custodian for the Depositary. At any time
following February 1, 1998 (the "Offshore Certificates Exchange Date"), upon
receipt by the Trustee of a certificate substantially in the form of Exhibit B,
a single permanent global Certificate of the related class in registered form,
substantially in the form set forth in Exhibit A (the "Permanent Offshore
Global Certificate," and together with the Temporary Offshore Global
Certificate of such class, the "Offshore Global Certificates"), duly executed
and authenticated by the Trustee as hereinafter provided, shall be registered
in the name of a nominee for the Depositary and deposited with the Trustee, as
custodian for the Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal amount of the
Temporary Offshore Global Certificate of such class in an amount equal to the
principal amount of the beneficial interest in such Temporary Offshore Global
Certificate transferred. The U.S. Global Certificate and the Offshore Global
Certificates are sometimes referred to as the "Global Certificates."
(e) Initial Certificates of any class offered and sold to
Institutional Accredited Investors shall be issued in the form of permanent
certificated Certificates of the same class in registered form, in
substantially the form set forth as Exhibit A (the "U.S. Physical
Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for
interests in any Offshore Global Certificate of any class shall be in the form
of permanent certificated Certificates of the same class in registered form,
substantially in the form set forth in Exhibit A (the "Offshore Physical
Certificates"). The Offshore Physical Certificates and U.S. Physical
Certificates are sometimes collectively herein referred to as the "Physical
Certificates."
(f) The definitive Certificates shall be in registered form
and shall be typed, printed, lithographed or engraved or produced by any
combination of these methods or may be produced in any other manner, all as
determined by the officers executing such Certificates, as evidenced by their
execution of such Certificates.
Section 3.02 Restrictive Legends. (a) In respect of the
Certificates of any class, subject to Section 3.06(e), unless and until (i) an
Initial Certificate of such class is sold under an effective Registration
Statement or (ii) an Initial Certificate of such class is exchanged for an
Exchange Certificate of such class pursuant to an effective Exchange Offer
Registration Statement, in each case as provided for in the Registration Rights
Agreement, each Global Certificate of such
21
<PAGE> 28
class (other than the Permanent Offshore Global Certificate of such class) and
each U.S. Physical Certificate of such class shall bear the following legend
(the "Private Placement Legend") on the face thereof:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS
HELD BY UNITED AIR LINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY
SUCH PERSON RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A)
TO UNITED AIR LINES, INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING
$100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE
LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY UNITED AIR LINES,
INC., THE TRUSTEE OR ANY AFFILIATE OF ANY SUCH PERSONS, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
22
<PAGE> 29
REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST
AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
(b) Each Global Certificate of each class shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
(b) Each Certificate of each class shall also bear the
following legend on the face thereof:
EITHER: (A) THE HOLDER IS NOT ACQUIRING THIS CERTIFICATE WITH PLAN
ASSETS OF ANY PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"); OR (B) THE
HOLDER'S PURCHASE AND HOLDING OF THIS CERTIFICATE IS EXEMPT FROM THE
PROHIBITED TRANSACTION RESTRICTIONS OF SECTION 406(A) OF ERISA AND
SECTION 4975 OF THE CODE BY AN ADMINISTRATIVE CLASS PROHIBITED
TRANSACTION EXEMPTION GRANTED BY THE DEPARTMENT OF LABOR.
Section 3.03 Authentication of Certificates. (a) The Trustee
shall duly execute, authenticate and deliver Certificates of each class in
authorized denominations equaling in the aggregate the aggregate principal
amount of the Equipment Notes to be purchased by the Trustee
23
<PAGE> 30
pursuant to the Note Purchase Agreement and evidencing the entire ownership of
the related Trust. Thereafter, the Trustee shall duly execute, authenticate and
deliver the Certificates of a class as herein provided.
(b) No Certificate shall be entitled to any benefit under
this Agreement or be valid or obligatory for any purpose, unless there appears
on such Certificate a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate of authentication upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder.
Section 3.04 Transfer and Exchange. The Trustee shall cause
to be kept at the office or agency to be maintained by it in accordance with
the provisions of Section 7.12 a register (the "Register") for each class of
Certificates in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates of
such class and of transfers and exchanges of such Certificates as herein
provided. The Trustee shall initially be the registrar (the "Registrar") for
the purpose of registering Certificates of each class and transfers and
exchanges of such Certificates as herein provided. A Certificateholder may
transfer a Certificate by written application to the Registrar stating the name
of the proposed transferee and otherwise complying with the terms of this
Agreement, including providing a written certificate or other evidence of
compliance with any restrictions on transfer. No such transfer shall be
effected until, and such transferee shall succeed to the rights of a
Certificateholder only upon, final acceptance and registration of the transfer
by the Registrar in the Register. Prior to the registration of any transfer by
a Certificateholder as provided herein, the Trustee shall treat the person in
whose name the Certificate is registered as the owner thereof for all purposes,
and the Trustee shall not be affected by notice to the contrary. Furthermore,
the Depositary shall, by acceptance of a Global Certificate, agree that
transfers of beneficial interests in such Global Certificate may be effected
only through a book-entry system maintained by the Depositary (or its agent),
and that ownership of a beneficial interest in such Certificate shall be
required to be reflected in a book entry. When Certificates of a class are
presented to the Registrar with a request to register the transfer or to
exchange them for an equal aggregate Fractional Undivided Interest of
Certificates of like class of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met. To permit registrations of
transfers and exchanges in accordance with the terms, conditions and
restrictions hereof, the Trustee shall execute and authenticate Certificates at
the Registrar's request. No service charge shall be made for any registration
of transfer or exchange of the Certificates, but the Trustee may require
payment by the transferor of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any
such transfer taxes or other similar governmental charges payable upon
exchanges pursuant to Section 3.10 or 9.07).
Section 3.05 Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of, or participants
in, the Depositary ("Agent Members") shall have no rights under this Agreement
with respect to any Global Certificate of any class held on their behalf by the
Depositary, or the Trustee as its custodian, and the Depositary may be treated
by the
24
<PAGE> 31
Trustee and any agent of the Trustee as the absolute owner of such Global
Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Trustee or any agent of the Trustee from giving effect
to any written certification, proxy or other authorization furnished by the
Depositary or shall impair, as between the Depositary and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
holder of any Certificate. Upon the issuance of any Global Certificate of any
class, the Registrar or its duly appointed agent shall record a nominee of the
Depositary as the registered holder of such Global Certificate.
(b) Transfers of any Global Certificate shall be limited to
transfers of such Global Certificate or Offshore Global Certificate in whole,
but not in part, to nominees of the Depositary, its successor or such
successor's nominees. Beneficial interests in the U.S. Global Certificate of
any class and any Offshore Global Certificate of any class may be transferred
in accordance with the rules and procedures of the Depositary and the
provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate
of any class or an Offshore Global Certificate of any class shall be delivered
to all beneficial owners in the form of U.S. Physical Certificates of such
class or Offshore Physical Certificates of such class, as the case may be, if
(i) the Depositary notifies the Trustee that it is unwilling or unable to
continue as Depositary for such U.S. Global Certificate or such Offshore Global
Certificate, as the case may be, and a successor depositary is not appointed by
the Trustee within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depositary to issue Physical Certificates.
(c) Any beneficial interest in one of the Global Certificates
of any class that is transferred to a Person who takes delivery in the form of
an interest in the other Global Certificate of such class shall, upon such
transfer, cease to be an interest in such Global Certificate and become an
interest in the other Global Certificate and, accordingly, shall thereafter be
subject to all transfer restrictions, if any, and other procedures applicable
to beneficial interests in such other Global Certificate for as long as it
remains such an interest.
(d) In connection with the transfer of the entire U.S. Global
Certificate of any class or an entire Offshore Global Certificate of any class
to the beneficial owners thereof pursuant to Section 3.05(b), such U.S. Global
Certificate or Offshore Global Certificate, as the case may be, shall be deemed
to be surrendered to the Trustee for cancellation, and the Trustee shall
execute, authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in such U.S. Global
Certificate or Offshore Global Certificate, as the case may be, an equal
aggregate Fractional Undivided Interest of U.S. Physical Certificates or
Offshore Physical Certificates, as the case may be, of like class and of
authorized denominations.
(e) Any U.S. Physical Certificate delivered in exchange for
an interest in the U.S. Global Certificate pursuant to Section 3.05(b) shall,
except as otherwise provided by Section 3.06(e), bear the Private Placement
Legend.
(f) Any Offshore Physical Certificate delivered in exchange
for an interest in an Offshore Global Certificate pursuant to Section 3.05(b)
shall, except as otherwise provided by Section 3.06(e), bear the applicable
legend regarding transfer restrictions set forth in Section 3.02(a).
25
<PAGE> 32
(g) The registered holder of the U.S. Global Certificate of
any class or any Offshore Global Certificate of any class may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Certificates.
Section 3.06 Special Transfer Provisions. With respect to the
Certificates of any class, unless and until (i) an Initial Certificate of such
class is sold under an effective Registration Statement, or (ii) an Initial
Certificate is exchanged for an Exchange Certificate of such class pursuant to
an effective Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, the following provisions shall apply to such
Initial Certificates of such class (and the Registrar shall refuse to register
any exchange except in accordance with the following provisions):
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Certificate of any class to any Institutional Accredited
Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons):
(i) The Registrar shall register the transfer of any
Certificate of such class, whether or not such Certificate
bears the Private Placement Legend, if (x) the requested
transfer is at least two years after the later of the
original issue date of the Certificates and the last date on
which such Certificate was held by the Company, the Trustee
or any affiliate of any such persons or (y) the proposed
transferee has delivered to the Registrar a letter
substantially in the form of Exhibit D and the aggregate
principal amount of the Certificates being transferred is at
least $100,000.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Certificate
of such class, upon receipt by the Registrar of (x) the
documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on
its books and records the date of the transfer and a decrease
in the principal amount of such U.S. Global Certificate in an
amount equal to the Fractional Cumulative Interest
represented by the beneficial interest in such U.S. Global
Certificate to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver to the
transferor or at its direction, one or more U.S.
Physical Certificates of like class, tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial
Certificate of any class to a QIB (excluding Non-U.S. Persons):
(i) If the Certificate to be transferred consists of
U.S. Physical Certificates of such class or an interest in
any Temporary Offshore Global Certificate of such class, the
Registrar shall register the transfer if such transfer is
being made
26
<PAGE> 33
by a proposed transferor who has checked the box provided for
on the form of Initial Certificate of such class stating, or
has otherwise advised the Trustee and the Registrar in
writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Initial Certificate
of such class stating, or has otherwise advised the Trustee
and the Registrar in writing, that it is purchasing the
Initial Certificate of such class for its own account or an
account with respect to which it exercises sole investment
discretion and that it, or the Person on whose behalf it is
acting with respect to any such account, is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the related Trust
and/or the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it
is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents
referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books
and records the date of such transfer and an increase in the
Fractional Cumulative Interest of the U.S. Global Certificate
of such class in an amount equal to the Fractional Cumulative
Interest of the U.S. Physical Certificates or interests in
the Temporary Offshore Global Certificate of such class, as
the case may be, being transferred, and the Trustee shall
cancel such Physical Certificates of such class or decrease
the Fractional Cumulative Interest of such Temporary Offshore
Global Certificate of such class so transferred.
(c) Transfers of Interests in the Permanent Offshore Global
Certificate or Offshore Physical Certificates. The Registrar shall register any
transfer of interests in the Permanent Offshore Global Certificate of any class
or Offshore Physical Certificates of any class without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any registration of any transfer of an
Initial Certificate of any class to a Non-U.S. Person:
(i) With respect to the Certificates of any class,
prior to the Offshore Certificates Exchange Date, the
Registrar shall register any proposed transfer of an Initial
Certificate of such class to a Non-U.S. Person upon receipt
of a certificate substantially in the form set forth as
Exhibit C from the proposed transferor.
(ii) On and after the Offshore Certificates Exchange
Date, the Registrar shall register any proposed transfer to
any Non-U.S. Person if the Certificate of such class to be
transferred is a U.S. Physical Certificate of such class or
an interest in the U.S. Global Certificate of such class,
upon receipt of a certificate substantially in the
27
<PAGE> 34
form of Exhibit C from the proposed transferor. The Registrar
shall promptly send a copy of such certificate to the
Company.
(iii) Upon receipt by the Registrar of (x) the
documents, if any, required by paragraph (ii) and (y)
instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its
books and records the date of such transfer and a decrease in
the Fractional Cumulative Interest of such U.S. Global
Certificate of such class in an amount equal to the
Fractional Cumulative Interest represented by the beneficial
interest in such U.S. Global Certificate of such class to be
transferred, and (B) upon receipt by the Registrar of
instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the
Fractional Cumulative Interest of the Offshore Global
Certificate of such class in an amount equal to the
Fractional Cumulative Interest of the U.S. Physical
Certificate of such class or the U.S. Global Certificate of
such class, as the case may be, to be transferred, and the
Trustee shall cancel the Physical Certificate of such class
if any, so transferred or decrease the Fractional Cumulative
Interest of such U.S. Global Certificate of such class.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Certificates not bearing the Private Placement Legend, the
Registrar shall deliver Certificates of like class that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Certificates
bearing the Private Placement Legend, the Registrar shall deliver only
Certificates of like class that bear the Private Placement Legend unless either
(i) the circumstances contemplated by paragraph (a)(i)(x) or (d)(ii) of this
Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of
Counsel to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(f) General. By its acceptance of any Certificate bearing the
Private Placement Legend, each Holder of such a Certificate acknowledges the
restrictions on transfer of such Certificate set forth in this Agreement and
agrees that it shall transfer such Certificate only as provided in this
Agreement. The Registrar shall not register a transfer of any Certificate
unless such transfer complies with the restrictions on transfer of such
Certificate set forth in this Agreement. In connection with any transfer of
Certificates, each Certificateholder agrees by its acceptance of the
Certificates to furnish the Registrar or the Trustee such certifications, legal
opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities
Act.
Until such time as no Certificates remain Outstanding, the
Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 3.05 or this Section 3.06. The
Trustee, if not the Registrar at such time, shall have the right to inspect and
make copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
28
<PAGE> 35
Section 3.07 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Registrar
or the Registrar receives evidence to its satisfaction of the destruction, loss
or theft of any Certificate and (b) there is delivered to the Registrar and the
Trustee such security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the Registrar or the
Trustee that such destroyed, lost or stolen Certificate has been acquired by a
bona fide purchaser, and provided that the requirements of Section 8-405 of the
Uniform Commercial Code in effect in any applicable jurisdiction are met, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or
Certificates of like class, in authorized denominations and of like Fractional
Undivided Interest and bearing a number not contemporaneously outstanding. In
connection with the issuance of any new Certificate under this Section 3.07,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Registrar)
connected therewith. Any duplicate Certificate issued pursuant to this Section
3.07 shall constitute conclusive evidence of the appropriate Fractional
Undivided Interest in the related Trust, as if originally issued, whether or
not the lost, stolen or destroyed Certificate shall be found at any time.
The provisions of this Section 3.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.08 Persons Deemed Owners. Prior to due presentment
of a Certificate for registration of transfer, the Trustee, the Registrar and
any Paying Agent may treat the Person in whose name any Certificate is
registered (as of the day of determination) as the owner of such Certificate
for the purpose of receiving distributions pursuant to Article IV and for all
other purposes whatsoever, and none of the Trustee, the Registrar or any Paying
Agent shall be affected by any notice to the contrary.
Section 3.09 Cancellation. All Certificates surrendered for
payment or transfer or exchange shall, if surrendered to the Trustee or any
agent of the Trustee other than the Registrar, be delivered to the Registrar
for cancellation and shall promptly be canceled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates canceled as
provided in this Section 3.09, except as expressly permitted by this Agreement.
All canceled Certificates held by the Registrar shall be destroyed and a
certification of their destruction delivered to the Trustee.
Section 3.10 Temporary Certificates. Until definitive
Certificates of any class are ready for delivery, the Trustee shall execute,
authenticate and deliver temporary Certificates of such class. Temporary
Certificates of each class shall be substantially in the form of definitive
Certificates of such class but may have insertions, substitutions, omissions
and other variations determined to be appropriate by the officers executing the
temporary Certificates of such class, as evidenced by their execution of such
temporary Certificates. If temporary Certificates of any class are issued, the
Trustee shall cause definitive Certificates of like class to be prepared
without unreasonable delay. After the preparation of definitive Certificates of
such class, the temporary
29
<PAGE> 36
Certificates shall be exchangeable for definitive Certificates upon surrender
of such temporary Certificates at the Corporate Trust Office of the Trustee
designated for such purpose pursuant to Section 7.12, without charge to the
Certificateholder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute, authenticate and deliver in exchange
therefor a like face amount of definitive Certificates of like class, in
authorized denominations and of a like Fractional Undivided Interest. Until so
exchanged, the temporary Certificates shall be entitled to the same benefits
under this Agreement as definitive Certificates.
Section 3.11 Limitation of Liability for Payments. All
payments and distributions made to Certificateholders of any class in respect
of the Certificates of such class shall be made only from the Trust Property of
the Trusts of the same class and only to the extent that the Trustee shall have
sufficient income or proceeds from such Trust Property to make such payments in
accordance with the terms of Article IV. Each Certificateholder, by its
acceptance of a Certificate, agrees that it shall look solely to the income and
proceeds from the Trust Property of the Trusts of the same class for any
payment or distribution due to such Certificateholder pursuant to the terms of
this Agreement and that it shall not have any recourse to the Company, the
Trustee, the Indenture Trustees, the Liquidity Providers, the Owner Trustees or
the Owner Participants, except as otherwise expressly provided herein or in the
Intercreditor Agreement.
The Company is a party to this Agreement solely for purposes of
meeting the requirements of the Trust Indenture Act, and therefore shall not
have any right, obligation or liability hereunder (except as otherwise
expressly provided herein).
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01 Certificate Account and Special Payments
Account. (a) The Trustee shall establish and maintain on behalf of the
Certificateholders of each class a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold such Certificate Account
in trust for the benefit of the Certificateholders of such class, and shall
make or permit withdrawals therefrom only as provided in this Agreement. On
each day when a Scheduled Payment is made to the Trustee under the
Intercreditor Agreement with respect to the Certificates of such class, the
Trustee, upon receipt thereof, shall immediately deposit the aggregate amount
of such Scheduled Payment in the applicable Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders of each class a Special Payments Account as one or more
accounts, which shall be non-interest bearing except as provided in Section
4.04. The Trustee shall hold such Special Payments Account in trust for the
benefit of the Certificateholders of such class and shall make or permit
withdrawals therefrom only as provided in this Agreement. On each day when one
or more Special Payments are made to the Trustee under the Intercreditor
Agreement with respect to the Certificates of such
30
<PAGE> 37
class, the Trustee, upon receipt thereof, shall immediately deposit the
aggregate amount of such Special Payments in such Special Payments Account.
(c) The Trustee shall present (or, if applicable, cause the
Subordination Agent to present) to the related Indenture Trustee to which an
Equipment Note relates such Equipment Note on the date of its stated final
maturity or, in the case of any Equipment Note which is to be redeemed in whole
pursuant to the related Indenture, on the applicable redemption date under such
Indenture.
Section 4.02 Distributions from Certificate Account and
Special Payments Account. (a) On each Regular Distribution Date with respect to
a class of Certificates or as soon thereafter as the Trustee has confirmed
receipt of the payment of all or any part of the Scheduled Payments due on the
Equipment Notes held in the related Trusts on such date, the Trustee shall
distribute out of the applicable Certificate Account the entire amount
deposited therein pursuant to Section 4.01(a). There shall be so distributed to
each Certificateholder of record of such class on the Record Date with respect
to such Regular Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such Certificateholder,
at the address appearing in the Register, such Certificateholder's pro rata
share (based on the Fractional Cumulative Interest in the Trusts of such class
held by such Certificateholder) of the total amount in the applicable
Certificate Account, except that, with respect to Certificates registered on
the Record Date in the name of the nominee of the Depositary (initially, such
nominee to be Cede & Co.), such distribution shall be made by wire transfer in
immediately available funds to the account designated by such nominee.
(b) On each Special Distribution Date with respect to any
Special Payment with respect to a class of Certificates or as soon thereafter
as the Trustee has confirmed receipt of the Special Payments due on the
Equipment Notes held in the related Trusts or realized upon the sale of such
Equipment Notes, the Trustee shall distribute out of the applicable Special
Payments Account the entire amount of such Special Payment deposited therein
pursuant to Section 4.01(b) of such Special Payment. There shall be so
distributed to each Certificateholder of record of such class on the Record
Date with respect to such Special Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Cumulative Interest
in the Trusts of such class held by such Certificateholder) of the total amount
in the applicable Special Payments Account on account of such Special Payment,
except that, with respect to Certificates registered on the Record Date in the
name of the nominee of the Depositary (initially, such nominee to be Cede &
Co.), such distribution shall be made by wire transfer in immediately available
funds to the account designated by such nominee.
(c) The Trustee shall, at the expense of the Company, cause
notice of each Special Payment with respect to a class of Certificates to be
mailed to each Certificateholder of such class at his address as it appears in
the Register. In the event of redemption or purchase of Equipment Notes held in
the related Trust, such notice shall be mailed not less than 20 days prior to
the Special Distribution Date for the Special Payment resulting from such
redemption or purchase, which Special Distribution Date shall be the date of
such redemption or purchase. In the case of any
31
<PAGE> 38
other Special Payments, such notice shall be mailed as soon as practicable
after the Trustee has confirmed that it has received funds for such Special
Payment, stating the Special Distribution Date for such Special Payment which
shall occur not less than 20 days after the date of such notice and as soon as
practicable thereafter. Notices mailed by the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date
therefor (except as otherwise provided in Section 11.01);
(ii) the amount of the Special Payment for each
$1,000 face amount Certificate (taking into account any
payment to be made by the Company pursuant to Section
2.02(b)) and the amount thereof constituting principal,
Additional Payments, and interest;
(iii) the reason for the Special Payment; and
(iv) if the Special Distribution Date is the same
date as a Regular Distribution Date for the Certificates of
such class, the total amount to be received on such date for
each $1,000 face amount Certificate.
If the Additional Payments, if any, payable upon the redemption or purchase of
an Equipment Note has not been calculated at the time that the Trustee mails
notice of a Special Payment, it shall be sufficient if the notice sets forth
the other amounts to be distributed and states that any Additional Payments
received shall also be distributed.
If any redemption of the Equipment Notes held in any Trust is
canceled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder of the related class at
its address as it appears on the Register.
Section 4.03 Statements to Certificateholders. (a) On each
Distribution Date with respect to a class Certificates, the Trustee shall
include with each distribution to Certificateholders of the related class a
Scheduled Payment or Special Payment, as the case may be, a statement setting
forth the following information (per $1,000 face amount Certificate as to (i)
and (ii) below):
(i) the amount of such distribution allocable to
principal and the amount allocable to Additional Payments;
(ii) the amount of such distribution allocable to
interest; and
(iii) the Pool Balance and the Pool Factor of the
Trusts of such class.
With respect to the Certificates registered in the name of
Cede & Co., as nominee for the Depositary, on the Record Date prior to each
Distribution Date, the Trustee shall request from the Depositary a securities
position listing setting forth the names of all Agent Members reflected on the
Depositary's books as holding interests in the Certificates on such Record
Date. On each
32
<PAGE> 39
Distribution Date, the Trustee shall mail to each such Agent Member the
statement described above and shall make available additional copies as
requested by such Agent Member for forwarding to holders of interests in the
Certificates.
(b) Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Trustee
shall furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) above with respect to the
related Trusts for such calendar year or, if such Person was a
Certificateholder of record during a portion of such calendar year, for such
portion of such year, and such other items as are readily available to the
Trustee and which a Certificateholder shall reasonably request as necessary for
the purpose of such Certificateholder's preparation of its United States
federal income tax returns. Such statement and such other items shall be
prepared on the basis of information supplied to the Trustee by the Agent
Members and shall be delivered by the Trustee to such Agent Members to be
available for forwarding by such Agent Members to the holders of interests in
the Certificates in the manner described in Section 4.03(a).
Section 4.04 Investment of Special Payment Moneys. Any money
received by the Trustee pursuant to Section 4.01(b) representing a Special
Payment which is not to be promptly distributed shall, to the extent
practicable, be invested in Permitted Investments by the Trustee pending
distribution of such Special Payment pursuant to Section 4.02(b). Any
investment made pursuant to this Section 4.04 shall be in such Permitted
Investments having maturities not later than the date that such moneys are
required to be used to make the payment required under Section 4.02(b) on the
applicable Special Distribution Date and the Trustee shall hold any such
Permitted Investments until maturity. The Trustee shall have no liability with
respect to any investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee. All income and
earnings from such investments shall be distributed on such Special
Distribution Date as part of such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01 Maintenance of Corporate Existence. The Company,
at its own cost and expense, shall do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence, rights
and franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the preservation thereof is no
longer necessary or desirable in the conduct of the business of the Company.
Section 5.02 Consolidation, Merger, etc. The Company shall
not consolidate with or merge into any other corporation or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless:
33
<PAGE> 40
(a) the corporation formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Company as an
entirety shall (i) be a "citizen of the United States" as defined in
49 U.S.C. 40102(a)(15), as amended, and (ii) hold an air carrier
operating certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code, as
amended, for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo; if and so long as such status is a
condition of entitlement to the benefits of Section 1110 of the
Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
Section 1110);
(b) the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance, transfer or lease substantially all of the assets of the
Company as an entirety shall execute and deliver to the Trustee
applicable to the Certificates of each class a duly authorized, valid,
binding and enforceable agreement in form and substance reasonably
satisfactory to the Trustee containing an assumption by such successor
corporation or Person of the due and punctual performance and
observance of each covenant and condition of this Agreement, the
Registration Rights Agreement and the Note Purchase Agreement
applicable to the Certificates of each class to be performed or
observed by the Company; and
(c) the Company shall have delivered to the Trustee an
Officer's Certificate of the Company and an Opinion of Counsel of the
Company reasonably satisfactory to the Trustee, each stating that such
consolidation, merger, conveyance, transfer or lease and the
assumption agreement mentioned in Section 5.02(b) comply with this
Section 5.02 and that all conditions precedent provided for in this
Section 5.02 relating to such transaction have been complied with.
Upon any consolidation or merger, or any conveyance, transfer
or lease of substantially all of the assets of the Company as an entirety in
accordance with this Section 5.02, the successor corporation or Person formed
by such consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Agreement
applicable to the Certificates of each class with the same effect as if such
successor corporation or Person had been named as the Company herein. No such
conveyance, transfer or lease of substantially all of the assets of the Company
as an entirety shall have the effect of releasing any successor corporation or
Person which shall have become such in the manner prescribed in this Section
5.02 from its liability in respect of this Agreement, the Note Purchase
Agreement and any Financing Document applicable to the Certificates of such
class to which it is a party.
34
<PAGE> 41
ARTICLE VI
DEFAULT
Section 6.01 Events of Default. (a) Exercise of Remedies. In
respect of the Trusts of any class, upon the occurrence and during the
continuation of any Indenture Default under any related Indenture, the Trustee
may, to the extent it is the Controlling Party at such time (as determined
pursuant to the Intercreditor Agreement), direct the exercise of remedies as
provided in the Intercreditor Agreement.
(b) Purchase Rights of Certificateholders. By acceptance of
its Certificate, each Certificateholder agrees that at any time after
the occurrence and during the continuation of a Triggering Event,
(i) each Class B Certificateholder shall have the
right to purchase all, but not less than all, of the Class A
Certificates upon ten days' written notice to the Trustee and
each other Class B Certificateholder, provided that (A) if
prior to the end of such ten-day period any other Class B
Certificateholder notifies such purchasing Class B
Certificateholder that such other Class B Certificateholder
wants to participate in such purchase, then such other Class
B Certificateholder may join with the purchasing Class B
Certificateholder to purchase all, but not less than all, of
the Class A Certificates pro rata based on the Fractional
Cumulative Interest held by each such Class B
Certificateholder and (B) if prior to the end of such ten-day
period any other Class B Certificateholder fails to notify
the purchasing Class B Certificateholder of such other Class
B Certificateholder's desire to participate in such a
purchase, then such other Class B Certificateholder shall
lose its right to purchase such Class A Certificates pursuant
to this Section 6.01(b);
(ii) each Class C Certificateholder shall have the
right (which shall not expire upon any purchase of the Class
A Certificates by the Class B Certificateholders pursuant to
clause (i) above) to purchase all, but not less than all, of
the Class A Certificates and the Class B Certificates upon
ten days' written notice to the Trustee and each other Class
C Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Class C Certificateholder
notifies such purchasing Class C Certificateholder that such
other Class C Certificateholder wants to participate in such
purchase, then such other Class C Certificateholder may join
with the purchasing Class C Certificateholder to purchase
all, but not less than all, of the Class A Certificates and
the Class B Certificates pro rata based on the Fractional
Cumulative Interest held by each such Class C
Certificateholder and (B) if prior to the end of such ten-day
period any other Class C Certificateholder fails to notify
the purchasing Class C Certificateholder of such other Class
C Certificateholder's desire to participate in such a
purchase, then such other Class C
35
<PAGE> 42
Certificateholder shall lose its right to purchase such Class
A Certificates and Class B Certificates pursuant to this
Section 6.01(b); and
(iii) each Class D Certificateholder shall have the
right (which shall not expire upon any purchase of the Class
A Certificates by the Class B Certificateholders pursuant to
clause (i) above or the purchase of the Class A Certificates
and the Class B Certificates by the Class C
Certificateholders pursuant to clause (ii) above) to purchase
all, but not less than all, of the Class A Certificates, the
Class B Certificates and the Class C Certificates upon ten
days' written notice to the Trustee and each other Class D
Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Class D Certificateholder
notifies such purchasing Class D Certificateholder that such
other Class D Certificateholder wants to participate in such
purchase, then such other Class D Certificateholder may join
with the purchasing Certificateholder to purchase all, but
not less than all, of the Class A Certificates, the Class B
Certificates and the Class C Certificates pro rata based on
the Fractional Cumulative Interest held by each such Class D
Certificateholder and (B) if prior to the end of such ten-day
period any other Class D Certificateholder fails to notify
the purchasing Class D Certificateholder of such other Class
D Certificateholder's desire to participate in such a
purchase, then such other Class D Certificateholder shall
lose its right to purchase the Certificates, the Class B
Certificates and the Class C Certificates pursuant to this
Section 6.01(b).
The purchase price with respect to the Certificates of any
class shall be equal to the Pool Balance of the Certificates of such class,
together with accrued and unpaid interest thereon to the date of such purchase,
without Additional Payments, but including any other amounts then due and
payable to the Certificateholders of such class under this Agreement, the
Intercreditor Agreement or any other Note Document or on or in respect of the
Certificates of such class; provided, however, that no such purchase of
Certificates shall be effective unless the purchaser shall certify to the
Trustee that contemporaneously with such purchase, such purchaser is
purchasing, pursuant to the terms of this Agreement, the Certificates of such
class that are senior to the securities held by such purchaser. Each payment of
the purchase price of the Certificates referred to in the first sentence hereof
shall be made to an account or accounts designated by the Trustee and each such
purchase shall be subject to the terms of this Section 6.01(b). Each
Certificateholder agrees by its acceptance of its Certificate that it shall,
subject to Section 3.04, upon payment from such Class B Certificateholder(s),
Class C Certificateholder(s) or Class D Certificateholder(s), as the case may
be, of the purchase price set forth in the first sentence of this paragraph,
forthwith sell, assign, transfer and convey to the purchaser thereof (without
recourse, representation or warranty of any kind except for its own acts), all
of the right, title, interest and obligation of such Certificateholder in, this
Agreement, the Intercreditor Agreement, the Liquidity Facilities, in the case
of Class A Certificates and Class B Certificates, the Note Purchase Agreement,
the Note Documents and all Certificates of the class or classes being purchased
held by such Certificateholder (excluding all right, title and interest under
any of the foregoing to the extent such right, title or interest is with
respect to an obligation not then due and payable as respects any action or
inaction or state of affairs occurring prior to such sale) and the purchaser
shall assume all of such Certificateholder's
36
<PAGE> 43
obligations under this Agreement, the Intercreditor Agreement, the Liquidity
Facilities, the Note Purchase Agreement and the Note Documents. The
Certificates of the class or classes being purchased shall be deemed to be
purchased on the date payment of the purchase price is made notwithstanding the
failure of the applicable Certificateholders to deliver such Certificates
(whether in the form of Physical Certificates or beneficial interests in Global
Certificates) and, upon such a purchase, (i) the only rights of such
Certificateholders shall be to deliver such Certificates to the purchaser and
receive the purchase price for such Certificates and (ii) if the purchaser
shall so request, such Certificateholder shall comply with all the provisions
of Section 3.04 to enable new Certificates of like class to be issued to the
purchaser in such denominations as it shall request. All charges and expenses
in connection with the issuance of any such new Certificates shall be borne by
the purchaser thereof.
As used in this Section 6.01(b), the terms
"Certificateholder," "Class," "Class A Certificateholder," "Class B
Certificate," "Class B Certificateholder," "Class B Trust," "Class C
Certificate," "Class C Certificateholder," "Class D Certificate," and "Class D
Certificateholder, shall have the respective meanings assigned to such terms in
the Intercreditor Agreement.
Section 6.02 Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit. If there shall be a failure to make payment of the
principal of, Additional Payments, if any, or interest on any Equipment Note,
or if there shall be any failure to pay Rent (as defined in the relevant Lease)
under any Lease when due and payable, then the Trustee, in its own name and as
trustee of an express trust, as holder of such Equipment Notes, to the extent
permitted by and in accordance with the terms of the Intercreditor Agreement
and the Financing Documents (subject, in the case of Equipment Notes related to
the Leased Aircraft to the rights of the applicable Owner Trustee or Owner
Participant to cure any such failure in accordance with Section 8.03(e) of the
applicable Indenture), shall be entitled and empowered to institute any suits,
actions or proceedings at law, in equity or otherwise, for the collection of
the sums so due and unpaid on such Equipment Notes or under such Lease and may
prosecute any such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.
Section 6.03 Control by Certificateholders. Subject to
Section 6.02 and the Intercreditor Agreement, the Certificateholders holding
Certificates of a class evidencing Fractional Cumulative Interests aggregating
not less than a majority in interest in the Trusts of the related class shall
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee with respect to such Trusts
or pursuant to the terms of the Intercreditor Agreement, or exercising any
trust or power conferred on the Trustee under this Agreement or the
Intercreditor Agreement, including any right of the Trustee as Controlling
Party under the Intercreditor Agreement or as holder of the Equipment Notes in
the related Trusts, provided that:
(1) such Direction shall not in the opinion of the Trustee be
in conflict with any rule of law or with this Agreement and would not
involve the Trustee in personal liability or expense;
37
<PAGE> 44
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Certificateholders of
such class not taking part in such Direction; and
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such Direction.
Section 6.04 Waiver of Past Defaults. Subject to the
Intercreditor Agreement, the Certificateholders holding Certificates of a class
evidencing Fractional Cumulative Interests aggregating not less than a majority
in interest in the Trusts of such class (i) may on behalf of all of the
Certificateholders of such class waive any past Event of Default hereunder or
under the related Trust Supplements with respect to such class and its
consequences or (ii) if the Trustee is the Controlling Party, may direct the
Trustee to instruct the applicable Indenture Trustee to waive any past
Indenture Default under the related Indenture with respect to such class and
its consequences, and thereby annul any Direction given by such
Certificateholders or the Trustee to such Indenture Trustee with respect
thereto, except a default:
(1) in the deposit of any Scheduled Payment or Special
Payment under Section 4.01 or in the distribution of any payment under
Section 4.02 on the Certificates of such class;
(2) in the payment of the principal of, Additional Payments,
if any, or interest on the Equipment Notes held in the Trusts of such
class; or
(3) in respect of a covenant or provision hereof which under
Article X cannot be modified or amended without the consent of each
Certificateholder holding an Outstanding Certificate of such class
affected thereby.
Upon any such waiver, such default shall cease to exist with
respect to the Certificates of such class and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose in respect of
such class and any direction given by the Trustee on behalf of the
Certificateholders of such class to the relevant Indenture Trustee shall be
annulled with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Upon any such waiver, the Trustee of such class shall vote the
Equipment Notes issued under the relevant Indenture to waive the corresponding
Indenture Default.
Section 6.05 Right of Certificateholders to Receive Payments
Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding,
including Section 6.06, but subject to the Intercreditor Agreement, the right
of any Certificateholder to receive distributions of payments required pursuant
to Section 4.02 on the applicable Certificates when due, or to institute suit
for the enforcement of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be impaired or
affected without the consent of such Certificateholder.
Section 6.06 Certificateholders May Not Bring Suit Except
Under Certain Conditions. A Certificateholder of any class shall not have the
right to institute any suit, action or
38
<PAGE> 45
proceeding at law or in equity or otherwise with respect to this Agreement, for
the appointment of a receiver or for the enforcement of any other remedy under
this Agreement, unless:
(1) such Certificateholder previously shall have given
written notice to the Trustee of a continuing Event of Default;
(2) the Certificateholders holding Certificates of such class
evidencing Fractional Cumulative Interests aggregating not less than
25% shall have requested the Trustee in writing to institute such
action, suit or proceeding and shall have offered to the Trustee
indemnity as provided in Section 7.03(e);
(3) the Trustee shall have refused or neglected to institute
such an action, suit or proceeding for 60 days after receipt of such
notice, request and offer of indemnity; and
(4) no direction inconsistent with such written request shall
have been given to the Trustee during such 60-day period by the
Certificateholders holding Certificates of such class evidencing
Fractional Cumulative Interests aggregating not less than a majority
in interest in the related Trusts.
It is understood and intended that no one or more of the
Certificateholders of any class shall have any right in any manner whatsoever
hereunder or under each related Trust Supplement or under the Certificates of
such class to (i) surrender, impair, waive, affect, disturb or prejudice any
property in the Trust Property of the related Trusts or the lien of any related
Indenture on any property subject thereto, or the rights of the
Certificateholders of such class or the holders of the related Equipment Notes,
(ii) obtain or seek to obtain priority over or preference with respect to any
other such Certificateholder of such class or (iii) enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all the Certificateholders of such class subject to the
provisions of this Agreement.
Section 6.07 Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders of any class shall
not be exclusive of any other remedy or remedies, and every such remedy shall
be cumulative and in addition to every other remedy given hereunder or now or
hereafter given by statute, law, equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default in respect of the Trusts of a
class, the Trustee undertakes to perform such duties in respect of such Trusts
as are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee.
39
<PAGE> 46
(b) If an Event of Default in respect of the Trusts of a
class has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Agreement in respect of such Trusts, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of its own
affairs.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own wilful misconduct, except that
(i) this Subsection shall not be construed to limit
the effect of Section 7.01(a); and
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of
the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts.
(d) Whether or not herein expressly so provided, every
provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.01.
Section 7.02 Notice of Defaults. As promptly as practicable
after, and in any event within 90 days after, the occurrence of any default (as
such term is defined below) hereunder known to the Trustee, the Trustee shall
transmit by mail to the Company, any related Owner Trustees, the related Owner
Participants, the related Indenture Trustees and the Certificateholders holding
Certificates of the related class in accordance with Section 313(c) of the
Trust Indenture Act, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default on the payment of the principal, Additional
Payments, if any, or interest on any Equipment Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Certificateholders of the related class. For
the purpose of this Section 7.02 in respect of the Trusts of any class, the
term "default" means any event that is, or after notice or lapse of time or
both would become, an Event of Default in respect of such Trusts.
Section 7.03 Certain Rights of Trustee. Subject to the
provisions of Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
40
<PAGE> 47
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a written description of the
subject matter thereof accompanied by an Officer's Certificate and an
Opinion of Counsel as provided in Section 1.02;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate of the Company, any related Owner Trustee or any related
Indenture Trustee;
(d) the Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the
Direction of any of the Certificateholders pursuant to this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the cost, expenses and
liabilities which might be incurred by it in compliance with such
Direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under
this Agreement or perform any duties under this Agreement either
directly or by or through agents or attorneys, and the Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the Direction of the Certificateholders holding Certificates of
any class evidencing Fractional Cumulative Interests aggregating not
less than a majority in interest in the related Trusts relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement; and
(i) the Trustee shall not be required to expend or risk its
own funds in the performance of any of its duties under this
Agreement, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk is not reasonably
assured to it.
Section 7.04 Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates of each
class, except the certificates of authentication, shall not be taken as the
statements of the Trustee, and the Trustee assumes no responsibility for their
41
<PAGE> 48
correctness. Subject to Section 7.15, the Trustee makes no representations as
to the validity or sufficiency of this Basic Agreement or any Trust Supplement,
the Intercreditor Agreement, the Note Purchase Agreement, the Registration
Rights Agreement, any Equipment Notes, the Certificates of any class or any
other Financing Document, except that the Trustee hereby represents and
warrants that this Basic Agreement has been, and each Trust Supplement, the
Intercreditor Agreement, the Registration Rights Agreement, the Note Purchase
Agreement and each Certificate of each class to which such Trustee is a party
shall be, executed, authenticated and delivered by one of its officers who is
duly authorized to execute, authenticate and deliver such document on its
behalf.
Section 7.05 May Hold Certificates. The Trustee, any Paying
Agent, Registrar or any of their Affiliates or any other agent in their
respective individual or any other capacity may become the owner or pledgee of
Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture
Act, if applicable, may otherwise deal with the Company, any Owner Trustees or
the Indenture Trustees with the same rights it would have if it were not
Trustee, Paying Agent, Registrar or such other agent.
Section 7.06 Money Held in Trust. Money held by the Trustee
or the Paying Agent in trust hereunder or under any Trust Supplement need not
be segregated from other funds except to the extent required herein or by law
and neither the Trustee nor the Paying Agent shall have any liability for
interest upon any such moneys except as provided for herein.
Section 7.07 Compensation and Reimbursement. The Company
agrees:
(1) to pay, or cause to be paid, to the Trustee from time to
time reasonable compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein or in any
Trust Supplement, to reimburse, or cause to be reimbursed, the Trustee
upon its request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Basic Agreement or any Trust
Supplement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence,
willful misconduct or bad faith or as may be incurred due to the
Trustee's breach of its representations and warranties set forth in
Section 7.15; and
(3) to indemnify, or cause to be indemnified, the Trustee
pursuant to Section 7 of the Participation Agreements relating to the
Leased Aircraft and Section 5(b) of the Participation Agreements
relating to the Owned Aircraft.
The Trustee shall be entitled to reimbursement from, and
shall have a lien prior to the Certificates of each class upon, the Trust
Property, with respect to such class or the related Trusts for any tax incurred
without negligence, bad faith or willful misconduct, on its part, arising out
of
42
<PAGE> 49
or in connection with the acceptance or administration of such Trusts (other
than any tax attributable to the Trustee's compensation for serving as such),
including any costs and expenses incurred in contesting the imposition of any
such tax. The Trustee shall notify the Company of any claim for any tax for
which it may seek reimbursement. If the Trustee reimburses itself from the
Trust Property of such Trusts for any such tax, it shall mail a brief report
within 30 days setting forth the circumstances thereof to all
Certificateholders of such class as their names and addresses appear in the
Register.
Section 7.08 Corporate Trustee Required; Eligibility. Each
Trust shall at all times have a Trustee which shall be a financial institution
unaffiliated with and independent of the Company, shall be eligible to act as a
trustee under Section 310(a) of the Trust Indenture Act and shall have a
combined capital and surplus of at least $75,000,000 (or a combined capital and
surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any state or territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000). If such corporation
publishes reports of conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 7.08, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.08 to act as Trustee of any
Trust, the Trustee shall resign immediately as Trustee of such Trust in the
manner and with the effect specified in Section 7.09.
Section 7.09 Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee of any Trust pursuant to this Article VII shall become
effective until the acceptance of appointment by the successor Trustee under
Section 7.10.
(b) The Trustee may resign at any time as trustee of any or
all Trusts by giving prior written notice thereof to the Company, the
Authorized Agents, the related Owner Trustees and the related Indenture
Trustees. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the related Owner
Trustees, the related Indenture Trustees and the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time as trustee of the
Trusts of any class by Direction of the Certificateholders of the related class
holding Certificates of such class evidencing Fractional Cumulative Interests
aggregating not less than a majority in interest in such Trusts delivered to
the Trustee and to the Company, the related Owner Trustees and the related
Indenture Trustees.
43
<PAGE> 50
(d) If at any time in respect of the Trusts of any class:
(i) the Trustee shall fail to comply with Section
310 of the Trust Indenture Act, if applicable, after written
request therefor by the Company or by any Certificateholder
of the related class who has been a bona fide
Certificateholder for at least six months;
(ii) the Trustee shall cease to be eligible under
Section 7.08 and shall fail to resign after written request
therefor by the Company or by any such Certificateholder; or
(iii) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any case, (i) the Company may remove the Trustee or (ii) any
Certificateholder of the related class who has been a bona fide
Certificateholder for at least six months may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee of such
Trusts.
(e) If a Responsible Officer of the Trustee shall obtain
actual knowledge of an Avoidable Tax in respect of the Trusts of any class
which has been or is likely to be asserted, the Trustee shall promptly notify
the Company and shall, within 30 days of such notification, resign as Trustee
of such Trust hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The Company shall
promptly appoint a successor Trustee of such Trusts in a jurisdiction where
there are no Avoidable Taxes.
(f) If the Trustee shall resign, be removed or become
incapable of acting as trustee of the Trusts of any class or if a vacancy shall
occur in the office of the Trustee of the Trusts for any cause, the Company
shall promptly appoint a successor Trustee of such Trusts. If, within one year
after such resignation, removal or incapability, or other occurrence of such
vacancy, a successor Trustee of such Trusts shall be appointed by Direction of
the Certificateholders of the related class holding Certificates of such class
evidencing Fractional Cumulative Interests aggregating not less than a majority
in interest in such Trusts delivered to the Company, the related Owner
Trustees, the related Indenture Trustees and the retiring Trustee, and the
Company approves such appointment, which approval shall not be unreasonably
withheld, then the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee of such Trusts and
supersede the successor Trustee of such Trusts appointed as provided above. If
no successor Trustee shall have been so appointed as provided above and
accepted appointment in the manner hereinafter provided, any Certificateholder
who has been a bona fide Certificateholder of the related class for at least
six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee of such Trusts.
44
<PAGE> 51
(g) The successor Trustee of the Trusts of a class shall give
notice of the resignation and removal of the Trustee and appointment of the
successor Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to the Certificateholders of the related class as their names
and addresses appear in the Register. Each notice shall include the name of
such successor Trustee and the address of its Corporate Trust Office.
Section 7.10 Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute and deliver to the Company,
the Authorized Agents, the Owner Trustees and the Indenture Trustees and to the
retiring Trustee with respect to any or all Trusts an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
with respect to such Trusts shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all such rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all Trust Property held by such retiring
Trustee in respect of such Trusts hereunder, subject nevertheless to its lien,
if any, provided for in Section 7.07. Upon request of any such successor
Trustee, the Company, the retiring Trustee and such successor Trustee shall
execute and deliver any and all instruments containing such provisions as shall
be necessary or desirable to transfer and confirm to, and for more fully and
certainly vesting in, such successor Trustee all such rights, powers and
trusts.
If a successor Trustee is appointed with respect to one or
more (but not all) Trusts, the Company, the predecessor Trustee and each
successor Trustee with respect to any Trust shall execute and deliver a
supplemental agreement hereto which shall contain such provisions as shall be
deemed necessary or desirable to confirm that all the rights, powers, trusts
and duties of the predecessor Trustee with respect to the Trusts as to which
the predecessor Trustee is not retiring shall continue to be vested in the
predecessor Trustee, and shall add to or change any of the provisions of this
Basic Agreement and the applicable Trust Supplements as shall be necessary to
provide for or facilitate the administration of the Trusts hereunder by more
than one Trustee.
It is understood that nothing herein or in any supplemental
agreement or Trust Supplement shall constitute any Trustee a co-Trustee of the
same Trust and that each Trustee shall be the Trustee of one or more separate
Trusts.
No institution shall accept its appointment as a Trustee
hereunder unless at the time of such acceptance such institution shall be
qualified and eligible under this Article VII.
Section 7.11 Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VII, without the execution
45
<PAGE> 52
or filing of any paper or any further act on the part of any of the parties
hereto. In case any Certificates shall have been executed or authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
execution or authentication and deliver the Certificates so executed or
authenticated with the same effect as if such successor Trustee had itself
executed or authenticated such Certificates.
Section 7.12 Maintenance of Agencies. (a) With respect to
each class of Certificates, there shall at all times be maintained an office or
agency in the location set forth in Section 12.03 where Certificates of such
class may be presented or surrendered for registration of transfer or for
exchange, and for payment thereof and where notices and demands to or upon the
Trustee in respect of such Certificates or this Agreement may be served;
provided, however, that, if it shall be necessary that the Trustee maintain an
office or agency in another location with respect to the Certificates of any
class (e.g., the Certificates shall be represented by Physical Certificates and
shall be listed on a national securities exchange), the Trustee shall make all
reasonable efforts to establish such an office or agency. Written notice of the
location of each such other office or agency and of any change of location
thereof shall be given by the Trustee to the Company, any Owner Trustees, the
Indenture Trustees (in the case of any Owner Trustee or Indenture Trustee, at
its address specified in the Note Purchase Agreement or such other address as
may be notified to the Trustee) and the Certificateholders of such class. In
the event that no such office or agency shall be maintained or no such notice
of location or of change of location shall be given, presentations and demands
may be made and notices may be served at the Corporate Trust Office of the
Trustee.
(b) There shall at all times be a Registrar and a Paying
Agent hereunder with respect to the Certificates of each class. Each such
Authorized Agent shall be a bank or trust company, shall be a corporation
organized and doing business under the laws of the United States or any state,
with a combined capital and surplus of at least $75,000,000, or a corporation
having a combined capital and surplus in excess of $5,000,000, the obligations
of which are guaranteed by a corporation organized and doing business under the
laws of the United States or any state, with a combined capital and surplus of
at least $75,000,000, and shall be authorized under such laws to exercise
corporate trust powers, subject to supervision by Federal or state authorities.
The Trustee shall initially be the Paying Agent and, as provided in Section
3.04, Registrar hereunder with respect to the Certificates of each class. Each
Registrar shall furnish to the Trustee, at stated intervals of not more than
six months, and at such other times as the Trustee may request in writing, a
copy of the Register maintained by such Registrar.
(c) Any corporation into which any Authorized Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any Authorized
Agent shall be a party, or any corporation succeeding to the corporate trust
business of any Authorized Agent, shall be the successor of such Authorized
Agent hereunder, if such successor corporation is otherwise eligible under this
Section 7.12, without the execution or filing of any paper or any further act
on the part of the parties hereto or such Authorized Agent or such successor
corporation.
46
<PAGE> 53
(d) Any Authorized Agent may at any time resign by giving
written notice of resignation to the Trustee, the Company, any related Owner
Trustees and the related Indenture Trustees. The Company may, and at the
request of the Trustee shall, at any time terminate the agency of any
Authorized Agent by giving written notice of termination to such Authorized
Agent and to the Trustee. Upon the resignation or termination of an Authorized
Agent or in case at any time any such Authorized Agent shall cease to be
eligible under this Section 7.12 (when, in either case, no other Authorized
Agent performing the functions of such Authorized Agent shall have been
appointed), the Company shall promptly appoint one or more qualified successor
Authorized Agents, reasonably satisfactory to the Trustee, to perform the
functions of the Authorized Agent which has resigned or whose agency has been
terminated or who shall have ceased to be eligible under this Section 7.12. The
Company shall give written notice of any such appointment made by it to the
Trustee, any related Owner Trustees and the related Indenture Trustees; and in
each case the Trustee shall mail notice of such appointment to all
Certificateholders of the related class as their names and addresses appear on
the Register for such class.
(e) The Company agrees to pay, or cause to be paid, from time
to time to each Authorized Agent reasonable compensation for its services and
to reimburse it for its reasonable expenses.
Section 7.13 Money for Certificate Payments to Be Held in
Trust. All moneys deposited with any Paying Agent for the purpose of any
payment on Certificates shall be deposited and held in trust for the benefit of
the Certificateholders entitled to such payment, subject to the provisions of
this Section 7.13. Moneys so deposited and held in trust shall constitute a
separate trust fund for the benefit of the Certificateholders with respect to
which such money was deposited.
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 7.14 Registration of Equipment Notes in Name of
Subordination Agent. The Trustee agrees that all Equipment Notes to be
purchased by the Trusts of any class shall be issued in the name of the
Subordination Agent or its nominee and held by the Subordination Agent in trust
for the benefit of the Certificateholders of such class, or, if not so held,
the Subordination Agent or its nominee shall be reflected as the owner of such
Equipment Notes in the register of the issuer of such Equipment Notes.
Section 7.15 Representations and Warranties of Trustee. The
Trustee hereby represents and warrants that:
(a) the Trustee is a national banking association organized
and validly existing in good standing under the Federal laws of the
United States;
47
<PAGE> 54
(b) the Trustee has full power, authority and legal right to
execute, deliver, and perform this Basic Agreement, each Trust
Supplement executed and delivered on the date hereof, each Certificate
executed, authenticated and delivered on the date hereof, the
Intercreditor Agreement, the Registration Rights Agreement, the Note
Purchase Agreement and the Participation Agreements and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Basic Agreement, such Trust Supplement, such
Certificate, the Intercreditor Agreement, the Registration Rights
Agreement, the Note Purchase Agreement and the Participation
Agreements;
(c) the execution, delivery and performance by the Trustee of
this Basic Agreement, each Trust Supplement executed and delivered on
the date hereof, each Certificate executed, authenticated and
delivered on the date hereof, the Intercreditor Agreement, the
Registration Rights Agreement, the Note Purchase Agreement and the
Participation Agreements (i) shall not violate any provision of United
States federal law or the law of the state of the United States where
it is located governing the banking and trust powers of the Trustee or
any order, writ, judgment, or decree of any court, arbitrator or
governmental authority applicable to the Trustee or any of its assets,
(ii) shall not violate any provision of the articles of association or
by-laws of the Trustee, or (iii) shall not violate any provision of,
or constitute, with or without notice or lapse of time, a default
under, or result in the creation or imposition of any lien on any
properties included in the Trust Property of any Trust pursuant to the
provisions of any mortgage, indenture, contract, agreement or other
undertaking to which it is a party, which violation, default or lien
could reasonably be expected to have an adverse effect on the
Trustee's performance or ability to perform its duties hereunder or
thereunder or on the transactions contemplated herein or therein;
(d) the execution, delivery and performance by the Trustee of
this Basic Agreement, each Trust Supplement executed and delivered on
the date hereof, each Certificate executed, authenticated and
delivered on the date hereof, the Intercreditor Agreement, the
Registration Rights Agreement, the Note Purchase Agreement and the
Participation Agreements shall not require the authorization, consent,
or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any
governmental authority or agency of the United States or the State of
the United States where it is located regulating the banking and
corporate trust activities of the Trustee; and
(e) this Basic Agreement, each Trust Supplement executed and
delivered on the date hereof, each Certificate executed, authenticated
and delivered on the date hereof, the Intercreditor Agreement, the
Registration Rights Agreement, the Note Purchase Agreement and the
Participation Agreements have been duly executed and delivered by the
Trustee and constitute the legal, valid, and binding agreements of the
Trustee, enforceable against it in accordance with their respective
terms, provided that enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and (ii) general
principles of equity.
48
<PAGE> 55
Section 7.16 Withholding Taxes; Information Reporting. As to
the Certificates of any class, the Trustee, as trustee of the related grantor
trust created by this Agreement, shall exclude and withhold from each
distribution of principal, Additional Payments, if any, and interest and other
amounts due under this Agreement or under the Certificates of such class any
and all withholding taxes applicable thereto as required by law. The Trustee
agrees to act as such withholding agent and, in connection therewith, whenever
any present or future taxes or similar charges are required to be withheld with
respect to any amounts payable in respect of the Certificates of such class, to
withhold such amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Certificateholders of such class, that it
shall file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it shall deliver to
each such Certificateholder appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such
Certificateholders of such class may reasonably request from time to time. The
Trustee agrees to file any other information reports as it may be required to
file under United States law.
Section 7.17 Trustee's Liens. The Trustee in its individual
capacity agrees that it shall, in respect of each Trust created by this
Agreement, at its own cost and expense promptly take any action as may be
necessary to duly discharge and satisfy in full any mortgage, pledge, lien,
charge, encumbrance, security interest or claim ("Trustee's Liens") on or with
respect to the Trust Property of such Trust which is attributable to the
Trustee either (i) in its individual capacity and which is unrelated to the
transactions contemplated by this Agreement, the Intercreditor Agreement, the
Note Purchase Agreement or the Note Documents, or (ii) as Trustee hereunder or
in its individual capacity and which arises out of acts or omissions which are
not contemplated by this Agreement.
Section 7.18 Preferential Collection of Claims. The Trustee
shall comply with Section 311(a) of the Trust Indenture Act, excluding any
creditor relationship listed in Section 311(b) of the Trust Indenture Act. If
the Trustee shall resign or be removed as Trustee, it shall be subject to
Section 311(a) of the Trust Indenture Act to the extent provided therein.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01 The Company to Furnish Trustee with Names and
Addresses of Certificateholders. The Company shall furnish to the Trustee
within 15 days after each Record Date with respect to a Scheduled Payment, and
at such other times as the Trustee may request in writing within 30 days after
receipt by the Company of any such request, a list, in such form as the Trustee
may reasonably require, of all information in the possession or control of the
Company as to the names and addresses of the Certificateholders of each class,
in each case as of a date not more than 15 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the sole Registrar
for such class, no such list need be furnished; and provided, further, that no
such list
49
<PAGE> 56
need be furnished for so long as a copy of the Register is being furnished to
the Trustee pursuant to Section 7.12.
Section 8.02 Preservation of Information; Communications to
Certificateholders. The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Certificateholders of each
class contained in the most recent list furnished to the Trustee as provided in
Section 7.12 or Section 8.01, as the case may be, and the names and addresses
of Certificateholders of each class received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a
new list so furnished.
Section 8.03 Reports by Trustee. Within 60 days after May 15
of each year commencing with the first full year following the issuance of any
class of Certificates, the Trustee shall transmit to the Certificateholders of
each class, as provided in Section 313(c) of the Trust Indenture Act, a brief
report dated as of such May 15, if required by Section 313(a) of the Trust
Indenture Act.
Section 8.04 Reports by the Company. The Company shall:
(a) file with the Trustee, within 30 days after the Company
is required to file the same with the SEC, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may from time to time by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not
required to file information, documents or reports pursuant to either of such
sections, then to file with the Trustee and the SEC, in accordance with rules
and regulations prescribed by the SEC, such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Exchange Act in respect of a security listed and registered on a
national securities exchange as may be prescribed in such rules and
regulations;
(b) file with the Trustee and the SEC, in accordance with the
rules and regulations prescribed by the SEC, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants of the Company provided for in this Agreement, as may
be required by such rules and regulations, including, in the case of annual
reports, if required by such rules and regulations, certificates or opinions of
independent public accountants;
(c) transmit to all Certificateholders, in the manner and to
the extent provided in Section 313(c) of the Trust Indenture Act such summaries
of any information, documents and reports required to be filed by the Company
pursuant to Sections 8.04(a) and (b) as may be required by rules and
regulations prescribed by the SEC; and
(d) furnish to the Trustee, not less often than annually, a
brief certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her
50
<PAGE> 57
knowledge of the Company's compliance with all conditions and covenants of the
Company under this Agreement (it being understood that for purposes of this
Section 8.04(d), such compliance shall be determined without regard to any
period of grace or requirement of notice provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01 Supplemental Agreements Without Consent of
Certificateholders. Without the consent of the Certificateholders of any class,
the Company may (but shall not be required to), and the Trustee (subject to
Section 9.03) shall, at the Company's request, at any time and from time to
time, enter into one or more agreements supplemental hereto or, if applicable,
to the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity
Facility in form reasonably satisfactory to the Trustee, for any of the
following purposes:
(1) to provide for the formation of a Trust, the issuance of a
class of Certificates and the other matters contemplated by Section 2.01(b);
(2) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the covenants of the
Company contained herein;
(3) to add to the covenants of the Company for the benefit of
the Certificateholders of any class, or to surrender any right or power in this
Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any
Liquidity Facility conferred upon the Company;
(4) (a) to correct or supplement any provision in this
Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the
Liquidity Facility that may be defective or inconsistent with any other
provision herein or in any Trust Supplement, (b) to cure any ambiguity or
correct any mistake or (c) to modify any other provision with respect to
matters or questions arising under this Agreement, the Intercreditor Agreement,
the Note Purchase Agreement or the Liquidity Facility, provided that any such
action shall not materially adversely affect the interests of the
Certificateholders of any class;
(5) to modify, eliminate or add to the provisions of this
Agreement to such extent as shall be necessary to continue the qualification of
this Agreement (including any supplemental agreement) under the Trust Indenture
Act or under any similar Federal statute hereafter enacted, and to add to this
Agreement such other provisions as may be expressly permitted by the Trust
Indenture Act, excluding, however, the provisions referred to in Section
316(a)(2) of the Trust Indenture Act as in effect at the date as of which this
Basic Agreement was executed or any corresponding provision in any similar
Federal statute hereafter enacted;
51
<PAGE> 58
(6) to evidence and provide for the acceptance of appointment
under this Agreement by the Trustee or a successor Trustee with respect to one
or more Trusts and to add to or change any of the provisions of this Agreement
as shall be necessary to provide for or facilitate the administration of the
Trusts hereunder and thereunder by more than one Trustee, pursuant to the
requirements of Section 7.10;
(7) to provide the information required under Sections 7.12
and 12.03 as to the Trustee;
(8) to modify or eliminate provisions relating to the
transfer or exchange of Exchange Certificates or the Initial Certificates upon
consummation of the Exchange Offer (as defined in the Registration Rights
Agreement) or effectiveness of the Registration Statement; or
(9) to comply with any requirement of the SEC, any applicable
law, rules or regulations of any exchange or quotation system on which the
Certificates of any class are listed or of any regulatory body.
Section 9.02 Supplemental Agreements with Consent of
Certificateholders. With respect to the Trusts of each class and the class of
Certificates relating thereto, with the consent of the Certificateholders
holding Certificates evidencing Fractional Cumulative Interests aggregating not
less than a majority in interest in such Trust, by Direction of said
Certificateholders delivered to the Company and the Trustee, the Company may
(with the consent of the Owner Trustees, if any, relating to such Certificates,
which consent shall not be unreasonably withheld), and the Trustee (subject to
Section 9.03) shall, enter into an agreement or agreements supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, the Intercreditor
Agreement, any Liquidity Facility, the Registration Rights Agreement or the
Note Purchase Agreement to the extent applicable to such Certificateholders or
of modifying in any manner the rights and obligations of such
Certificateholders under this Agreement, the Intercreditor Agreement, the
Liquidity Facility, the Registration Rights Agreement or the Note Purchase
Agreement; provided, however, that no such supplemental agreement shall,
without the consent of the Certificateholder of each Outstanding Certificate
affected thereby:
(1) reduce in any manner the amount of, or delay the timing
of, any receipt by the Trustee of payments on the Equipment Notes held
in such Trust or distributions that are required to be made herein on
any Certificate of such class, or change any date of payment on any
Certificate of such class, or change the place of payment where, or
the coin or currency in which, any Certificate of such class is
payable, or impair the right to institute suit for the enforcement of
any such payment or distribution on or after the Regular Distribution
Date or Special Distribution Date applicable thereto;
(2) permit the disposition of any Equipment Note included in
the Trust Property of such Trust except as permitted by this
Agreement, or otherwise deprive such Certificateholder of the benefit
of the ownership of the Equipment Notes in such Trust;
52
<PAGE> 59
(3) reduce the percentage of the aggregate Fractional
Cumulative Interests of such Trusts which is required for any such
supplemental agreement, or reduce such percentage required for any
waiver of compliance with certain provisions of this Agreement or
certain defaults hereunder and their consequences provided for in this
Agreement; or
(4) waive, amend or modify Section 2.4, 3.2 or 3.3 of the
Intercreditor Agreement in a manner that has a material adverse effect
on the Certificateholders.
It shall not be necessary for any Direction of such
Certificateholders under this Section 9.02 to approve the particular form of
any proposed supplemental agreement, but it shall be sufficient if such
Direction shall approve the substance thereof.
Section 9.03 Documents Affecting Immunity or Indemnity. If in
the opinion of the Trustee any document required to be executed by it pursuant
to the terms of Section 9.01 or 9.02 has a material adverse effect on any
interest, right, duty, immunity or indemnity in favor of the Trustee under this
Basic Agreement or any Trust Supplement, the Trustee may in its discretion
decline to execute such document.
Section 9.04 Execution of Supplemental Agreements. In
executing, or accepting the additional trusts created by, any supplemental
agreement permitted by this Article IX or the modifications thereby of the
trusts created by this Agreement, the Trustee shall be entitled to receive upon
its request, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental agreement is authorized
or permitted by this Agreement.
Section 9.05 Effect of Supplemental Agreements. Upon the
execution of any supplemental agreement under this Article IX, this Basic
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Basic Agreement for all purposes; and every
Certificateholder of each class theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby to the extent applicable to such
class.
Section 9.06 Conformity with Trust Indenture Act. Every
supplemental agreement executed pursuant to this Article IX shall conform to
the requirements of the Trust Indenture Act as then in effect.
Section 9.07 Reference in Certificates to Supplemental
Agreements. Certificates of each class authenticated and delivered after the
execution of any supplemental agreement applicable to such class pursuant to
this Article IX may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental agreement; and, in such case, suitable
notation may be made upon Outstanding Certificates of such class after proper
presentation and demand.
53
<PAGE> 60
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS
Section 10.01 Amendments and Supplements to Indentures and
Other Note Documents. If the Trustee, as holder (or beneficial owner through
the Subordination Agent) of any Equipment Note in trust for the benefit of the
Certificateholders of any class or as Controlling Party under the Intercreditor
Agreement, receives a request pursuant to Section 9.02 or Section 6.04 for a
consent to any amendment, modification, waiver or supplement under any related
Indenture or other related Note Document, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or supplement to each
Certificateholder of such class registered on the Register as of the date of
such notice. The Trustee shall request from the Certificateholders of such
class a Direction as to (a) whether or not to take or refrain from taking (or
direct the Subordination Agent to take or refrain from taking) any action which
a holder of such Equipment Note has the option to direct, (b) whether or not to
give or execute (or direct the Subordination Agent to give or execute) any
waivers, consents, amendments, modifications or supplements as a holder of such
Equipment Note or a Controlling Party and (c) how to vote (or direct the
Subordination Agent to vote) the Equipment Notes if a vote has been called for
with respect thereto. If such a request for Certificateholder Direction shall
have been made, in directing any action or casting any vote or giving any
consent as the holder of any such Equipment Notes (or directing the
Subordination Agent in any of the foregoing), (i) other than as Controlling
Party, the Trustee shall vote for or give consent to any such action with
respect to such Equipment Note in the same proportion as that of (A) the
aggregate face amounts of all Certificates of such class actually voted in
favor of or for giving consent to such action by such Direction of
Certificateholders to (B) the aggregate face amount of all Outstanding
Certificates and (i) as Controlling Party, the Trustee shall vote as directed
in such Certificateholder Direction by the Certificateholders of such class
evidencing a Fractional Cumulative Interest aggregating not less than a
majority in interest in the related Trusts. For purposes of the preceding
sentence, a Certificate shall have been "actually voted" if the Holder of such
Certificate has delivered to the Trustee an instrument evidencing such Holder's
consent to such Direction prior to two Business Days before the Trustee directs
such action or casts such vote or gives such consent. Notwithstanding the
foregoing, but subject to Section 6.04 and the Intercreditor Agreement, the
Trustee may, with respect to the Certificates of any class, in its own
discretion and at its own direction, consent and notify the relevant Indenture
Trustee of such consent (or direct the Subordination Agent to consent and
notify such Indenture Trustee of such consent) to any amendment, modification,
waiver or supplement under the relevant Indenture or any other Note Document,
if an Event of Default hereunder shall have occurred and be continuing, or if
such amendment, modification or waiver shall not adversely affect the interests
of the Certificateholders of such class.
54
<PAGE> 61
ARTICLE XI
TERMINATION OF TRUSTS
Section 11.01 Termination of the Trusts. In respect of the
Trusts of each class created by the Basic Agreement as supplemented by a
related Trust Supplement, the respective obligations and responsibilities of
the Company and the Trustee created under this Agreement and such Trusts
created hereby shall terminate upon the distribution to all Holders of the
Certificates of the class of such Trusts and the Trustee of all amounts
required to be distributed to them pursuant to this Agreement and the
disposition of all property held as part of the Trust Property of the related
class of such Trusts; provided, however, that in no event shall such Trusts
continue beyond 21 years less one day following the death of the last survivor
of all descendants living on the date hereof of Joseph P. Kennedy, Sr., unless
applicable law shall permit a longer term, in which case such longer term shall
apply.
Notice of any termination of the Trusts of a class,
specifying the applicable Regular Distribution Date (or applicable Special
Distribution Date, as the case may be) upon which the Certificateholders of
such class may surrender their Certificates to the Trustee for payment of the
final distribution and cancellation, shall be mailed promptly by the Trustee to
Certificateholders of such class not earlier than the 60th day and not later
than the 26th day preceding such final distribution specifying (A) the Regular
Distribution Date (or Special Distribution Date, as the case may be) upon which
the proposed final payment of the Certificates of such class shall be made upon
presentation and surrender of Certificates of such class at the office or
agency of the Trustee therein specified, (B) the amount of any such proposed
final payment, and (C) that the Record Date otherwise applicable to such
Regular Distribution Date (or Special Distribution Date, as the case may be) is
not applicable, payments being made only upon presentation and surrender of the
Certificates of such class at the office or agency of the Trustee therein
specified. The Trustee shall give such notice to the Registrar at the time such
notice is given to Certificateholders of such class. Upon presentation and
surrender of the Certificates of such class in accordance with such notice, the
Trustee shall cause to be distributed to Certificateholders of such class such
final payments.
If all of the Certificateholders of such class shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee shall give a
second written notice to the remaining Certificateholders of such class to
surrender their Certificates for cancellation and receive the final
distribution with respect thereto. No additional interest shall accrue on the
Certificates of such class after the Regular Distribution Date (or Special
Distribution Date, as the case may be) specified in the first written notice.
If any money held by the Trustee for the payment of distributions on the
Certificates of such class shall remain unclaimed for two years (or such lesser
time as the Trustee shall be satisfied, after 60 days' notice from the Company,
is one month prior to the escheat period provided under applicable law) after
the final distribution date with respect thereto, the Trustee shall pay to each
Indenture Trustee the appropriate amount of money relating to such Indenture
Trustee and shall give written notice thereof to the related Owner Trustees,
the Owner Participants and the Company.
55
<PAGE> 62
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Limitation on Rights of Certificateholders. The
death or incapacity of any Certificateholder of any class shall not operate to
terminate this Agreement or the related Trust, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations, and
liabilities of the parties hereto or any of them.
Section 12.02 Certificates Nonassessable and Fully Paid.
Except as set forth in the last sentence of this Section 12.02,
Certificateholders of each class shall not be personally liable for obligations
of the related Trusts, the Fractional Undivided Interests represented by the
Certificates of such class shall be nonassessable for any losses or expenses of
such Trust or for any reason whatsoever, and Certificates of such class, upon
authentication thereof by the Trustee pursuant to Section 3.03, are and shall
be deemed fully paid. No Certificateholder of such class shall have any right
(except as expressly provided herein) to vote or in any manner otherwise
control the operation and management of the related Trust Property, the related
Trust, or the obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates of such class, be
construed so as to constitute the Certificateholders of such class from time to
time as partners or members of an association. Neither the existence of any
Trust nor any provision herein is intended to or shall limit the liability the
Certificateholders of each class would otherwise incur if such
Certificateholders owned the related Trust Property as co-owners, or incurred
any obligations of the related Trust, directly rather than through the related
Trust.
Section 12.03 Notices. (a) Unless otherwise specifically
provided herein or in the applicable Trust Supplement with respect to any
Trust, all notices required under the terms and provisions of this Basic
Agreement or such Trust Supplement with respect to such Trust shall be in
English and in writing, and any such notice may be given by United States mail,
courier service or telecopy, and any such notice shall be effective when
delivered or received or, if mailed, three days after deposit in the United
States mail with proper postage for ordinary mail prepaid,
if to the Company, to:
U.S. Mail Overnight Delivery Service
--------- --------------------------
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Attn: Vice President and
Treasurer Treasurer
Telecopy: (708) 952-7117
56
<PAGE> 63
if to the Trustee, to:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopy: (801) 246-5053
(b) The Company or the Trustee as to any class of
Certificates, by written notice to the other, may designate additional or
different addresses for subsequent notices or communications.
(c) Any notice or communication to Certificateholders of any
class shall be mailed by first-class mail to the addresses for
Certificateholders of such class shown on the Register kept by the Registrar.
Failure so to mail a notice or communication or any defect in such notice or
communication shall not affect its sufficiency with respect to other
Certificateholders of such class.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it. Notwithstanding the
foregoing, all communications or notices to the Trustee shall be deemed to be
given only when received by a Responsible Officer of the Trustee.
(e) If the Company mails a notice or communication to the
Certificateholders of such class, it shall mail a copy to the Trustee and to
each Paying Agent for such class at the same time.
(f) The Trustee shall promptly furnish the Company with a
copy of any demand, notice or written communication received by the Trustee
hereunder from any Certificateholder, Owner Trustee or Indenture Trustee.
Section 12.04 Governing Law. THIS BASIC AGREEMENT, ALL TRUST
SUPPLEMENTS AND ALL CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 12.05 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or any
Trust, or of the Certificates of any class or the rights of the
Certificateholders thereof.
57
<PAGE> 64
Section 12.06 Trust Indenture Act Controls. This Agreement is
subject to the provisions of the Trust Indenture Act and shall, to the extent
applicable, be governed by such provisions.
Section 12.07 Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 12.08 Successors and Assigns. All covenants,
agreements, representations and warranties in this Agreement by the Trustee and
the Company shall bind and, to the extent permitted hereby, shall inure to the
benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not.
Section 12.09 Benefits of Agreement. Nothing in this
Agreement or in the Certificates of any class, express or implied, shall give
to any Person, other than the parties hereto and their successors hereunder,
and the Certificateholders of each class, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 12.10 Legal Holidays. In any case where any Regular
Distribution Date or Special Distribution Date relating to any Certificate of
any class shall not be a Business Day with respect to such class, then
(notwithstanding any other provision of this Agreement) payment need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on such Regular Distribution Date or Special
Distribution Date, and interest shall accrue during the intervening period.
Section 12.11 Counterparts. For the purpose of facilitating
the execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 12.12 Intention of Parties. The parties hereto intend
that each Trust be classified for U.S. federal income tax purposes as a grantor
trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of
1986, as amended, and not as a trust or association taxable as a corporation or
as a partnership. The powers granted and obligations undertaken pursuant to
this Agreement shall be so construed so as to further such intent.
Section 12.13 Registration of Equipment Notes in Name of
Subordination Agent. The Trustee agrees that all Equipment Notes to be
purchased by any Trust shall be issued in the name of the Subordination Agent
under the Intercreditor Agreement or its nominee and held by the Subordination
Agent in trust for the benefit of the Certificateholders, or, if not so held,
the Subordination Agent or its nominee shall be reflected as the owner of such
Equipment Notes in the register of the issuer of such Equipment Notes.
58
<PAGE> 65
Section 12.14 Communication by Certificateholders with other
Certificateholders. Certificateholders of any class may communicate with other
Certificateholders of such class with respect to their rights under this Basic
Agreement, the related Trust Supplements or the Certificates of such class
pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee
and any and all other persons benefitted by this Agreement shall have the
protection afforded by Section 312(c) of the Trust Indenture Act.
59
<PAGE> 66
IN WITNESS WHEREOF, the parties have caused this Basic Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first written above.
UNITED AIR LINES, INC.
By: /s/ THOMAS A. MUTRYN
-------------------------------
Name: Thomas A. Mutryn
Title: Vice President & Treasurer
PASS THROUGH TRUST AGREEMENT
S-1
<PAGE> 67
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Trustee
By: /s/ C. SCOTT NIELSEN
-------------------------------
Name: C. Scott Nielsen
Title: Vice President
PASS THROUGH TRUST AGREEMENT
S-2
<PAGE> 68
EXHIBIT A
FORM OF CERTIFICATE
REGISTERED $_____________________________
Fractional Undivided Interest*
No. R - _____
CUSIP NO. ____________________
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS
HELD BY UNITED AIR LINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY
SUCH PERSON RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A)
TO UNITED, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE
PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT
- ------------
*/ Denominations of $100,000 and integral multiples of $1,000 in excess
thereof (except one Class D Certificate may be issued in a different
denomination).
PASS THROUGH TRUST AGREEMENT
A-1
<PAGE> 69
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH
THIS CERTIFICATE WAS HELD BY UNITED AIR LINES, INC., THE TRUSTEE OR
ANY AFFILIATE OF ANY SUCH PERSONS, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]*
[TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.]**
- ------------
*/ Not to be included on the face of the Permanent Offshore Global
Certificate.
**/ To be included on the face of each Global Certificate.
PASS THROUGH TRUST AGREEMENT
A-2
<PAGE> 70
[EITHER: (A) THE HOLDER IS NOT ACQUIRING THIS CERTIFICATE WITH PLAN
ASSETS OF ANY PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"); OR (B) THE
HOLDER'S PURCHASE AND HOLDING OF THIS CERTIFICATE IS EXEMPT FROM THE
PROHIBITED TRANSACTION RESTRICTIONS OF SECTION 406(A) OF ERISA AND
SECTION 4975 OF THE CODE BY AN ADMINISTRATIVE CLASS PROHIBITED
TRANSACTION EXEMPTION GRANTED BY THE DEPARTMENT OF LABOR.]*
UNITED AIRLINES 1997-1[A][B][C][D] PASS THROUGH TRUST
UNITED AIRLINES [INITIAL] [EXCHANGE] ENHANCED PASS
THROUGH CERTIFICATE, SERIES 1997-1[A][B][C][D]
Final Expected Distribution Date: December 2, 2002
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft owned by or leased
to United Air Lines, Inc.
THIS CERTIFIES THAT _______________, for value received, is
the registered owner of a _____________ Dollars ($ dollars) Fractional
Undivided Interest in the United Airlines 1997-1[A][B][C][D] Pass Through Trust
(the "Trust") created by First Security Bank, National Association, as trustee
(the "Trustee") pursuant to a Pass Through Trust Agreement, dated as of
December 23, 1997 (the "Basic Agreement"), as supplemented by Trust Supplement
No. 1997-1 [A-__] [B-__] [C-__] [D-__], (collectively, the "Agreement") between
the Trustee and United Air Lines, Inc., a Delaware corporation (the "Company"),
a summary of certain of the pertinent provisions of which is set forth below.
To the extent not otherwise defined herein, the capitalized terms used herein
have the meanings assigned to them in the Agreement. This Certificate is one of
the duly authorized Certificates designated as "United Airlines [Initial]
[Exchange] Enhanced Pass Through Certificates, Series 1997-1[A][B][C][D]" (the
"Certificates"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement.
By virtue of its acceptance hereof, the Certificateholder of
this Certificate assents to and agrees to be bound by the provisions of the
Agreement, the Intercreditor Agreement and the Note Purchase Agreement. The
property of the Trust includes (i) certain Equipment Notes and all monies at
any time paid thereon and all monies due and to become due thereunder, (ii)
funds from time to time deposited in the related Escrow Account, the related
Certificate Account and the related
- ------------
*/ To be included on the face of each Global Certificate.
PASS THROUGH TRUST AGREEMENT
A-3
<PAGE> 71
Special Payments Account, (iii) all rights of such Trust and the Trustee, on
behalf of such Trust, under the Intercreditor Agreement, the Registration
Rights Agreement and the Note Purchase Agreement, including all rights to
receive certain payments thereunder and all monies paid to such Trustee on
behalf of such Trust pursuant to the Intercreditor Agreement, the Registration
Rights Agreement or the Note Purchase Agreement; [and (iv) all monies
receivable by the Subordination Agent under the Liquidity Facilities for the
Trust]* ( together with the property of all other trusts of the same class the
"Trust Property"). Each issue of the Equipment Notes is secured by, among other
things, a security interest in the Aircraft leased to or owned by the Company.
The Certificates represent fractional undivided interests in
the Trust, all other trusts of the same class and the Trust Property, and have
no rights, benefits or interest in respect of any assets or property of any
trust of another class.
Interest applicable to this Certificate will be payable at a
floating rate equal to Three- Month LIBOR plus ____%.
Subject to and in accordance with the terms of the Agreement,
the Intercreditor Agreement and the Note Purchase Agreement, from and to the
extent of funds then available to the Trustee, there shall be distributed on
each March 2, June 2, September 2 and December 2 (a "Regular Distribution
Date"), commencing on March 2, 1998, to the Person in whose name this
Certificate is registered at the close of business on the 15th day preceding
such Regular Distribution Date, an amount in respect of the Scheduled Payments
on the Equipment Notes due on such Regular Distribution Date, the receipt of
which has been confirmed by the Trustee, equal to the product of the percentage
interest in the Trust (or, if more than one trust of like class, all such
trusts) evidenced by this Certificate and an amount equal to the sum of such
Scheduled Payments. Subject to and in accordance with the terms of the
Agreement, the Intercreditor Agreement and the Note Purchase Agreement, if
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust (or, if more than one
trust of like class, all such trusts) evidenced by this Certificate and an
amount equal to the sum of such Special Payments so received. If a Regular
Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the next Business Day with the same force and
effect as if made on such Regular Distribution Date or Special Distribution
Date and interest shall accrue during the intervening period. The Trustee shall
mail notice of each Special Payment and the Special Distribution Date therefor
to the Certificateholder of this Certificate. The Certificates are redeemable
as and to the extent provided in the Note Purchase Agreement.
- ------------
*/ For Class A Certificates and Class B Certificates only.
PASS THROUGH TRUST AGREEMENT
A-4
<PAGE> 72
[The Holder of this Certificate is entitled to the benefits
of the Registration Rights Agreement, dated as of December 23, 1997, between
the Company, the Trustee and the Initial Purchasers named therein (the
"Registration Rights Agreement"). If neither the consummation of the Exchange
Offer nor the declaration by the SEC of a Shelf Registration to be effective (a
"Registration Event") occurs on or prior to 180th day after the Closing Date
(as defined in the Registration Rights Agreement), the interest rate per annum
borne by the Equipment Notes shall be increased by 0.50%, from and including
July 1, 1998, to but excluding the date on which a Registration Event occurs.
If the Shelf Registration Statement ceases to be effective at any time during
the period specified by the Registration Rights Agreement for more than 60
days, whether or not consecutive, during any 12-month period, the interest rate
per annum borne by the Equipment Notes shall be increased by 0.50% from the
61st day of the applicable 12-month period such Shelf Registration Statement
ceases to be effective until such time as the Shelf Registration Statement
again becomes effective.]*
The Holder of this Certificate is entitled to the benefits of
the Note Purchase Agreement, which provides that the interest rate on each
series of Equipment Notes relating to the Leased Aircraft shall be reset on the
Final Expected Distribution Date. No later than 60 days prior to the Final
Expected Distribution Date, the Company shall cause the Trustee to hire (and,
if the Company does not so cause the Trustee, the Trustee shall no later than
30 days prior to the Final Expected Distribution Date, hire) an independent
investment banker (the "Reset Agent") of recognized national standing (which
may be an Initial Purchaser) to (i) determine the interest rate on each series
of the Equipment Notes relating to the Leased Aircraft to an interest rate
that, in the good faith determination of the Reset Agent, after consideration
of the then current rates for pass through certificates of the Company and
other comparable equipment lessees having similar tenor, rating and other
pricing terms, shall enable each such series of Equipment Notes to be sold at
100% of the principal amount thereof on the Final Expected Distribution Date,
and (ii) for such reasonable fee payable by the applicable Trust as shall be
mutually agreed by the and the Reset Agent, use its best efforts to sell any
such Equipment Notes with such new interest rates on the Final Expected
Distribution Date or as promptly as practicable thereafter.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate shall be
made after notice mailed by the Trustee of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency of the Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE HOLDER OF THIS CERTIFICATE SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
- ------------
*/ To be included only on each Class A and Class B Initial Certificates.
PASS THROUGH TRUST AGREEMENT
A-5
<PAGE> 73
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate
to be duly signed, manually or in facsimile, by its Authorized Officer.
Dated: UNITED AIRLINES 1997-1[A][B][C][D]
-------------------- PASS THROUGH TRUST
By: FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity
but solely as Trustee
By:
-------------------------------
Name:
Title:
PASS THROUGH TRUST AGREEMENT
A-6
<PAGE> 74
FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Agreement.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but
solely as Trustee
By:
-------------------------------
Authorized Officer
PASS THROUGH TRUST AGREEMENT
A-7
<PAGE> 75
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company or the Trustee or
any of their affiliates. The Certificates are limited in right or payment, all
as more specifically set forth on the face hereof and in the Agreement. All
payments or distributions made to Certificateholders under the Agreement shall
be made only from the Trust Property and only to the extent that the Trustee
shall have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of the Agreement. Each Certificateholder
of this Certificate, by its acceptance hereof, agrees that it shall look solely
to the income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made
to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby. A copy of the
Agreement may be examined during normal business hours at the principal office
of the Trustee, and at such other places, if any, designated by the Trustee, by
any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Certificateholders under the
Agreement at any time by the Company and the Trustee with the consent of the
Certificateholders holding Certificates evidencing Fractional Cumulative
Interests aggregating not less than a majority in interest in the Trust. Any
such consent by the Certificateholder of this Certificate shall be conclusive
and binding on such Certificateholder and upon all future Certificateholders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof,
in certain limited circumstances, without the consent of the Certificateholders
of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, at its Corporate Trust Office, duly
endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized
in writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided Interest in
the Trust shall be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons [in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000
PASS THROUGH TRUST AGREEMENT
A-8
<PAGE> 76
in excess thereof]*. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant
to the Agreement and the disposition of all property held as part of the Trust
Property.
- ------------
*/ Not to be included in Class D Certificates.
PASS THROUGH TRUST AGREEMENT
A-9
<PAGE> 77
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- -------------------
please print or typewrite name and address including zip code of assignee
- -------------------
the within Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
- -------------------
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE GLOBAL AND
OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Certificate occurring
prior to the date that is the earlier of the date of an effective Registration
Statement or December 23, 1999, the undersigned confirms that without utilizing
any general solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the
PASS THROUGH TRUST AGREEMENT
A-10
<PAGE> 78
conditions to any such transfer of registration set forth herein and in Section
3.06 of the Agreement shall have been satisfied.
Date: [Name of Transferor]
------------------------------------
NOTE: The signature must correspond with
the name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
---------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
---------------------- ---------------------------------------
NOTE: To be executed by an executive
officer.
PASS THROUGH TRUST AGREEMENT
A-11
<PAGE> 79
EXHIBIT B
FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES
[Date]
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Trustee Administration
Re: United Airlines 1997-1[A][B][C][D] Pass Through Trust,
United Airlines Enhanced Pass Through Certificates,
Series 1997-1 [A][B][C][D] (the "Certificates")
Dear Sirs:
This letter relates to U.S. $_______ Fractional Undivided
Interest of Certificates represented by a Certificate (the "Legended
Certificate") which bears a legend outlining restrictions upon transfer of such
Legended Certificate. Pursuant to Section 3.01 of the Pass Through Trust
Agreement relating to the Certificates, dated as of December 23, 1997, as
supplemented by Trust Supplement No. ___, (the "Trust Agreement"), between
United Air Lines, Inc. ("United") and you, we hereby certify that we are (or we
shall hold such securities on behalf of) a person outside the United States to
whom the Certificates could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to exchange the legended certificate for
an unlegended certificate representing an identical principal amount of
Certificates, all in the manner provided for in the Trust Agreement.
You and United are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Certificateholder]
By:
-----------------------------
Authorized Signature
PASS THROUGH TRUST AGREEMENT
<PAGE> 80
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
[Date]
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Trustee Administration
Re: United Airlines 1997-1[A][B][C][D] Pass Through Trust (the
"Trust"), United Airlines Enhanced Pass Through
Certificates, Series 1997-1 [A][B][C][D] (the
"Certificates")
Dear Sirs:
In connection with our proposed sale of $_______ Fractional
Undivided Interest of the Certificates, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
1. the offer of the Certificates was not made to a person in
the United States;
2. either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
3. no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
4. the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has
PASS THROUGH TRUST AGREEMENT
<PAGE> 81
been made in accordance with the applicable provisions of Rule 903(c)(3) or
Rule 904(c)(1), as the case may be.
You and United Air Lines, Inc. are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------
Authorized Signature
PASS THROUGH TRUST AGREEMENT
C-2
<PAGE> 82
EXHIBIT D
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
[Date]
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Trustee Administration
Re: United Airlines 1997-1[A][B][C][D] Pass Through Trust (the
"Trust"), United Airlines Enhanced Pass Through
Certificates, Series 1997-1 [A][B][C][D] (the
"Certificates")
Dear Sirs:
In connection with our proposed purchase of $_________
aggregate principal amount of the Certificates, we confirm that:
1. We understand that any subsequent transfer of the
Certificates is subject to certain restrictions and conditions set
forth in the Pass Through Trust Agreement, dated as of December 23,
1997, as supplemented by Trust Supplement No. ___, relating to the
Certificates (the "Pass Through Trust Agreement") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer
the Certificates except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the Certificates have not been
registered under the Securities Act, and that the Certificates may not
be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell any
Certificate, we shall do so only (A) to United Air Lines, Inc., (B) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes to you and United Air Lines, Inc., a signed letter
substantially in the form of this letter, (D) outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant
PASS THROUGH TRUST AGREEMENT
<PAGE> 83
to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree
to provide to any person purchasing any of the Certificates from us a
notice advising such purchaser that resales of the Notes are
restricted as stated herein. We further understand that the
Certificates purchased by us shall bear a legend to the foregoing
effect.
3. We understand that, on any proposed resale of any
Certificates, we shall be required to furnish to you and United Air
Lines, Inc. such certifications, legal opinions and other information
as you and United Air Lines, Inc. may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We
further understand that the Certificates purchased by us shall bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of our investment in the Certificates and we and any accounts
for which we are acting are each able to bear the economic risk of our
or its investment.
5. We are acquiring the Certificates purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You and United Air Lines, Inc. are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
Authorized Signature
PASS THROUGH TRUST AGREEMENT
D-2
<PAGE> 1
EXHIBIT 4.4
TRUST SUPPLEMENT NO. 1997-1A-1
TO
PASS THROUGH TRUST AGREEMENT
Dated as of December 23, 1997
between
UNITED AIR LINES, INC.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee
============================
$445,826,000
United Airlines Enhanced Pass Through Certificates, Series 1997-1A
<PAGE> 2
TRUST SUPPLEMENT NO. 1997-1A-1
Dated as of December 23, 1997
Enhanced Pass Through Certificates, Series 1997-1A
---------------
Table of Contents
---------------
<TABLE>
<CAPTION>
ARTICLE I
DECLARATION OF TRUST PAGE
----
<S> <C> <C>
Section 1.01. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE CERTIFICATES
Section 2.01. The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
DEFINITIONS
Section 3.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
THE TRUSTEE
Section 4.01. The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Ratified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.02. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.03. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.04. Limitation on Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
i
<PAGE> 3
Exhibit A Form of Initial U.S. Global Certificate and Form of Temporary
Offshore Global Certificate
Exhibit B DTC Letter of Representations
Exhibit C Scheduled Payments of Principal on Class A Certificates
Exhibit D Equipment Notes, Principal Amounts and Maturities
Exhibit E Aircraft, Registration Numbers and Maturities
Exhibit F Note Documents
ii
<PAGE> 4
TRUST SUPPLEMENT NO. 1997-1A-1
This Trust Supplement No. 1997-1A-1, dated as of December 23,
1997 (herein called the "Trust Supplement"), between United Air Lines, Inc., a
Delaware corporation (the "Company"), and First Security Bank, National
Association (the "Trustee"), to the Pass Through Trust Agreement, dated as of
December 23, 1997 (the "Basic Agreement"), between the Company and the Trustee.
WHEREAS, the Basic Agreement, which is unlimited as to the
aggregate principal amount of Certificates that may be issued thereunder, has
heretofore or concurrently herewith been executed and delivered;
WHEREAS, the Company intends (i) in connection with ten
separate debt financings, each secured by an Owned Aircraft, to issue on a
recourse basis Equipment Notes and (ii) in connection with four separate
leveraged lease transactions relating to the Leased Aircraft, to refinance the
current the indebtedness originally incurred to finance the purchase by the
Owner Trustee of such Leased Aircraft through the issuance of Equipment Notes
by each such Owner Trustee, acting on behalf of its respective Owner
Participant, on a non-recourse basis;
WHEREAS, pursuant to the terms and conditions of the Basic
Agreement as supplemented by this Trust Supplement (the "Agreement"), the
Trustee shall purchase such Equipment Notes issued by the Company, in the case
of the Owned Aircraft, and each Owner Trustee, in the case of the Leased
Aircraft, of the same interest rate as the Certificates of the class issued
hereunder and shall hold such Equipment Notes in trust for the benefit of the
Certificateholders of such class;
WHEREAS, the Trustee intends to declare the creation of this
Trust (the "1997-1A-1 Trust") for the benefit of the Certificateholders of the
Certificates issued hereunder, and the initial Certificateholders, as the
grantors of this 1997-1A-1 Trust, by their respective acceptances of the
Certificates issued hereunder, intend to join in the creation of this 1997-1A-1
Trust with the Trustee;
WHEREAS, the Basic Agreement provides for the creation in the
future of additional trusts of the same class (collectively, the "Class A
Trusts");
WHEREAS, all Certificates to be issued by the 1997-1A-1 Trust
will evidence fractional undivided interests in the 1997-1A-1 Trust created
hereby and in all Class A Trusts and will convey no rights, benefits or
interests in respect of any property other than the Trust Property of the Class
A Trusts;
WHEREAS, all of the conditions and requirements necessary to
make this Trust Supplement, when duly executed and delivered, a valid, binding
and legal instrument in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and
<PAGE> 5
the execution and delivery of this Trust Supplement in the form and with the
terms hereof have been in all respects duly authorized;
WHEREAS, this Trust Supplement shall, upon effectiveness of
the Exchange Offer Registration Statement or the Shelf Registration Statement
described in the Registration Rights Agreement, be subject to the provisions of
the Trust Indenture Act of 1939, as amended, and shall, to the extent
applicable, be governed by such provisions;
NOW, THEREFORE, in consideration of the premises herein, it is
agreed between the Company and the Trustee as follows:
ARTICLE I
DECLARATION OF TRUST
Section 1.01. Declaration of Trust. The Trustee hereby
declares the creation of this 1997-1A-1 Trust for the benefit of the
Certificateholders of the Certificates issued hereunder, and the initial
Certificateholders, as the grantors of the 1997-1A-1 Trust, by their respective
acceptances of the Certificates issued hereunder, join in the creation of this
1997-1A-1 Trust with the Trustee.
ARTICLE II
THE CERTIFICATES
Section 2.01. The Certificates. There is hereby created a
class of Certificates to be issued under the Agreement, designated and to be
distinguished and known as "Enhanced Pass Through Certificates, Series 1997-1A"
(the "Class A Certificates"). Each Certificate represents a Fractional
Undivided Interest in the 1997-1A-1 Trust created hereby and a fractional
undivided interest in all Class A Trusts. The terms and conditions applicable
to the Class A Certificates are as follows:
1. The aggregate principal amount of the Class A
Certificates that shall be authenticated under the Agreement (except
for Class A Certificates authenticated and delivered pursuant to
Sections 3.04, 3.07 and 3.10 of the Basic Agreement) upon their
initial issuance is $445,826,000.
2. The Cut-off Date is December 23, 1997.
3. The Regular Distribution Dates with respect to any
payment of Scheduled Payments means each March 2, June, September 2
and December 2, commencing March 2, 1997 and ending December 2, 2002.
4. The Special Distribution Dates with respect to the
Class A Certificates are any Business Day on which a Special Payment
is to be distributed pursuant to the Agreement.
2
<PAGE> 6
5. The Class A Certificates shall be in the form
attached hereto as Exhibit A. The Class A Certificates shall (i)
initially be issued as an Initial Certificate (which may be exchanged
for Exchange Certificates pursuant to the Registration Rights
Agreement), (ii) be either a U.S. Global Certificate or a Temporary
Offshore Global Certificate and (iii) be subject to the conditions set
forth in the Letter of Representations between the Company and the
Depositary attached hereto as Exhibit B.
6. The Scheduled Payments of principal shall be as set
forth in Exhibit C.
7. The proceeds of the Class A Certificates issued under
the Class 1997-1A-1 Trust shall be used to purchase the Equipment
Notes described in Exhibit D.
8. The Equipment Notes described in paragraph 7 relate
to the Aircraft listed in Exhibit E.
9. The related Note Documents are listed in Exhibit F.
10. The Class A Certificates shall bear the following
legend:
EITHER: (A) THE HOLDER IS NOT ACQUIRING THIS CERTIFICATE WITH
PLAN ASSETS OF ANY PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"),
OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"); OR (B) THE HOLDER'S PURCHASE AND HOLDING
OF THIS CERTIFICATE IS EXEMPT FROM THE PROHIBITED TRANSACTION
RESTRICTIONS OF SECTION 406(A) OF ERISA AND SECTION 4975 OF
THE CODE BY AN ADMINISTRATIVE CLASS PROHIBITED TRANSACTION
EXEMPTION GRANTED BY THE DEPARTMENT OF LABOR.
11. The Class A Certificates shall have the benefit of the
Class A Liquidity Facilities (as defined in the Intercreditor
Agreement).
ARTICLE III
DEFINITIONS
Section 3.01. Definitions. Unless otherwise specified
herein, capitalized terms used herein without definition shall have the
respective meanings specified heretofore in the Basic Agreement.
3
<PAGE> 7
ARTICLE IV
THE TRUSTEE
Section 4.01. The Trustee. The Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Trust Supplement or the due execution hereof by the Company
or for or in respect of the recitals and statements contained herein, all of
which recitals and statements are made solely by the Company.
Except as herein otherwise provided, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed by the Trustee by reason of this Trust Supplement other than as set
forth in the Basic Agreement, and this Trust Supplement is executed and
accepted on behalf of the Trustee, subject to all the terms and conditions set
forth in the Basic Agreement, upon the effectiveness thereof, as fully to all
intents as if the same were herein set forth at length.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Ratified. Except and so far
as herein expressly provided, all of the provisions, terms and conditions of
the Basic Agreement are in all respects ratified and confirmed; and the Basic
Agreement and this Trust Supplement shall be taken, read and construed as one
and the same instrument.
Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE
CLASS A CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW)) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 5.03. Execution in Counterparts. This Trust
Supplement may be executed in any number of counterparts, each of which shall
be an original, but such counterparts shall together constitute but one and the
same instrument.
Section 5.04. Limitation on Class A Certificates. At the
time of the creation of any additional Class A Trust and the issuance of Class
A Certificates pursuant thereto, and taking such issuance into account, the
aggregate outstanding principal amount of Class A Certificates issued under all
Class A Trusts shall not exceed $445,826,000.
4
<PAGE> 8
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Supplement to be duly executed by their respective officers thereto duly
authorized, as of the day and year first written above.
UNITED AIR LINES, INC.
By: /s/ THOMAS A. MUTRYN
--------------------------------
Name: Thomas A. Mutryn
Title: Vice President &
Treasurer
S-1 TRUST SUPPLEMENT NO. 1997-1A-1
<PAGE> 9
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ C. SCOTT NIELSEN
------------------------------------
Name: C. Scott Nielsen
-------------------------------
Title: Vice President
------------------------------
S-2 TRUST SUPPLEMENT NO. 1997-1A-1
<PAGE> 10
EXHIBIT A
FORM OF CLASS A CERTIFICATE
REGISTERED $_________________________
Fractional Undivided Interest
No. R - _____
CUSIP NO. _______________
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY UNITED AIR LINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF ANY SUCH PERSON RESELL OR OTHERWISE TRANSFER THIS
CERTIFICATE EXCEPT (A) TO UNITED, (B) TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING
$100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
A-1
<PAGE> 11
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE
ON WHICH THIS CERTIFICATE WAS HELD BY UNITED AIR LINES, INC., THE
TRUSTEE OR ANY AFFILIATE OF ANY SUCH PERSONS, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
- ------------------
A-2
<PAGE> 12
EITHER: (A) THE HOLDER IS NOT ACQUIRING THIS CERTIFICATE WITH PLAN
ASSETS OF ANY PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"); OR (B) THE
HOLDER'S PURCHASE AND HOLDING OF THIS CERTIFICATE IS EXEMPT FROM THE
PROHIBITED TRANSACTION RESTRICTIONS OF SECTION 406(A) OF ERISA AND
SECTION 4975 OF THE CODE BY AN ADMINISTRATIVE CLASS PROHIBITED
TRANSACTION EXEMPTION GRANTED BY THE DEPARTMENT OF LABOR.
UNITED AIRLINES 1997-1A PASS THROUGH TRUST
UNITED AIRLINES [INITIAL] [EXCHANGE] ENHANCED PASS
THROUGH CERTIFICATE, SERIES 1997-1A
Final Expected Distribution Date: December 2, 2002
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft owned by or leased
to United Air Lines, Inc.
THIS CERTIFIES THAT CEDE & CO., for value received, is the
registered owner of a _____________ Dollars ($ ) Fractional Undivided
Interest in the United Airlines 1997-1A Pass Through Trust (the "Trust") created
by First Security Bank, National Association, as trustee (the "Trustee")
pursuant to a Pass Through Trust Agreement, dated as of December 23, 1997 (the
"Basic Agreement"), as supplemented by Trust Supplement No. 1997-1A-1
(collectively, the "Agreement") between the Trustee and United Air Lines, Inc.,
a Delaware corporation (the "Company"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
the Agreement. This Certificate is one of the duly authorized Certificates
designated as "United Airlines [Initial] [Exchange] Enhanced Pass Through
Certificates, Series 1997-1A" (the "Certificates"). This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement.
By virtue of its acceptance hereof, the Certificateholder of
this Certificate assents to and agrees to be bound by the provisions of the
Agreement, the Intercreditor Agreement and the Note Purchase Agreement. The
property of the Trust includes (i) certain Equipment Notes and all monies at any
time paid thereon and all monies due and to become due thereunder, (ii) funds
from time to time deposited in the related Escrow Account, the related
Certificate Account and the related Special Payments Account, (iii) all rights
of such Trust and the Trustee, on behalf of such Trust, under the Intercreditor
Agreement, the Registration Rights Agreement and the Note Purchase Agreement,
including all rights to receive certain payments thereunder and all monies paid
to such Trustee on behalf of such Trust pursuant to the Intercreditor Agreement,
the Registration Rights
A-3
<PAGE> 13
Agreement and the Note Purchase Agreement, and (iv) all monies receivable by the
Subordination Agent under the Liquidity Facilities for the Trust (together with
the property of all other trusts of the same class the "Trust Property"). Each
issue of the Equipment Notes is secured by, among other things, a security
interest in the Aircraft leased to or owned by the Company.
The Certificates represent fractional undivided interests in
the Trust, all other trusts of the same class and the Trust Property, and have
no rights, benefits or interest in respect of any assets or property of any
trust of another class.
Interest applicable to this Certificate will be payable at a
floating rate equal to Three-Month LIBOR plus 0.22%.
Subject to and in accordance with the terms of the Agreement,
the Intercreditor Agreement and the Note Purchase Agreement, from and to the
extent of funds then available to the Trustee, there shall be distributed on
each March 2, June 2, September 2 and December 2 (a "Regular Distribution
Date"), commencing on March 2, 1998, to the Person in whose name this
Certificate is registered at the close of business on the 15th day preceding
such Regular Distribution Date, an amount in respect of the Scheduled Payments
on the Equipment Notes due on such Regular Distribution Date, the receipt of
which has been confirmed by the Trustee, equal to the product of the percentage
interest in the Trust (or, if more than one trust of like class, all such
trusts) evidenced by this Certificate and an amount equal to the sum of such
Scheduled Payments. Subject to and in accordance with the terms of the
Agreement, the Intercreditor Agreement and the Note Purchase Agreement, if
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust (or, if more than one
trust of like class, all such trusts) evidenced by this Certificate and an
amount equal to the sum of such Special Payments so received. If a Regular
Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the next Business Day with the same force and
effect as if made on such Regular Distribution Date or Special Distribution Date
and interest shall accrue during the intervening period. The Trustee shall mail
notice of each Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate. The Certificates are redeemable as and to
the extent provided in the Note Purchase Agreement.
The Holder of this Certificate is entitled to the benefits of
the Registration Rights Agreement, dated as of December 23, 1997, between the
Company, the Trustee and the Initial Purchasers named therein (the "Registration
Rights Agreement"). If neither the consummation of the Exchange Offer nor the
declaration by the SEC of a Shelf Registration to be effective (a "Registration
Event") occurs on or prior to 180th day after the Closing Date (as defined in
the Registration Rights Agreement), the interest rate per annum borne by the
Equipment Notes shall be increased by 0.50%, from and including July 1, 1998, to
but excluding the date on which a Registration Event occurs. If the Shelf
Registration Statement ceases to be effective at any time
A-4
<PAGE> 14
during the period specified by the Registration Rights Agreement for more than
60 days, whether or not consecutive, during any 12-month period, the interest
rate per annum borne by the Equipment Notes shall be increased by 0.50% from the
61st day of the applicable 12-month period such Shelf Registration Statement
ceases to be effective until such time as the Shelf Registration Statement again
becomes effective.
The Holder of this Certificate is entitled to the benefits of
the Note Purchase Agreement, which provides that the interest rate on each
series of Equipment Notes relating to the Leased Aircraft shall be reset on the
Final Expected Distribution Date. No later than 60 days prior to the Final
Expected Distribution Date, the Company shall cause the Trustee to hire (and, if
the Company does not so cause the Trustee, the Trustee shall no later than 30
days prior to the Final Expected Distribution Date, hire) an independent
investment banker (the "Reset Agent") of recognized national standing (which may
be an Initial Purchaser) to (i) determine the interest rate on each series of
the Equipment Notes relating to the Leased Aircraft to an interest rate that, in
the good faith determination of the Reset Agent, after consideration of the then
current rates for pass through certificates of the Company and other comparable
equipment lessees having similar tenor, rating and other pricing terms, shall
enable each such series of Equipment Notes to be sold at 100% of the principal
amount thereof on the Final Expected Distribution Date, and (ii) for such
reasonable fee payable by the applicable Trust as shall be mutually agreed by
the and the Reset Agent, use its best efforts to sell any such Equipment Notes
with such new interest rates on the Final Expected Distribution Date or as
promptly as practicable thereafter.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate shall be
made after notice mailed by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
of the Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE HOLDER OF THIS CERTIFICATE SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-5
<PAGE> 15
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly signed, manually or in facsimile, by its Authorized Officer.
Dated: __________________ UNITED AIRLINES 1997-1A PASS
THROUGH TRUST
By: FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but
solely as Trustee
By:
----------------------------------
Name:
--------------------------
Title:
--------------------------
A-6
<PAGE> 16
FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Agreement.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but solely
as Trustee
By:
--------------------------------------
Authorized Officer
A-7
<PAGE> 17
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company or the Trustee or
any of their affiliates. The Certificates are limited in right or payment, all
as more specifically set forth on the face hereof and in the Agreement. All
payments or distributions made to Certificateholders under the Agreement shall
be made only from the Trust Property and only to the extent that the Trustee
shall have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of the Agreement. Each Certificateholder
of this Certificate, by its acceptance hereof, agrees that it shall look solely
to the income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Certificateholders under the
Agreement at any time by the Company and the Trustee with the consent of the
Certificateholders holding Certificates evidencing Fractional Cumulative
Interests aggregating not less than a majority in interest in the Trust. Any
such consent by the Certificateholder of this Certificate shall be conclusive
and binding on such Certificateholder and upon all future Certificateholders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Certificateholders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, at its Corporate Trust Office, duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Trustee and the Registrar duly executed by the Certificateholder hereof
or such Certificateholder's attorney duly authorized in writing, and thereupon
one or more new Certificates of authorized denominations evidencing the same
aggregate Fractional Undivided Interest in the Trust shall be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000 in excess thereof. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
A-8
<PAGE> 18
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
A-9
<PAGE> 19
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- -------------------
please print or typewrite name and address including zip code of assignee
- -------------------
the within Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
- -------------------
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE GLOBAL AND
OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Certificate occurring
prior to the date that is the earlier of the date of an effective Registration
Statement or December 23, 1999, the undersigned confirms that without utilizing
any general solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the
A-10
<PAGE> 20
conditions to any such transfer of registration set forth herein and in Section
3.06 of the Agreement shall have been satisfied.
Date: [Name of Transferor]
------------------------------------
NOTE: The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTE: To be executed by an
executive officer.
<PAGE> 21
EXHIBIT B
DTC LETTER OF REPRESENTATIONS
<PAGE> 22
EXHIBIT C
SCHEDULED PAYMENTS OF PRINCIPAL
ON CLASS A CERTIFICATES
<PAGE> 23
EXHIBIT D
EQUIPMENT NOTES, PRINCIPAL AMOUNTS AND MATURITIES
<TABLE>
<CAPTION>
Equipment Notes Principal Amount Maturity
- --------------- ---------------- --------
OWNED
-----
<S> <C> <C>
1997 A320-1-A1 $ 17,388,000 December 2, 2002
1997 A320-1-B1 4,158,000 December 2, 2002
1997 A320-1-C1 4,914,000 December 2, 2002
1997 A320-2-A1 17,388,000 December 2, 2002
1997 A320-2-B1 4,158,000 December 2, 2002
1997 A320-2-C1 4,914,000 December 2, 2002
1997 A320-3-A1 17,595,000 December 2, 2002
1997 A320-3-B1 4,207,000 December 2, 2002
1997 A320-3-C1 4,973,000 December 2, 2002
1997 A320-4-A1 17,779,000 December 2, 2002
1997 A320-4-B1 4,251,000 December 2, 2002
1997 A320-4-C1 5,025,000 December 2, 2002
1997 747-2-A1 64,961,000 December 2, 2002
1997 747-2-B1 15,534,000 December 2, 2002
1997 747-2-C1 18,359,000 December 2, 2002
1997 747-1-A1 64,961,000 December 2, 2002
1997 747-1-B1 15,534,000 December 2, 2002
1997 747-1-C1 2,362,000 December 2, 2002
1997 777-1-A1 48,300,000 December 2, 2002
1997 777-1-B1 11,550,000 December 2, 2002
1997 777-1-C1 13,650,000 December 2, 2002
1997 777-2-A1 48,813,000 December 2, 2002
1997 777-2-B1 11,673,000 December 2, 2002
1997 777-2-C1 13,795,000 December 2, 2002
1997 777-3-A1 48,905,000 December 2, 2002
1997 777-3-B1 11,695,000 December 2, 2002
1997 777-3-C1 13,821,000 December 2, 2002
1997 777-4-A1 57,012,000 December 2, 2002
1997 777-4-B1 13,633,000 December 2, 2002
1997 777-4-C1 16,113,000 December 2, 2002
</TABLE>
D-1
<PAGE> 24
<TABLE>
<CAPTION>
LEASED
------
Equipment Notes Principal Amount Maturity
- --------------- ---------------- --------
<S> <C> <C>
1994 737B-A1 $ 10,750,000 December 2, 2015
1994 737B-B1 2,570,000 December 2, 2014
1994 737B-C1 3,038,000 December 2, 2013
1994 737B-D1 2,751,192 December 2, 2004
1994 737C-A1 10,658,000 December 2, 2015
1994 737C-B1 2,548,000 December 2, 2015
1994 737C-C1 3,012,000 December 2, 2014
1994 737C-D1 2,890,399 December 2, 2013
1994 737D-A1 10,658,000 December 2, 2015
1994 737D-B1 2,548,000 December 2, 2015
1994 737D-C1 3,012,000 December 2, 2014
1994 737D-D1 2,890,399 December 2, 2013
1994 737E-A1 10,658,000 December 2, 2015
1994 737E-B1 2,548,000 December 2, 2015
1994 737E-C1 3,012,000 December 2, 2014
1994 737E-D1 2,891,192 December 2, 2013
</TABLE>
D-2
<PAGE> 25
EXHIBIT E
AIRCRAFT, REGISTRATION NUMBERS AND MATURITIES
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Maturity
- -------- ------------ --------
<S> <C> <C>
Boeing 747-422 N193UA December 2, 2002
Boeing 747-422 N194UA December 2, 2002
Airbus A320-232 N433UA December 2, 2002
Airbus A320-232 N434UA December 2, 2002
Airbus A320-232 N435UA December 2, 2002
Airbus A320-232 N436UA December 2, 2002
Boeing 777-222 N776UA December 2, 2002
Boeing 777-222 N778UA December 2, 2002
Boeing 777-222 N780UA December 2, 2002
Boeing 777-222IGW N786UA December 2, 2002
Boeing 777-322 N202UA December 2, 2015
Boeing 777-322 N203UA December 2, 2015
Boeing 777-322 N398UA December 2, 2015
Boeing 777-322 N399UA December 2, 2015
</TABLE>
E-1
<PAGE> 26
EXHIBIT F
NOTE DOCUMENTS
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Note Document
- -------- ------------- -------------
OWNED
- -----
<S> <C> <C>
Boeing 747-422 N193UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 747-422 N194UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N433UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N434UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N435UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N436UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
</TABLE>
F-1
<PAGE> 27
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Note Document
- -------- ------------- -------------
<S> <C> <C>
Boeing 777-222 N776UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 777-222 N778UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 777-222 N780UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 777-222 N786UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
LEASED
- ------
Boeing 737-322 N202UA Participation Agreement, as amended
Amended and Restated Trust
Indenture and Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
</TABLE>
F-2
<PAGE> 28
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Note Document
- -------- ------------- -------------
<S> <C> <C>
Boeing 737-322 N203UA Participation Agreement, as amended
Amended and Restated Trust
Indenture and Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
Boeing 737-322 N398UA Participation Agreement, as amended
Amended and Restated Trust
Indenture and Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
Boeing 737-322 N399UA Participation Agreement, as amended
Amended and Restated Trust
Indenture and Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
</TABLE>
F-3
<PAGE> 1
EXHIBIT 4.5
TRUST SUPPLEMENT NO. 1997-1B-1
TO
PASS THROUGH TRUST AGREEMENT
Dated as of December 23, 1997
between
UNITED AIR LINES, INC.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee
============================
$106,607,000
United Airlines Enhanced Pass Through Certificates, Series 1997-1B
<PAGE> 2
TRUST SUPPLEMENT NO. 1997-1B-1
Dated as of December 23, 1997
Enhanced Pass Through Certificates, Series 1997-1B
-----------------
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DECLARATION OF TRUST
Section 1.01. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE CERTIFICATES
Section 2.01. The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
DEFINITIONS
Section 3.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
THE TRUSTEE
Section 4.01. The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Ratified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.02. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.03. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.04. Limitation on Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exhibit A Form of Initial U.S. Global Certificate
Exhibit B DTC Letter of Representations
Exhibit C Scheduled Payments of Principal on Class B Certificates
Exhibit D Equipment Notes, Principal Amounts and Maturities
Exhibit E Aircraft, Registration Numbers and Maturities
Exhibit F Note Documents
</TABLE>
<PAGE> 3
TRUST SUPPLEMENT NO. 1997-1B-1
This Trust Supplement No. 1997-1B-1, dated as of December 23,
1997 (herein called the "Trust Supplement"), between United Air Lines, Inc., a
Delaware corporation (the "Company"), and First Security Bank, National
Association (the "Trustee"), to the Pass Through Trust Agreement, dated as of
December 23, 1997 (the "Basic Agreement"), between the Company and the Trustee.
WHEREAS, the Basic Agreement, which is unlimited as to the
aggregate principal amount of Certificates that may be issued thereunder, has
heretofore or concurrently herewith been executed and delivered;
WHEREAS, the Company intends (i) in connection with ten
separate debt financings, each secured by an Owned Aircraft, to issue on a
recourse basis Equipment Notes and (ii) in connection with four separate
leveraged lease transactions relating to the Leased Aircraft, to refinance the
current the indebtedness originally incurred to finance the purchase by the
Owner Trustee of such Leased Aircraft through the issuance of Equipment Notes
by each such Owner Trustee, acting on behalf of its respective Owner
Participant, on a non-recourse basis;
WHEREAS, pursuant to the terms and conditions of the Basic
Agreement as supplemented by this Trust Supplement (the "Agreement"), the
Trustee shall purchase such Equipment Notes issued by the Company, in the case
of the Owned Aircraft, and each Owner Trustee, in the case of the Leased
Aircraft, of the same interest rate as the Certificates of the class issued
hereunder and shall hold such Equipment Notes in trust for the benefit of the
Certificateholders of such class;
WHEREAS, the Trustee intends to declare the creation of this
Trust (the "1997-1B-1 Trust") for the benefit of the Certificateholders of the
Certificates issued hereunder, and the initial Certificateholders, as the
grantors of this 1997-1B-1 Trust, by their respective acceptances of the
Certificates issued hereunder, intend to join in the creation of this 1997-1B-1
Trust with the Trustee;
WHEREAS, the Basic Agreement provides for the creation in the
future of additional trusts of the same class (collectively, the "Class B
Trusts");
WHEREAS, all Certificates to be issued by the 1997-1B-1 Trust
will evidence fractional undivided interests in the 1997-1B-1 Trust created
hereby and in all Class B Trusts and will convey no rights, benefits or
interests in respect of any property other than the Trust Property of the Class
B Trusts;
WHEREAS, all of the conditions and requirements necessary to
make this Trust Supplement, when duly executed and delivered, a valid, binding
and legal instrument in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and
<PAGE> 4
the execution and delivery of this Trust Supplement in the form and with the
terms hereof have been in all respects duly authorized;
WHEREAS, this Trust Supplement shall, upon effectiveness of
the Exchange Offer Registration Statement or the Shelf Registration Statement
described in the Registration Rights Agreement, be subject to the provisions of
the Trust Indenture Act of 1939, as amended, and shall, to the extent
applicable, be governed by such provisions;
NOW, THEREFORE, in consideration of the premises herein, it is
agreed between the Company and the Trustee as follows:
ARTICLE I
DECLARATION OF TRUST
Section 1.01. Declaration of Trust. The Trustee hereby
declares the creation of this 1997-1B-1 Trust for the benefit of the
Certificateholders of the Certificates issued hereunder, and the initial
Certificateholders, as the grantors of the 1997-1B-1 Trust, by their respective
acceptances of the Certificates issued hereunder, join in the creation of this
1997-1B-1 Trust with the Trustee.
ARTICLE II
THE CERTIFICATES
Section 2.01. The Certificates. There is hereby created a
class of Certificates to be issued under the Agreement, designated and to be
distinguished and known as "Enhanced Pass Through Certificates, Series 1997-1B"
(the "Class B Certificates"). Each Certificate represents a Fractional
Undivided Interest in the 1997-1B-1 Trust created hereby and a fractional
undivided interest in all Class B Trusts. The terms and conditions applicable
to the Class B Certificates are as follows:
1. The aggregate principal amount of the Class B
Certificates that shall be authenticated under the Agreement (except
for Class B Certificates authenticated and delivered pursuant to
Sections 3.04, 3.07 and 3.10 of the Basic Agreement) upon their
initial issuance is $106,607,000.
2. The Cut-off Date is December 23, 1997.
3. The Regular Distribution Dates with respect to any
payment of Scheduled Payments means each March 2, June, September 2
and December 2, commencing March 2, 1997 and ending December 2, 2002.
4. The Special Distribution Dates with respect to the
Class B Certificates are any Business Day on which a Special Payment
is to be distributed pursuant to the Agreement.
<PAGE> 5
5. The Class B Certificates shall be in the form
attached hereto as Exhibit A. The Class B Certificates shall (i)
initially be issued as an Initial Certificate (which may be exchanged
for Exchange Certificates pursuant to the Registration Rights
Agreement), (ii) be a U.S. Global Certificate and (iii) be subject to
the conditions set forth in the Letter of Representations between the
Company and the Depositary attached hereto as Exhibit B.
6. The Scheduled Payments of principal shall be as set
forth in Exhibit C.
7. The proceeds of the Class B Certificates issued under
the Class 1997-1B-1 Trust shall be used to purchase the Equipment
Notes described in Exhibit D.
8. The Equipment Notes described in paragraph 7 relate
to the Aircraft listed in Exhibit E.
9. The related Note Documents are listed in Exhibit F.
10. The Class B Certificates shall bear the following
legend:
EITHER: (A) THE HOLDER IS NOT ACQUIRING THIS CERTIFICATE WITH PLAN
ASSETS OF ANY PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"); OR (B) THE
HOLDER'S PURCHASE AND HOLDING OF THIS CERTIFICATE IS EXEMPT FROM THE
PROHIBITED TRANSACTION RESTRICTIONS OF SECTION 406(A) OF ERISA AND
SECTION 4975 OF THE CODE BY AN ADMINISTRATIVE CLASS PROHIBITED
TRANSACTION EXEMPTION GRANTED BY THE DEPARTMENT OF LABOR.
11. The Class B Certificates shall have the benefit of the
Class B Liquidity Facilities (as defined in the Intercreditor
Agreement).
ARTICLE III
DEFINITIONS
Section 3.01. Definitions. Unless otherwise specified
herein, capitalized terms used herein without definition shall have the
respective meanings specified heretofore in the Basic Agreement.
3
<PAGE> 6
ARTICLE IV
THE TRUSTEE
Section 4.01. The Trustee. The Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Trust Supplement or the due execution hereof by the Company
or for or in respect of the recitals and statements contained herein, all of
which recitals and statements are made solely by the Company.
Except as herein otherwise provided, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed by the Trustee by reason of this Trust Supplement other than as set
forth in the Basic Agreement, and this Trust Supplement is executed and
accepted on behalf of the Trustee, subject to all the terms and conditions set
forth in the Basic Agreement, upon the effectiveness thereof, as fully to all
intents as if the same were herein set forth at length.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Ratified. Except and so far
as herein expressly provided, all of the provisions, terms and conditions of
the Basic Agreement are in all respects ratified and confirmed; and the Basic
Agreement and this Trust Supplement shall be taken, read and construed as one
and the same instrument.
Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE
CLASS B CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW)) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 5.03. Execution in Counterparts. This Trust
Supplement may be executed in any number of counterparts, each of which shall
be an original, but such counterparts shall together constitute but one and the
same instrument.
Section 5.04. Limitation on Class B Certificates. At the
time of the creation of any additional Class B Trust and the issuance of Class
B Certificates pursuant thereto, and taking such issuance into account, the
aggregate outstanding principal amount of Class B Certificates issued under all
Class B Trusts shall not exceed $106,607,000.
4
<PAGE> 7
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Supplement to be duly executed by their respective officers thereto duly
authorized, as of the day and year first written above.
UNITED AIR LINES, INC.
By: /s/ THOMAS A. MUTRYN
-----------------------------
Name: Thomas A. Mutryn
Title: Vice President &
Treasurer
S-1 TRUST SUPPLEMENT NO. 1997-1B-1
<PAGE> 8
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ C. SCOTT NIELSEN
-------------------------------------
Name: C. Scott Nielsen
--------------------------------
Title: Vice President
-------------------------------
S-2 TRUST SUPPLEMENT NO. 1997-1B-1
<PAGE> 9
EXHIBIT A
FORM OF CLASS B CERTIFICATE
REGISTERED $106,607,000
Fractional Undivided Interest
No. R - _____
CUSIP NO. _______________
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY UNITED AIR LINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF ANY SUCH PERSON RESELL OR OTHERWISE TRANSFER THIS
CERTIFICATE EXCEPT (A) TO UNITED, (B) TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING
$100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
A-1
<PAGE> 10
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE
ON WHICH THIS CERTIFICATE WAS HELD BY UNITED AIR LINES, INC., THE
TRUSTEE OR ANY AFFILIATE OF ANY SUCH PERSONS, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.](1)
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
- --------
(1) Not to be included on the face of the Permanent Offshore Global
Certificate.
A-2
<PAGE> 11
EITHER: (A) THE HOLDER IS NOT ACQUIRING THIS CERTIFICATE WITH PLAN
ASSETS OF ANY PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"); OR (B) THE
HOLDER'S PURCHASE AND HOLDING OF THIS CERTIFICATE IS EXEMPT FROM THE
PROHIBITED TRANSACTION RESTRICTIONS OF SECTION 406(A) OF ERISA AND
SECTION 4975 OF THE CODE BY AN ADMINISTRATIVE CLASS PROHIBITED
TRANSACTION EXEMPTION GRANTED BY THE DEPARTMENT OF LABOR.
UNITED AIRLINES 1997-1B PASS THROUGH TRUST
UNITED AIRLINES [INITIAL] [EXCHANGE] ENHANCED PASS
THROUGH CERTIFICATE, SERIES 1997-1B
Final Expected Distribution Date: December 2, 2002
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft owned by or leased
to United Air Lines, Inc.
THIS CERTIFIES THAT CEDE & CO., for value received, is the
registered owner of a ONE HUNDRED SIX MILLION, SIX HUNDRED SEVEN THOUSAND
DOLLARS ($106,607,000) Fractional Undivided Interest in the United Airlines
1997-1B Pass Through Trust (the "Trust") created by First Security Bank,
National Association, as trustee (the "Trustee") pursuant to a Pass Through
Trust Agreement, dated as of December 23, 1997 (the "Basic Agreement"), as
supplemented by Trust Supplement No. 1997-1B-1, (collectively, the "Agreement")
between the Trustee and United Air Lines, Inc., a Delaware corporation (the
"Company"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "United
Airlines [Initial] [Exchange] Enhanced Pass Through Certificates, Series
1997-1B" (the "Certificates"). This Certificate is issued under and is subject
to the terms, provisions and conditions of the Agreement.
By virtue of its acceptance hereof, the Certificateholder of
this Certificate assents to and agrees to be bound by the provisions of the
Agreement, the Intercreditor Agreement and the Note Purchase Agreement. The
property of the Trust includes (i) certain Equipment Notes and all monies at any
time paid thereon and all monies due and to become due thereunder, (ii) funds
from time to time deposited in the related Escrow Account, the related
Certificate Account and the related Special Payments Account, (iii) all rights
of such Trust and the Trustee, on behalf of such Trust, under the Intercreditor
Agreement, the Registration Rights Agreement and the Note Purchase Agreement,
including all rights to receive certain payments thereunder and all monies paid
to such
A-3
<PAGE> 12
Trustee on behalf of such Trust pursuant to the Intercreditor Agreement, the
Registration Rights Agreement and the Note Purchase Agreement and (iv) all
monies receivable by the Subordination Agent under the Liquidity Facilities for
the Trust ( together with the property of all other trusts of the same class the
"Trust Property"). Each issue of the Equipment Notes is secured by, among other
things, a security interest in the Aircraft leased to or owned by the Company.
The Certificates represent fractional undivided interests in
the Trust, all other trusts of the same class and the Trust Property, and have
no rights, benefits or interest in respect of any assets or property of any
trust of another class.
Interest applicable to this Certificate will be payable at a
floating rate equal to Three-Month LIBOR plus 0.325%.
Subject to and in accordance with the terms of the Agreement,
the Intercreditor Agreement and the Note Purchase Agreement, from and to the
extent of funds then available to the Trustee, there shall be distributed on
each March 2, June 2, September 2 and December 2 (a "Regular Distribution
Date"), commencing on March 2, 1998, to the Person in whose name this
Certificate is registered at the close of business on the 15th day preceding
such Regular Distribution Date, an amount in respect of the Scheduled Payments
on the Equipment Notes due on such Regular Distribution Date, the receipt of
which has been confirmed by the Trustee, equal to the product of the percentage
interest in the Trust (or, if more than one trust of like class, all such
trusts) evidenced by this Certificate and an amount equal to the sum of such
Scheduled Payments. Subject to and in accordance with the terms of the
Agreement, the Intercreditor Agreement and the Note Purchase Agreement, if
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust (or, if more than one
trust of like class, all such trusts) evidenced by this Certificate and an
amount equal to the sum of such Special Payments so received. If a Regular
Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the next Business Day with the same force and
effect as if made on such Regular Distribution Date or Special Distribution Date
and interest shall accrue during the intervening period. The Trustee shall mail
notice of each Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate. The Certificates are redeemable as and to
the extent provided in the Note Purchase Agreement.
The Holder of this Certificate is entitled to the benefits of
the Registration Rights Agreement, dated as of December 23, 1997, between the
Company, the Trustee and the Initial Purchasers named therein (the "Registration
Rights Agreement"). If neither the consummation of the Exchange Offer nor the
declaration by the SEC of a Shelf Registration to be effective (a "Registration
Event") occurs on or prior to 180th day after the Closing Date (as defined in
the Registration Rights Agreement), the interest rate per annum borne by the
Equipment Notes shall be increased by 0.50%, from and including July 1, 1998, to
but excluding the date on which a
A-4
<PAGE> 13
Registration Event occurs. If the Shelf Registration Statement ceases to be
effective at any time during the period specified by the Registration Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period, the interest rate per annum borne by the Equipment Notes shall be
increased by 0.50% from the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective until such time as the Shelf
Registration Statement again becomes effective.
The Holder of this Certificate is entitled to the benefits of
the Note Purchase Agreement, which provides that the interest rate on each
series of Equipment Notes relating to the Leased Aircraft shall be reset on the
Final Expected Distribution Date. No later than 60 days prior to the Final
Expected Distribution Date, the Company shall cause the Trustee to hire (and, if
the Company does not so cause the Trustee, the Trustee shall no later than 30
days prior to the Final Expected Distribution Date, hire) an independent
investment banker (the "Reset Agent") of recognized national standing (which may
be an Initial Purchaser) to (i) determine the interest rate on each series of
the Equipment Notes relating to the Leased Aircraft to an interest rate that, in
the good faith determination of the Reset Agent, after consideration of the then
current rates for pass through certificates of the Company and other comparable
equipment lessees having similar tenor, rating and other pricing terms, shall
enable each such series of Equipment Notes to be sold at 100% of the principal
amount thereof on the Final Expected Distribution Date, and (ii) for such
reasonable fee payable by the applicable Trust as shall be mutually agreed by
the and the Reset Agent, use its best efforts to sell any such Equipment Notes
with such new interest rates on the Final Expected Distribution Date or as
promptly as practicable thereafter.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate shall be
made after notice mailed by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
of the Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE HOLDER OF THIS CERTIFICATE SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-5
<PAGE> 14
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly signed, manually or in facsimile, by its Authorized Officer.
Dated: __________________ UNITED AIRLINES 1997-1B PASS
THROUGH TRUST
By: FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but
solely as Trustee
By:
-------------------------------
Name:
--------------------------
Title:
--------------------------
A-6
<PAGE> 15
FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Agreement.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but solely
as Trustee
By:
--------------------------------------
Authorized Officer
A-7
<PAGE> 16
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company or the Trustee or
any of their affiliates. The Certificates are limited in right or payment, all
as more specifically set forth on the face hereof and in the Agreement. All
payments or distributions made to Certificateholders under the Agreement shall
be made only from the Trust Property and only to the extent that the Trustee
shall have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of the Agreement. Each Certificateholder
of this Certificate, by its acceptance hereof, agrees that it shall look solely
to the income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Certificateholders under the
Agreement at any time by the Company and the Trustee with the consent of the
Certificateholders holding Certificates evidencing Fractional Cumulative
Interests aggregating not less than a majority in interest in the Trust. Any
such consent by the Certificateholder of this Certificate shall be conclusive
and binding on such Certificateholder and upon all future Certificateholders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Certificateholders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, at its Corporate Trust Office, duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Trustee and the Registrar duly executed by the Certificateholder hereof
or such Certificateholder's attorney duly authorized in writing, and thereupon
one or more new Certificates of authorized denominations evidencing the same
aggregate Fractional Undivided Interest in the Trust shall be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000 in excess thereof. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
A-8
<PAGE> 17
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
A-9
<PAGE> 18
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- -------------------
please print or typewrite name and address including zip code of assignee
- -------------------
the within Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
- -------------------
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE GLOBAL AND
OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Certificate occurring
prior to the date that is the earlier of the date of an effective Registration
Statement or December 23, 1999, the undersigned confirms that without utilizing
any general solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the
A-10
<PAGE> 19
conditions to any such transfer of registration set forth herein and in Section
3.06 of the Agreement shall have been satisfied.
Date: [Name of Transferor]
------------------------------------
NOTE: The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTE: To be executed by an
executive officer.
<PAGE> 20
EXHIBIT B
DTC LETTER OF REPRESENTATIONS
<PAGE> 21
EXHIBIT C
SCHEDULED PAYMENTS OF PRINCIPAL
ON CLASS B CERTIFICATES
<PAGE> 22
EXHIBIT D
EQUIPMENT NOTES, PRINCIPAL AMOUNTS AND MATURITIES
<TABLE>
<CAPTION>
Equipment Notes Principal Amount Maturity
- --------------- ---------------- --------
OWNED
-----
<S> <C> <C>
1997 A320-1-A1 $17,388,000 December 2, 2002
1997 A320-1-B1 4,158,000 December 2, 2002
1997 A320-1-C1 4,914,000 December 2, 2002
1997 A320-2-A1 17,388,000 December 2, 2002
1997 A320-2-B1 4,158,000 December 2, 2002
1997 A320-2-C1 4,914,000 December 2, 2002
1997 A320-3-A1 17,595,000 December 2, 2002
1997 A320-3-B1 4,207,000 December 2, 2002
1997 A320-3-C1 4,973,000 December 2, 2002
1997 A320-4-A1 17,779,000 December 2, 2002
1997 A320-4-B1 4,251,000 December 2, 2002
1997 A320-4-C1 5,025,000 December 2, 2002
1997 747-2-A1 64,961,000 December 2, 2002
1997 747-2-B1 15,534,000 December 2, 2002
1997 747-2-C1 18,359,000 December 2, 2002
1997 747-1-A1 64,961,000 December 2, 2002
1997 747-1-B1 15,534,000 December 2, 2002
1997 747-1-C1 2,362,000 December 2, 2002
1997 777-1-A1 48,300,000 December 2, 2002
1997 777-1-B1 11,550,000 December 2, 2002
1997 777-1-C1 13,650,000 December 2, 2002
1997 777-2-A1 48,813,000 December 2, 2002
1997 777-2-B1 11,673,000 December 2, 2002
1997 777-2-C1 13,795,000 December 2, 2002
1997 777-3-A1 48,905,000 December 2, 2002
1997 777-3-B1 11,695,000 December 2, 2002
1997 777-3-C1 13,821,000 December 2, 2002
1997 777-4-A1 57,012,000 December 2, 2002
1997 777-4-B1 13,633,000 December 2, 2002
1997 777-4-C1 16,113,000 December 2, 2002
</TABLE>
D-1
<PAGE> 23
<TABLE>
<CAPTION>
LEASED
------
Equipment Notes Principal Amount Maturity
- --------------- ---------------- --------
<S> <C> <C>
1994 737B-A1 $10,750,000 December 2, 2015
1994 737B-B1 2,570,000 December 2, 2014
1994 737B-C1 3,038,000 December 2, 2013
1994 737B-D1 2,751,192 December 2, 2004
1994 737C-A1 10,658,000 December 2, 2015
1994 737C-B1 2,548,000 December 2, 2015
1994 737C-C1 3,012,000 December 2, 2014
1994 737C-D1 2,890,399 December 2, 2013
1994 737D-A1 10,658,000 December 2, 2015
1994 737D-B1 2,548,000 December 2, 2015
1994 737D-C1 3,012,000 December 2, 2014
1994 737D-D1 2,890,399 December 2, 2013
1994 737E-A1 10,658,000 December 2, 2015
1994 737E-B1 2,548,000 December 2, 2015
1994 737E-C1 3,012,000 December 2, 2014
1994 737E-D1 2,891,192 December 2, 2013
</TABLE>
D-2
<PAGE> 24
EXHIBIT E
AIRCRAFT, REGISTRATION NUMBERS AND MATURITIES
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Maturity
- -------- ------------ --------
<S> <C> <C>
Boeing 747-422 N193UA December 2, 2002
Boeing 747-422 N194UA December 2, 2002
Airbus A320-232 N433UA December 2, 2002
Airbus A320-232 N434UA December 2, 2002
Airbus A320-232 N435UA December 2, 2002
Airbus A320-232 N436UA December 2, 2002
Boeing 777-222 N776UA December 2, 2002
Boeing 777-222 N778UA December 2, 2002
Boeing 777-222 N780UA December 2, 2002
Boeing 777-222IGW N786UA December 2, 2002
Boeing 777-322 N202UA December 2, 2015
Boeing 777-322 N203UA December 2, 2015
Boeing 777-322 N398UA December 2, 2015
Boeing 777-322 N399UA December 2, 2015
</TABLE>
E-1
<PAGE> 25
EXHIBIT F
NOTE DOCUMENTS
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Note Document
- -------- ------------- -------------
OWNED
- -----
<S> <C> <C>
Boeing 747-422 N193UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 747-422 N194UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N433UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N434UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N435UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Airbus A320-232 N436UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
</TABLE>
F-1
<PAGE> 26
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Note Document
- -------- ------------- -------------
<S> <C> <C>
Boeing 777-222 N776UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 777-222 N778UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 777-222 N780UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Boeing 777-222 N786UA Participation Agreement
Trust Indenture and Mortgage
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
LEASED
- ------
Boeing 737-322 N202UA Participation Agreement, as amended
Amended and Restated Trust Indenture and
Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
</TABLE>
F-2
<PAGE> 27
<TABLE>
<CAPTION>
Aircraft
Registration
Aircraft Number Note Document
- -------- ------------- -------------
<S> <C> <C>
Boeing 737-322 N203UA Participation Agreement, as amended
Amended and Restated Trust Indenture and
Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
Boeing 737-322 N398UA Participation Agreement, as amended
Amended and Restated Trust Indenture and
Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
Boeing 737-322 N399UA Participation Agreement, as amended
Amended and Restated Trust Indenture and
Security Agreement
Lease Agreement, as amended
Equipment Note, Series A
Equipment Note, Series B
Equipment Note, Series C
Equipment Note, Series D
</TABLE>
F-3
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
Dated as of December 23, 1997
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent,
as agent and trustee for the
United Airlines 1997-1A Pass Through Trust,
as Borrower
and
KREDITANSTALT FUR WIEDERAUFBAU,
as Liquidity Provider
- --------------------------------------------------------------------------------
Relating to
United Airlines 1997-1A Pass Through Trust
United Airlines Enhanced Pass Through Certificates, Series 1997-1A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01 The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.02 Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.03 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.04 Automatic Adjustments and Termination of the Commitment. . . . . . . . . . . . . . . . . . . 9
Section 2.05 Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . 9
Section 2.06 Repayments of Downgrade Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.07 Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . 10
Section 2.08 Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.09 Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
OBLIGATIONS OF THE BORROWER
Section 3.01 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.02 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.03 Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.04 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.05 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.06 Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.07 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.08 Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.09 Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.10 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Effectiveness of Section 2.01. . . . . . . . . . . . . . . . . . . 16
Section 4.02 Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
COVENANTS
Section 5.01 Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.02 Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT
Section 6.01 Liquidity Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII
MISCELLANEOUS
Section 7.01 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.02 Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.05 Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.06 Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.07 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.08 Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.09 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 24
Section 7.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.13 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION
TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
Annex I Interest Advance Notice of Borrowing
Annex II Downgrade Advance Notice of Borrowing
Annex III Final Advance Notice of Borrowing
Annex IV Notice of Termination
Annex V Notice of Replacement Borrower
iii
<PAGE> 5
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT, dated as of December 23,
1997, between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Subordination Agent
under the Intercreditor Agreement (each as defined below), as agent and trustee
for the Class A Trust (as defined below) (the "Borrower"), and KREDITANSTALT
FUR WIEDERAUFBAU, a corporation organized under the public law of the Federal
Republic of Germany ("KfW" or the "Liquidity Provider").
WHEREAS, pursuant to the Class A Trust Agreement (as defined
below), the Class A Trust is issuing the Class A Certificates; and
WHEREAS, the Borrower, in order to support the timely payment
of a portion of the interest on the Class A Certificates in accordance with
their terms, has requested the Liquidity Provider to enter into this Agreement,
providing in part for the Borrower to request in specified circumstances that
Advances be made hereunder.
NOW, THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. (a) Definitions. As
used in this Agreement and unless otherwise expressly indicated, the following
capitalized terms shall have the following respective meanings for all purposes
of this Agreement:
"Additional Costs" has the meaning specified in Section 3.01.
"Advance" means an Interest Advance, a Final Advance, a
Downgrade Advance, an Applied Downgrade Advance or an Unpaid Advance, as the
case may be.
"Applicable Liquidity Rate" has the meaning specified in
Section 3.07(g).
"Applicable Margin" means (w) with respect to any Unpaid
Advance (including an Applied Downgrade Advance) that is a LIBOR Advance, 1.00%
and (x) with respect to any Unpaid Advance (including an Applied Downgrade
Advance) that is a Base Rate Advance, 1.00%.
"Applied Downgrade Advance" has the meaning specified in
Section 2.06(a).
"Available Commitment" means, at any time of determination, an
amount equal to (i) the Commitment at such time, less (ii) subject to the
proviso contained in the last sentence of
1
<PAGE> 6
Section 2.02(a), the aggregate amount of each Interest Advance outstanding at
such time; provided, however, that following a Downgrade Advance or a Final
Advance, the Available Commitment shall be zero.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal to
(a) the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing selected by
it, plus (b) one-quarter of one percent (.25)%.
"Base Rate Advance" means an Advance that bears interest at a
rate based upon the Base Rate.
"Borrower" has the meaning specified in the recitals to this
Agreement.
"Borrowing" means the making of Advances requested by delivery
of a Notice of Borrowing.
"Business Day" means any day (x) other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close
in Chicago, Illinois, New York, New York, Frankfurt, Germany or the city and
state in which the Trustee, the Subordination Agent or any Indenture Trustee
maintains its corporate trust office or receives and disburses funds, and (y)
on which dealings are carried on in the London interbank market.
"Calculation Agent" means the Liquidity Provider.
"Capped Interest Rate" means Capped LIBOR plus 0.22% per
annum.
"Capped LIBOR" means 10.04% per annum; provided, however, that
the Capped LIBOR means 9.57% per annum (i) in the event no Registration Event
(as defined in the Registration Rights Agreement) occurs on or prior to the
180th day after the Closing Date, from July 1, 1998 through but excluding the
date on which such Registration Event occurs or (ii) in the event the Shelf
Registration Statement (as defined in the Registration Rights Agreement) ceases
to be effective for more than 60 days, whether or not consecutive during any
12-month period, during the period from the 61st day of such applicable
12-month period until such time as the Shelf Registration Statement again
becomes effective.
"Commitment" means initially $70,071,917 ("Initial
Commitment"), as the same may be reduced or increased from time to time in
accordance with Section 2.04(a).
"Downgrade Advance" means an Advance made pursuant to Section
2.02(b).
2
<PAGE> 7
"Effective Date" has the meaning specified in Section 4.01.
"Excluded Taxes" means (i) any Taxes imposed on, based on, or
measured by the overall net income, capital, franchises, or receipts (other
than Taxes which are or are in the nature of sales or use Taxes or value added
Taxes) of the Liquidity Provider or any of its Lending Offices, (ii)
withholding Taxes imposed under laws in effect on the date hereof by the United
States on payments to a recipient in the jurisdiction in which the Liquidity
Provider's initial Lending Office is located, and (iii) withholding Taxes
imposed by the United States on payments to a recipient in any other
jurisdiction to which such Lending Office is moved if, under the laws in effect
at the time of such move, such laws would require greater withholding of Taxes
on payments to such Liquidity Provider acting from an office in such
jurisdiction than would be required on payments to such Liquidity Provider
acting from an office in the jurisdiction from which such Lending Office was
moved.
"Expenses" means liabilities, obligations, damages,
settlements, penalties, claims, actions, suits, costs, expenses, and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel and costs of investigation).
"Expiry Date" means March 2, 2004.
"Final Advance" means an Advance made pursuant to Section
2.02(c).
"Indenture Trustee" means, with respect to any Indenture, the
Indenture Trustee thereunder.
"Initial Commitment" has the meaning specified in the
definition of "Commitment" in this Section 1.01.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated as of December 23, 1997, among the Trustee, each Liquidity Provider, each
Above-Cap Liquidity Provider and the Subordination Agent, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"Interest Advance" means an Advance made pursuant to Section
2.02(a).
"Interest Period" means, with respect to any LIBOR Advance,
each of the following periods:
(1) the period beginning on the third Business Day
following the Liquidity Provider's receipt of the Notice of Borrowing
for such LIBOR Advance and ending on the next Regular Distribution
Date; and
(2) each subsequent period commencing on the last day of
the preceding Interest Period and ending on the next Regular
Distribution Date;
3
<PAGE> 8
provided, however, that if (x) the Final Advance shall have been made,
or (y) other outstanding Advances shall have been converted into the Final
Advance, then the Interest Periods shall be successive periods of one month
beginning on the third Business Day following the Liquidity Provider's receipt
of the Notice of Borrowing for such Final Advance (in the case of clause (x)
above) or the Regular Distribution Date following such conversion (in the case
of clause (y) above).
"Interest Period Available Amount" means, at any time, the
lesser of (i) the Interest Period Commitment and (ii) the Available Commitment.
"Interest Period Commitment" means, at any time, an amount
equal to the product of the Commitment at such time times 1/6..
"KfW" has the meaning specified in the recital of parties to
this Agreement.
"Leased Aircraft Participation Agreement" means, with respect
to the Indenture pertaining to each Leased Aircraft, the "Participation
Agreement" referred to therein.
"Lending Office" means the lending office of the Liquidity
Provider, presently located at Frankfurt, Germany, or such other lending office
as the Liquidity Provider from time to time shall notify the Borrower as its
lending office hereunder.
"LIBOR" means, with respect to any Interest Period, the
interest rate per annum (calculated on the basis of a 360-day year and actual
days elapsed) at which deposits in United States dollars are offered to prime
banks in the London interbank market as indicated on display page 3750 (British
Bankers Association-LIBOR) of the Dow Jones Markets Service (or such other page
as may replace such display page 3750 for the purpose of displaying London
interbank offered rates for United States dollar deposits) or, if not so
indicated, the average (rounded upwards to the nearest 1/100%), as determined
by the Calculation Agent, of such rates as indicated on the Reuters Screen LIBO
Page (or such other page as may replace such Reuters Screen LIBO Page for the
purpose of displaying London interbank offered rates for United States dollar
deposits) or, if neither such alternative is indicated, the average (rounded
upwards to the nearest 1/100%), as determined by the Calculation Agent, of such
rates offered by the London Reference Banks to prime banks in the London
interbank market, in each case at or about 11:00 a.m. (London time) on the day
two LIBOR Business Days prior to the first day of such Interest Period for
deposits of a duration equal to such Interest Period (or such other period most
nearly corresponding to such period) in an amount substantially equal to the
principal amount of the applicable LIBOR Advance as of the first day of such
Interest Period. The Calculation Agent will, if necessary, request that each
of the London Reference Banks provide a quotation of its rate. If at least two
such quotations are provided, the rate will be the average of the quotations
(rounded upwards to the nearest 1/100%). If no such quotation can be obtained,
the rate will be LIBOR for the immediately preceding Interest Period.
"LIBOR Advance" means an Advance bearing interest at a rate
based upon LIBOR.
4
<PAGE> 9
"LIBOR Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close
in New York, New York or London, England.
"London Reference Banks" means the principal London offices of
National Westminster Bank Plc, Barclays Bank Plc and Bayrische Landesbank
Girozentrale, or such other bank or banks as may from time to time be agreed to
by United and the Calculation Agent.
"Liquidity Event of Default" means the occurrence of either
(a) the acceleration of all of the Equipment Notes or (b) a United Bankruptcy
Event.
"Liquidity Indemnitee" means (i) the Liquidity Provider, (ii)
each Affiliate of the Liquidity Provider, (iii) the directors, officers,
employees, servants and agents of the Liquidity Provider and its Affiliates,
and (iv) the successors and permitted assigns of the persons described in
clauses (i) through (iii), inclusive.
"Liquidity Provider" has the meaning specified in the recital
of parties to this Agreement.
"Non-Excluded Tax" has the meaning specified in Section 3.03.
"Notice of Borrowing" has the meaning specified in Section
2.02(d).
"Notice of Replacement Borrower" has the meaning specified in
Section 3.08.
"Offering Memorandum" means the Offering Memorandum, dated
December 18, 1997, relating to the Certificates, as such Offering Memorandum
may be amended or supplemented.
"Owned Aircraft Participation Agreement" means, with respect
to the Indenture pertaining to each Owned Aircraft, the "Participation
Agreement" referred to therein.
"Participating Institution" has the meaning specified in
Section 7.08(b).
"Performing Note Deficiency" means any time that less than 65%
of the then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.
"Registration Event" has the meaning set forth in the
Registration Rights Agreements.
"Regulatory Change" has the meaning specified in Section 3.01.
"Remaining Commitment Amount" means, at any time of
determination, an amount equal to (i) the Commitment, less (ii) the product of
(A) the Interest Period Commitment times (B) the number of Unpaid Advances that
are Interest Advances.
5
<PAGE> 10
"Replenishment Amount" has the meaning assigned to such term
in Section 2.06(b).
"Required Amount" means, for any day, the sum of the aggregate
amount of interest, calculated at the rate per annum equal to the Capped
Interest Rate for the Class A Certificates, that would be payable on the Class
A Certificates on each of the six successive quarterly Regular Distribution
Dates following such day or, if such day is a Regular Distribution Date, on
such day and the succeeding five quarterly Regular Distribution Dates, in each
case calculated on the basis of the Pool Balance of the Class A Certificates on
such day and without regard to expected future payments of principal on the
Class A Certificates.
"Termination Date" means the earliest to occur of the
following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to
the Liquidity Provider a certificate, signed by a Responsible Officer of the
Borrower, certifying that all of the Class A Certificates have been paid in
full (or provision has been made for such payment in accordance with the
Intercreditor Agreement and the Trust Agreement) or are otherwise no longer
entitled to the benefits of this Agreement; (iii) the date on which the
Borrower delivers to the Liquidity Provider a certificate, signed by a
Responsible Officer of the Borrower, certifying that a Replacement Primary
Liquidity Facility has been substituted for this Agreement in full pursuant to
Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day
following the receipt by the Borrower of a Termination Notice from the
Liquidity Provider pursuant to Section 6.01; and (v) the date on which no
Advance is or may (including by reason of reinstatement as herein provided)
become available for a Borrowing hereunder.
"Termination Notice" means the Notice of Termination
substantially in the form of Annex IV to this Agreement.
"Unpaid Advance" has the meaning specified in Section 2.05.
(b) Terms Defined in the Intercreditor Agreement. For
all purposes of this Agreement, the following terms shall have the respective
meanings assigned to such terms in the Intercreditor Agreement:
"Above-Cap Liquidity Provider," "Additional Payments," "Affiliate,"
"Certificates," "Class A Certificates," "Class A Certificateholders,"
"Class A Cash Collateral Account," "Class A Trust ," "Class A Trust
Agreement," "Class B Certificates," "Class C Certificates," "Class D
Certificates," "Closing Date," "Distribution Date," "Equipment Notes,"
"Fee Letter," "Indenture," "Initial Purchasers," "Investment
Earnings," "Leased Aircraft", "Primary Liquidity Facility," "Moody's,"
"Note Purchase Agreement," "Operative Agreements," "Owned Aircrafts",
"Participation Agreements," "Performing Equipment Note," "Performing
Note Deficiency," "Person," "Pool Balance," "Purchase Agreement,"
"Rating Agency," "Registration Rights Agreement," "Regular
Distribution Date," "Replacement Primary Liquidity Facility,"
"Responsible Officer," "Scheduled Payment," "Special Payment,"
"Standard & Poor's," "Stated Interest Rate," "Subordination Agent,"
6
<PAGE> 11
"Taxes," "Threshold Rating," "Triggering Event," "Trust Agreement,"
"Trustee," "United," "United Bankruptcy Event" and "Written Notice."
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01 Advances. The Liquidity Provider hereby
irrevocably agrees, on the terms and conditions hereinafter set forth, to make
Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date until 12:00 noon (New York City time) on the
Expiry Date (unless the obligations of the Liquidity Provider shall be earlier
terminated in accordance with the terms of Section 2.04) in an aggregate amount
at any time outstanding not to exceed the Commitment.
Section 2.02 Making the Advances. (a) Each "Interest
Advance" shall be made in a single Borrowing by delivery to the Liquidity
Provider of a written and completed Notice of Borrowing in substantially the
form of Annex I, signed by a Responsible Officer of the Borrower, such Interest
Advance in an amount not exceeding the Interest Period Available Amount at such
time and shall be used solely for the payment when due of interest on the Class
A Certificates at the Stated Interest Rate therefor in accordance with Section
3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder
shall automatically reduce the Available Commitment and the amount available to
be borrowed hereunder by subsequent Advances by the amount of such Interest
Advance (subject to reinstatement as provided in the next sentence). Upon
repayment to the Liquidity Provider in full of the amount of any Interest
Advance made pursuant to this Section 2.02(a), together with accrued interest
thereon (as provided herein), the Available Commitment shall be reinstated by
the amount of such repaid Interest Advance; provided, however, that the
Available Commitment shall not be so reinstated at any time if (i) a Triggering
Event shall have occurred and be continuing and (ii) there is a Performing Note
Deficiency.
(b) A "Downgrade Advance" shall be made in a single
Borrowing upon a downgrading of the Liquidity Provider's long-term unsecured
debt rating issued by any Rating Agency below the Threshold Rating (as provided
for in Section 3.6(c) of the Intercreditor Agreement) unless a Replacement
Primary Liquidity Facility shall have been delivered to the Borrower in
accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a
written and completed Notice of Borrowing in substantially the form of Annex
II, signed by a Responsible Officer of the Borrower, in an amount equal to the
Remaining Commitment Amount at such time (but not to exceed the Available
Commitment at such time), and shall be used to fund the Class A Cash Collateral
Account in accordance with Section 3.6(f). Upon such downgrading, the
Liquidity Provider shall promptly deliver notice thereof to the Borrower, the
Trustee and United.
(c) A "Final Advance" shall be made in a single Borrowing
upon the receipt by the Borrower of a Termination Notice from the Liquidity
Provider pursuant to Section 6.01, by delivery to the Liquidity Provider of a
written and completed Notice of Borrowing in substantially
7
<PAGE> 12
the form of Annex III, signed by a Responsible Officer of the Borrower, in an
amount equal to the Remaining Commitment Amount at such time (but not to exceed
the Available Commitment at such time), and shall be used to fund the Class A
Cash Collateral Account (in accordance with Section 3.6(i) of the Intercreditor
Agreement).
(d) Each Borrowing shall be made on notice in writing (a
"Notice of Borrowing") in substantially the form required by Section 2.02(a),
2.02(b) or 2.02(c), as the case may be, given not later than 12:00 Noon
(Chicago time) on the second Business Day prior to the day of the proposed
Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the
conditions precedent set forth in Section 4.02 with respect to a requested
Borrowing, the Liquidity Provider shall, before 12:00 Noon (Chicago time) on
the date of such Borrowing or on such later Business Day specified by the
Borrower in such Notice of Borrowing, make available for the account of its
Lending Office, in U.S. dollars and in immediately available funds, the amount
of such Borrowing to be paid to the Borrower in accordance with its payment
instructions. If a Notice of Borrowing is delivered by the Borrower in respect
of any Borrowing after 12:00 Noon (Chicago time) on a Business Day, the
Liquidity Provider shall, before 12:00 Noon (Chicago time) on the third
Business Day following the day of receipt of such Notice of Borrowing or on
such later Business Day specified by the Borrower in such Notice of Borrowing,
make available to the Borrower, in accordance with its payment instructions, in
U.S. dollars and in immediately available funds, the amount of such Borrowing.
Payments of proceeds of a Borrowing shall be made by wire transfer of
immediately available funds to the Borrower in accordance with such wire
transfer instructions as the Borrower shall furnish from time to time to the
Liquidity Provider for such purpose. Each Notice of Borrowing shall be
irrevocable and binding on the Borrower.
(e) Upon the making of any Advance requested pursuant to
a Notice of Borrowing in accordance with the Borrower's payment instructions,
the Liquidity Provider shall be fully discharged of its obligation hereunder
with respect to such Notice of Borrowing, and the Liquidity Provider shall not
thereafter be obligated to make any further Advances hereunder in respect of
such Notice of Borrowing to the Borrower or to any other person (including the
holder of any Class A Certificate or the Trustee) who makes to the Trustee or
the Borrower a demand for payment with respect to any Class A Certificate.
Following the making of any Advance pursuant to Section 2.02(b) or Section
2.02(c) to fund the Class A Cash Collateral Account, the Liquidity Provider
shall have no interest in or rights to the Class A Cash Collateral Account,
such Advance or any other amounts from time to time on deposit in the Class A
Cash Collateral Account; provided, however, that the foregoing shall not affect
or impair the obligations of the Subordination Agent to make the distributions
contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By
paying to the Borrower proceeds of Advances requested by the Borrower in
accordance with the provisions of this Agreement, the Liquidity Provider makes
no representation as to, and assumes no responsibility for, the correctness or
sufficiency for any purpose of the amount of the Advances so made and
requested.
Section 2.03 Fees. The Borrower agrees to pay to the
Liquidity Provider the fees set forth in the Fee Letter.
8
<PAGE> 13
Section 2.04 Automatic Adjustments and Termination of the
Commitment.
(a) Automatic Adjustments. Promptly following each date
on which the Required Amount is reduced or increased, as the case may be, as a
result of a reduction or increase, respectively, in the Pool Balance of the
Class A Certificates or otherwise, the Commitment shall automatically be
reduced or increased to an amount determined in accordance with the following
formula (provided that the Commitment shall in no event exceed the Initial
Commitment): the product of (x) 1.5, multiplied by, (y) the Capped Interest
Rate, multiplied by (z) the Pool Balance of the Class A Certificates (as
calculated by the Borrower). The Borrower shall give notice of any such
automatic reduction or increase of the Commitment to the Liquidity Provider
within two Business Days thereof. The failure by the Borrower to furnish any
such notice shall not affect such automatic reduction or increase of the
Commitment.
(b) Termination. Upon the making of any Downgrade
Advance or Final Advance hereunder or the occurrence of the Termination Date,
the obligation of the Liquidity Provider to make further Advances hereunder
shall automatically and irrevocably terminate, and the Borrower shall not be
entitled to request any further Borrowing hereunder.
Section 2.05 Repayments of Interest Advances or the Final
Advance. Subject to Sections 2.07 and 2.09, the Borrower hereby agrees to pay,
or to cause to be paid, to the Liquidity Provider on each date on which the
Liquidity Provider shall make an Interest Advance or the Final Advance, an
amount equal to (a) the amount of such Advance (any such Advance, until repaid,
is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount
of each such Unpaid Advance as provided in Section 3.07. Subject to Sections
2.06, 2.07 and 2.09, unless otherwise waived by the Liquidity Provider, the
Borrower shall be obligated, without notice of an Advance or demand for
repayment from the Liquidity Provider (which notice and demand are hereby
waived by the Borrower), to repay the Liquidity Provider for all Advances on
the same day as made. The Borrower and the Liquidity Provider agree that the
repayment in full of each Interest Advance and Final Advance on the date such
Advance is made is intended to be a contemporaneous exchange for new value
given to the Borrower by the Liquidity Provider.
Section 2.06 Repayments of Downgrade Advances. (a)
Amounts advanced hereunder in respect of a Downgrade Advance shall be deposited
in the Class A Cash Collateral Account, invested and withdrawn from the Class A
Cash Collateral Account as set forth in Sections 3.6(c) and (f) of the
Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider,
on each Regular Distribution Date, commencing on the first Regular Distribution
Date after the making of a Downgrade Advance, interest on the principal amount
of any such Downgrade Advance as provided in Section 3.07; provided, however,
that amounts in respect of a Downgrade Advance withdrawn from the Class A Cash
Collateral Account for the purpose of paying interest on the Class A
Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement
(the amount of any such withdrawal being, an "Applied Downgrade Advance") shall
be treated as an Interest Advance under this Agreement for purposes of
determining the Applicable Liquidity Rate for interest payable thereon; and
provided, further, that if, following the making of a Downgrade Advance, the
Liquidity Provider delivers a Termination Notice to the Borrower pursuant to
Section 6.01, such Downgrade
9
<PAGE> 14
Advance shall thereafter be treated as a Final Advance under this Agreement for
purposes of determining the Applicable Liquidity Rate for interest payable
thereon. Immediately upon the withdrawal of any amounts from the Class A Cash
Collateral Account on account of a reduction in the Required Amount and
Commitment, the Borrower shall repay to the Liquidity Provider a portion of the
Downgrade Advances in a principal amount equal to the amount of such reduction,
plus interest on the principal amount prepaid as provided in Section 3.07.
Immediately upon any increase in the Required Amount and Commitment, the
Liquidity Provider shall advance to the Borrower as a portion of the Downgrade
Advances, for deposit into the Class A Cash Collateral Account, a principal
amount equal to the amount of such increase.
(b) At any time when an Applied Downgrade Advance (or any
portion thereof) is outstanding, upon the deposit in the Class A Cash
Collateral Account of any amount pursuant to clause third of Section 2.4(b) of
the Intercreditor Agreement, clause third of Section 3.2 of the Intercreditor
Agreement or clause fourth of Section 3.3 of the Intercreditor Agreement (any
such amount being a "Replenishment Amount") for the purpose of replenishing the
balance thereof up to the amount of the Commitment, (i) the aggregate
outstanding principal amount of all Applied Downgrade Advances shall be
automatically reduced by the amount of such Replenishment Amount and (ii) the
principal amount of the outstanding Downgrade Advance shall be automatically
increased by the amount of such Replenishment Amount.
(c) Upon the provision of a Replacement Primary Liquidity
Facility in replacement of this Agreement in accordance with Section 3.6(e) of
the Intercreditor Agreement, amounts remaining on deposit in the Class A Cash
Collateral Account after giving effect to any application of funds therefrom to
any payment of interest on the Class A Certificates on the date of such
replacement shall be reimbursed to the Liquidity Provider, but only to the
extent such amounts are necessary to repay in full to the Liquidity Provider
all amounts owing to it hereunder.
Section 2.07 Payments to the Liquidity Provider Under the
Intercreditor Agreement. In order to provide for payment or repayment to the
Liquidity Provider of any amounts hereunder, the Intercreditor Agreement
provides that amounts available and referred to in Articles II and III of the
Intercreditor Agreement, to the extent payable to the Liquidity Provider
pursuant to the terms of the Intercreditor Agreement (including, without
limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to
the Liquidity Provider in accordance with the terms thereof. Amounts so paid
to the Liquidity Provider shall be applied by the Liquidity Provider in the
order of priority required by the applicable provisions of Articles II and III
of the Intercreditor Agreement.
Section 2.08 Book Entries. The Liquidity Provider shall
maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower resulting from Advances made from
time to time and the amounts of principal and interest payable hereunder and
paid from time to time in respect thereof; provided, however, that the failure
by the Liquidity Provider to maintain such account or accounts shall not affect
the obligations of the Borrower in respect of Advances.
10
<PAGE> 15
Section 2.09 Payments from Available Funds Only. All
payments to be made by the Borrower under this Agreement shall be made only
from amounts received by it that constitute Scheduled Payments or Special
Payments or payments under Section 7(c) of the Leased Aircraft Participation
Agreement, Section 5(b) of the Owned Participation Agreement and Section 9 of
the Note Purchase Agreement, and only to the extent that the Borrower shall
have sufficient income or proceeds therefrom to enable the Borrower to make
payments in accordance with the terms hereof after giving effect to the
priority of payments provisions set forth in the Intercreditor Agreement. The
Liquidity Provider agrees that it shall look solely to such amounts to the
extent available for distribution to it as provided in the Intercreditor
Agreement and this Agreement and that the Borrower, in its individual capacity,
is not personally liable to it for any amounts payable or liability under this
Agreement except as expressly provided in this Agreement or the Intercreditor
Agreement. Amounts on deposit in the Class A Cash Collateral Account shall be
available to the Borrower to make payments only to the extent and for the
purposes expressly contemplated in Section 3.6(f) of the Intercreditor
Agreement.
ARTICLE III
OBLIGATIONS OF THE BORROWER
Section 3.01 Increased Costs. The Borrower shall pay to
the Liquidity Provider from time to time such amounts as may be necessary to
compensate the Liquidity Provider for any costs incurred by the Liquidity
Provider which are attributable to its making or maintaining any LIBOR Advances
hereunder or its obligation to make any such Advances hereunder, or any
reduction in any amount receivable by the Liquidity Provider under this
Agreement or the Intercreditor Agreement in respect of any such Advances or
such obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any change after the
date of this Agreement in U.S. federal, state, or municipal, or any foreign
laws or regulations, or the adoption or making after such date of any
interpretation, regulation, directive, guideline, requirement or request
whether or not having the force of law, by any court or governmental or
monetary authority charged with the interpretation or administration thereof (a
"Regulatory Change"), which: (1) changes the basis of taxation of any amounts
payable to the Liquidity Provider under this Agreement in respect of any such
Advances (other than Excluded Taxes or any taxes described in Section 3.03); or
(2) imposes or modifies any reserve, special deposit, compulsory loan or
similar requirements relating to any extensions of credit or other assets of,
or any deposits with other liabilities of, the Liquidity Provider (including
any such Advances or any deposits referred to in the definition of LIBOR or
related definitions). The Liquidity Provider agrees to use reasonable efforts
(consistent with applicable legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any amount payable under this Section 3.01 that
may thereafter accrue and would not, in the reasonable judgment of the
Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider.
11
<PAGE> 16
The Liquidity Provider shall notify the Borrower of any event
occurring after the date of this Agreement that shall entitle the Liquidity
Provider to compensation pursuant to this Section 3.01 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation, which notice shall describe in reasonable detail the calculation
of the amounts owed under this Section 3.01. Determinations by the Liquidity
Provider for purposes of this Section 3.01 of the effect of any Regulatory
Change on its costs of making or maintaining Advances or on amounts receivable
by it in respect of Advances, and of the additional amounts required to
compensate the Liquidity Provider in respect of any Additional Costs, shall be
prima facie evidence of the amount owed under this Section 3.01.
Section 3.02 Capital Adequacy. If (1) compliance with any
judicial, administrative or other governmental interpretation of any law or
regulation or (2) compliance by the Liquidity Provider or any corporation
controlling the Liquidity Provider with any guideline or request from any
central bank or other governmental authority (whether or not having the force
of law) has the effect of requiring an increase in the amount of capital
required or expected to be maintained by the Liquidity Provider or any
corporation controlling the Liquidity Provider, and such increase is based upon
the Liquidity Provider's obligations hereunder and other similar obligations,
the Borrower shall pay to the Liquidity Provider such additional amount as
shall be reasonably allocable to the Liquidity Provider's obligations to the
Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts
(consistent with applicable legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any amount payable under this Section 3.02 that
may thereafter accrue and would not, in the reasonable judgment of the
Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider.
The Liquidity Provider shall notify the Borrower of any event
occurring after the date of this Agreement that shall entitle the Liquidity
Provider to compensation pursuant to this Section 3.02 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation, which notice shall describe in reasonable detail the calculation
of the amounts owed under this Section 3.02. Determinations by the Liquidity
Provider for purposes of this Section 3.02 of the effect of any increase in the
amount of capital required to be maintained by the bank and of the amount
allocable to the Liquidity Provider's obligations to the Borrower hereunder
shall be prima facie evidence of the amounts owed under this Section 3.02.
Section 3.03 Payments Free of Deductions. All payments
made by the Borrower under this Agreement shall be made free and clear of, and
without reduction for or on account of, any Taxes, excluding Excluded Taxes
(such non-excluded taxes being referred to herein, collectively, as
"Non-Excluded Taxes"). If any Non-Excluded Taxes are required to be withheld
or deducted from any amounts payable to the Liquidity Provider under this
Agreement, the Borrower shall (a) within the time prescribed therefor by
applicable law pay to the appropriate governmental or taxing authority the full
amount of any such Non-Excluded Taxes (and any additional Non-Excluded Taxes in
respect of the payment required under clause (b) below) and make such reports
or returns in connection therewith at the time or times and in the manner
prescribed by applicable law, and (b) pay to the Liquidity Provider an
additional amount which (after deduction of all such
12
<PAGE> 17
Non-Excluded Taxes) shall be sufficient to yield to the Liquidity Provider the
full amount which would have been received by it had no such withholding or
deduction been made. Within 30 days after the date of each payment hereunder,
the Borrower shall furnish to the Liquidity Provider the original or a
certified copy of (or other documentary evidence of) the payment of the
Non-Excluded Taxes applicable to such payment. The Liquidity Provider agrees
to use reasonable efforts (consistent with applicable legal and regulatory
restrictions) to change the jurisdiction of its Lending Office if making such
change would avoid the need for, or reduce the amount of, any such additional
amounts that may thereafter accrue and would not, in the reasonable judgment of
the Liquidity Provider, be otherwise materially disadvantageous to the
Liquidity Provider or require the Liquidity Provider to incur any cost or
expenses for which it is not indemnified by the Borrower. The Liquidity
Provider shall deliver to the Borrower such certificates and documents as may
be reasonably requested by the Borrower and required by applicable law to
establish that payments hereunder are exempt from (or entitled to a reduced
rate of) withholding Tax.
Section 3.04 Payments. The Borrower shall make or cause
to be made each payment to the Liquidity Provider under this Agreement so as to
cause the same to be received by the Liquidity Provider not later than 1:00
P.M. (Chicago time) on the day when due. The Borrower shall make all such
payments in lawful money of the United States of America, to the Liquidity
Provider in immediately available funds, by wire transfer to the office of
Citibank, N.A. New York City, for credit to KfW, Account No. 109-260-93.
Section 3.05 Computations. All computations of interest
based on the Base Rate shall be made on the basis of a year of 365 or 366 days,
as the case may be, and all computations of interest based on the LIBOR shall
be made on the basis of a year of 360 days, in each case for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
Section 3.06 Payment on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next Business Day and such
extension of time shall in such case be included in the computation of payment
of interest or fees, as the case may be. If any payment in respect of interest
on an Advance is so deferred to the next Business Day, such deferral shall not
delay the commencement of the next Interest Period for such Advance (if such
Advance is a LIBOR Advance) or reduce the number of days for which interest
shall be payable on such Advance on the next interest payment date for such
Advance.
Section 3.07 Interest. (a) The Borrower shall pay, or
shall cause to be paid, interest on (i) the unpaid principal amount of each
Advance from and including the date of such Advance (or, in the case of an
Applied Downgrade Advance, from and including the date on which the amount
thereof was withdrawn from the Class A Cash Collateral Account to pay interest
on the Class A Certificates) to but excluding the date such principal amount
shall be paid in full (or, in the case of an Applied Downgrade Advance, the
date on which the Class A Cash Collateral Account is fully replenished in
respect of such Advance) and (ii) any other amount due hereunder (whether fees,
commissions, expenses or other amounts or, installments of interest on Advances
or any such other
13
<PAGE> 18
amount) which is not paid when due (whether at stated maturity, by acceleration
or otherwise) from and including the due date thereof to but excluding the date
such amount is paid in full, in each such case, at a fluctuating interest rate
per annum for each day equal to the Applicable Liquidity Rate (as defined
below) for such Advance or such other amount as in effect for such day, but in
no event at a rate per annum greater than the maximum rate permitted by
applicable law; provided, however, that, if at any time the otherwise
applicable interest rate as set forth in this Section 3.07 shall exceed the
maximum rate permitted by applicable law, then any subsequent reduction in such
interest rate shall not reduce the rate of interest payable pursuant to this
Section 3.07 below the maximum rate permitted by applicable law until the total
amount of interest accrued equals the amount of interest that would have
accrued if such otherwise applicable interest rate as set forth in this Section
3.07 had at all times been in effect. Nothing contained in this Section 3.07
shall require the Borrower to pay any amount under this Section 3.07 other than
to the extent the Borrower shall have funds available therefor.
(b) Except as provided in Section 3.07(e), each Advance
shall be either a Base Rate Advance or a LIBOR Advance as provided in this
Section or Section 3.10. Each Advance will be a Base Rate Advance for the
period from the date of its borrowing to (but excluding) the third Business Day
following the Liquidity Provider's receipt of the Notice of Borrowing for such
Advance. Thereafter, such Advance shall be a LIBOR Advance.
(c) Each LIBOR Advance shall bear interest during each
Interest Period at the LIBOR for such Interest Period plus the Applicable
Margin for such LIBOR Advance, payable in arrears on the last day of such
Interest Period and, in the event of the payment of principal of such LIBOR
Advance on a day other than such last day, on the date of such payment (to the
extent of interest accrued on the amount of principal repaid).
(d) Each Base Rate Advance shall bear interest at the
Base Rate plus the Applicable Margin for such Base Rate Advance, payable in
arrears on each Regular Distribution Date and, in the event of the payment of
principal of such Base Rate Advance on a day other than a Regular Distribution
Date, on the date of such payment (to the extent of interest accrued on the
amount of principal repaid).
(e) Each Downgrade Advance other than an Applied
Downgrade Advance shall bear interest during the period from and including the
date of the making of such Downgrade Advance through but excluding the Expiry
Date (or, if earlier, the date of repayment thereof or of conversion thereof
into a Final Advance), in an amount equal to the Investment Earnings on amounts
on deposit in the Class A Cash Collateral Account for such period, payable in
arrears on each Regular Distribution Date.
(f) Each amount not paid when due hereunder (whether
fees, commissions, expenses or other amounts or, to the extent permitted by
applicable law, installments of interest on Advances) shall bear interest at
the Base Rate plus 1.00% per annum.
14
<PAGE> 19
(g) Each change in the Base Rate shall become effective
immediately. The rates of interest specified in this Section 3.07 with respect
to any Advance or other amount shall be referred to as the "Applicable
Liquidity Rate."
Section 3.08 Replacement of Borrower. Subject to Section
5.02, from time to time and subject to the successor Borrower's meeting the
eligibility requirements set forth in Section 6.9 of the Intercreditor
Agreement applicable to the Subordination Agent, upon the effective date and
time specified in a written and completed Notice of Replacement Borrower in
substantially the form of Annex V (a "Notice of Replacement Borrower")
delivered to the Liquidity Provider by the then Borrower, the successor
Borrower designated therein shall be substituted for as the Borrower for all
purposes hereunder.
Section 3.09 Funding Loss Indemnification. The Borrower
shall pay to the Liquidity Provider, upon the request of the Liquidity
Provider, such amount or amounts as shall be sufficient (in the reasonable
opinion of the Liquidity Provider) to compensate it for any loss, cost, or
expense incurred by reason of the liquidation or redeployment of deposits or
other funds acquired by the Liquidity Provider to fund or maintain any LIBOR
Advance (but excluding loss of anticipated profits) incurred as a result of:
(1) Any repayment of a LIBOR Advance, any conversion of a
LIBOR Advance to a Base Rate Advance or a conversion of a LIBOR
Advance to an Advance bearing interest in accordance with Section
3.07(e), in any case on a date other than the last day of the Interest
Period for such Advance; or
(2) Any failure by the Borrower to borrow a LIBOR Advance
on the date for Borrowing specified in the relevant notice under
Section 2.02.
Section 3.10 Illegality. Notwithstanding any other
provision in this Agreement, if any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Liquidity
Provider (or its Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for the Liquidity Provider (or its
Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the
Borrower by the Liquidity Provider, the outstanding principal amount of the
LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon
demand of the Liquidity Provider, if such change or compliance with such
request, in the judgment of the Liquidity Provider, requires immediate
repayment; or (b) at the expiration of the last Interest Period to expire after
the effective date of any such change or request.
15
<PAGE> 20
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Effectiveness of
Section 2.01. Section 2.01 of this Agreement shall become effective on and as
of the first date (the "Effective Date") on which the following conditions
precedent have been satisfied or waived:
(a) The Liquidity Provider shall have received on or
before the Closing Date each of the following, each dated such date,
and in the case of each document delivered pursuant to paragraphs (i),
(ii) and (iii), in form and substance satisfactory to the Liquidity
Provider:
(i) This Agreement duly executed on behalf of the
Borrower;
(ii) The Intercreditor Agreement duly executed on
behalf of each of the parties thereto;
(iii) Fully executed copies of each of the
Operative Agreements (other than this Agreement and the
Intercreditor Agreement);
(iv) A copy of the Offering Memorandum and
specimen copies of the Class A Certificates;
(v) An executed copy of each opinion, document,
instrument and certificate delivered pursuant to the Class A
Trust Agreement, the Intercreditor Agreement, the Note
Purchase Agreement and the other Operative Agreements
(together with, in the case of each such opinion, other than
the opinion of counsel for the Initial Purchasers, a letter
from the counsel rendering such opinion to the effect that the
Liquidity Provider is entitled to rely on such opinion as if
it were addressed to the Liquidity Provider);
(vi) Evidence that there shall have been made and
shall be in full force and effect, all filings, recordings
and/or registrations, and there shall have been given or taken
any notice or other similar action as may be reasonably
necessary or, to the extent reasonably requested by the
Liquidity Provider, reasonably advisable, in order to
establish, perfect, protect and preserve the right, title and
interest, remedies, powers, privileges, liens and security
interests of, or for the benefit of, the Trustee and the
Liquidity Provider created by the Operative Agreements;
(vii) Evidence that, on the Effective Date, the
Class A Certificates and the Class B Certificates shall
receive long-term credit ratings from Moody's of not lower
than "Aa2" and "A1", respectively, and from Standard & Poor's
of not lower than "AAA" and "AA-", respectively;
16
<PAGE> 21
(viii) An agreement from United, pursuant to which
United agrees to provide copies of its Quarterly Reports on
Form 10-Q and Annual Reports on Form 10-K to the Liquidity
Provider promptly after becoming publicly available; and
(ix) Such other documents, instruments, opinions
and approvals as the Liquidity Provider shall have reasonably
requested.
(b) The following statements shall be true on and as of
the Effective Date:
(i) The representations and warranties in the
Note Purchase Agreement and each of the Participation
Agreements are true and correct on and as of the Effective
Date as though made on and as of the Effective Date;
(ii) No event has occurred and is continuing, or
would result from the entering into of this Agreement or the
making of any Advance, which constitutes a Liquidity Event of
Default; and
(iii) There has been no material adverse change in
the financial condition or results of operations of United and
its subsidiaries taken as a whole since September 30, 1997.
(c) The Liquidity Provider shall have received payment in
full of all fees and other sums required to be paid to or for the
account of the Liquidity Provider on or prior to the Effective Date.
(d) All conditions precedent to the issuance of the
Certificates under the Trust Agreements shall have been satisfied, all
conditions precedent to the effectiveness of the other Liquidity
Facilities shall have been satisfied, and all conditions precedent to
the purchase of the Certificates by the Initial Purchasers under the
Purchase Agreement shall have been satisfied (unless any of such
conditions precedent shall have been waived by the Initial
Purchasers).
Section 4.02 Conditions Precedent to Borrowing. The
obligation of the Liquidity Provider to make an Advance on the occasion of each
Borrowing shall be subject to the conditions precedent that the Effective Date
shall have occurred and, prior to the date of such Borrowing, the Borrower
shall have delivered a Notice of Borrowing which conforms to the terms and
conditions of this Agreement and has been completed as may be required by the
relevant form of the Notice of Borrowing for the type of Advances requested.
17
<PAGE> 22
ARTICLE V
COVENANTS
Section 5.01 Affirmative Covenants of the Borrower. So
long as any Advance shall remain unpaid or the Liquidity Provider shall have
any Commitment hereunder or the Borrower shall have any obligation to pay any
amount to the Liquidity Provider hereunder, the Borrower shall, unless the
Liquidity Provider shall otherwise consent in writing:
(a) Performance of Agreements. Punctually pay or cause
to be paid all amounts payable by it under this Agreement and the other
Operative Agreements and observe and perform in all material respects the
conditions, covenants and requirements applicable to it contained in this
Agreement and the other Operative Agreements.
(b) Reporting Requirements. Furnish to the Liquidity
Provider with reasonable promptness, such other information and data with
respect to the transactions contemplated by the Operative Agreements as from
time to time may be reasonably requested by the Liquidity Provider; and permit
the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books
and records with respect to such transactions and to meet with officers and
employees of the Borrower to discuss such transactions.
(c) Certain Operative Agreements. Furnish to the
Liquidity Provider with reasonable promptness any Operative Agreement entered
into after the date hereof.
Section 5.02 Negative Covenants of the Borrower. So long
as any Advance shall remain unpaid or the Liquidity Provider shall have any
Commitment hereunder or the Borrower shall have any obligation to pay any
amount to the Liquidity Provider hereunder, the Borrower shall not appoint or
permit or suffer to be appointed any successor Borrower without the written
consent of the Liquidity Provider, which consent shall not be unreasonably
withheld or delayed.
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT
Section 6.01 Liquidity Events of Default. If (a) any
Liquidity Event of Default occurs and (b) there is a Performing Note
Deficiency, the Liquidity Provider may, in its discretion, deliver to the
Borrower a Termination Notice, the effect of which shall be to cause (i) this
Agreement to expire on the fifth Business Day after the date on which such
Termination Notice is received by the Borrower, (ii) the Borrower to promptly
request, and the Liquidity Provider to promptly make, a Final Advance in
accordance with Section 2.02(c) and Section 3.6(i) of the Intercreditor
Agreement, (iii) all other outstanding Advances to be automatically converted
into Final Advances for purposes of determining the Applicable Liquidity Rate
for interest payable thereon, and (iv) subject to Sections 2.07 and 2.09, all
Advances, any accrued interest thereon and
18
<PAGE> 23
any other amounts outstanding hereunder to become immediately due and payable
to the Liquidity Provider.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Amendments, Etc. No amendment or waiver of
any provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Liquidity Provider, and, in the case of an amendment, the
Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 7.02 Notices, Etc. Except as otherwise expressly
provided herein, all notices and other communications provided for hereunder
shall be in writing (including sent by telecopier):
Borrower: FIRST SECURITY BANK, NATIONAL ASSOCIATION
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopy: (801) 246-5053
19
<PAGE> 24
Liquidity
Provider: KREDITANSTALT FUR WIEDERAUFBAU
Palmengartenstrasse 5-9
D-60325 Frankfurt am Main
Germany
Attention: Head of Aircraft
Finance Department K 111 b 1
Telephone: 011-49-69-7431-0
Telecopy: 011-49-69-7431-2944
or, as to each of the foregoing, at such other address as shall be designated
by such Person in a Written Notice to the others. All such notices and
communications shall be effective (i) if given by telecopier, when transmitted
to the telecopier number specified above with receipt confirmed, (ii) if given
by mail, when deposited in the mails addressed as specified above, and (iii) if
given by other means, when delivered at the address specified above, except
that Written Notices to the Liquidity Provider pursuant to the provisions of
Articles II and III shall not be effective until received by the Liquidity
Provider. A copy of all notices delivered hereunder to either party shall in
addition be delivered to each of the parties to the Participation Agreements at
their respective addresses set forth therein.
Section 7.03 No Waiver; Remedies. No failure on the part
of the Liquidity Provider to exercise, and no delay in exercising, any right
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under this Agreement preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
Section 7.04 Further Assurances. The Borrower agrees to
do such further acts and things and to execute and deliver to the Liquidity
Provider such additional assignments, agreements, powers and instruments as the
Liquidity Provider may reasonably require or deem advisable to carry into
effect the purposes of this Agreement and the other Operative Agreements or to
better assure and confirm unto the Liquidity Provider its rights, powers and
remedies hereunder and under the other Operative Agreements.
Section 7.05 Indemnification; Survival of Certain
Provisions. The Liquidity Provider shall be indemnified hereunder to the
extent and in the manner described in Section 7(c) of the Leased Aircraft
Participation Agreement and Section 5(b) of the Owned Participation Agreement.
In addition, the Borrower agrees to indemnify, protect, defend and hold
harmless the Liquidity Provider from, against and in respect of, and shall pay
on demand, all Expenses of any kind or nature whatsoever that may be imposed,
incurred by or asserted against any Liquidity Indemnitee, in any way relating
to, resulting from, or arising out of or in connection with any action, suit or
proceeding by any third party against such Liquidity Indemnitee and relating to
this Agreement, the Intercreditor Agreement, the Fee Letter, the Intercreditor
Agreement or any Participation Agreement; provided, however, that the Borrower
shall not be required to indemnify,
20
<PAGE> 25
protect, defend and hold harmless any Liquidity Indemnitee in respect of any
Expense of such Liquidity Indemnitee to the extent such Expense is (i)
attributable to the gross negligence or willful misconduct of such Liquidity
Indemnitee or any other Liquidity Indemnitee, (ii) ordinary and usual operating
overhead expense or (iii) attributable to the failure by such Liquidity
Indemnitee or any other Liquidity Indemnitee to perform or observe any
agreement, covenant or condition on its part to be performed or observed in
this Agreement, the Intercreditor Agreement, the Fee Letter or any other
Operative Agreement to which it is a party. The provisions of Sections 3.01,
3.02, 3.03, 3.09 7.05 and 7.07 shall survive the termination of this Agreement.
Section 7.06 Liability of the Liquidity Provider. (a)
Neither the Liquidity Provider nor any of its officers or directors shall be
liable or responsible for: (i) the use which may be made of the Advances or any
acts or omissions of the Borrower or any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; or
(iii) the making of Advances by the Liquidity Provider against delivery of a
Notice of Borrowing and other documents which do not comply with the terms
hereof; provided, however, that the Borrower shall have a claim against the
Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower,
to the extent of any damages suffered by the Borrower which were the result of
(A) the Liquidity Provider's willful misconduct or negligence (except to the
extent that such conduct would otherwise be indemnified pursuant to Section
7.05, in which case gross negligence shall apply) in determining whether
documents presented hereunder comply with the terms hereof, or (B) any breach
by the Liquidity Provider of any of the terms of this Agreement, including, but
not limited to, the Liquidity Provider's failure to make lawful payment
hereunder after the delivery to it by the Borrower of a Notice of Borrowing
complying with the terms and conditions hereof.
(b) Neither the Liquidity Provider nor any of its
officers, employees, directors or Affiliates shall be liable or responsible in
any respect for (i) any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with this Agreement or any Notice of Borrowing delivered hereunder,
or (ii) any action, inaction or omission which may be taken by it in good
faith, absent willful misconduct or negligence (except to the extent that such
conduct would otherwise be indemnified pursuant to Section 7.05, in which case
gross negligence shall apply) (in which event the extent of the Liquidity
Provider's potential liability to the Borrower shall be limited as set forth in
the preceding paragraph), in connection with this Agreement or any Notice of
Borrowing.
Section 7.07 Costs, Expenses and Taxes. The Borrower
agrees to pay, or cause to be paid (A) on the Effective Date and on such later
date or dates on which the Liquidity Provider shall make demand, all reasonable
out-of- pocket costs and expenses of the Liquidity Provider in connection with
the preparation, negotiation, execution, delivery, filing and recording of this
Agreement, any other Operative Agreement and any other documents which may be
delivered in connection with this Agreement, including, without limitation, the
reasonable fees and expenses of outside counsel for the Liquidity Provider and
(B) on demand, all reasonable costs and expenses of the Liquidity Provider
(including reasonable counsel fees and expenses) in connection with (i) the
21
<PAGE> 26
enforcement of this Agreement or any other Operative Agreement, (ii) the
modification or amendment of, or supplement to, this Agreement or any other
Operative Agreement or such other documents which may be delivered in
connection herewith or therewith (whether or not the same shall become
effective) or (iii) any action or proceeding relating to any order, injunction,
or other process or decree restraining or seeking to restrain the Liquidity
Provider from paying any amount under this Agreement, the Intercreditor
Agreement or any other Operative Document or otherwise affecting the
application of funds in the Cash Collateral Accounts. In addition, the
Borrower shall pay any and all recording, stamp and other similar taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement any other Operative Agreement
and such other documents, and agrees to save the Liquidity Provider harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes or fees.
Section 7.08 Binding Effect; Participations. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower and
the Liquidity Provider and their respective successors and assigns, except that
neither the Liquidity Provider (except as otherwise provided in this Section
7.08) nor the Borrower shall have the right to assign its rights hereunder or
any interest herein without the prior written consent of the other party,
subject to the requirements of Section 7.08(b). The Liquidity Provider may
grant participations herein or in any of its rights or security hereunder and
under the other Operative Agreements to such Persons as the Liquidity Provider
may in its sole discretion select, subject to the requirements of Section
7.08(b). No such participation by the Liquidity Provider, however, shall
relieve the Liquidity Provider of its obligations hereunder. In connection
with any participation or any proposed participation, the Liquidity Provider
may disclose to the participant or the proposed participant any information
that the Borrower is required to deliver or to disclose to the Liquidity
Provider pursuant to this Agreement. The Borrower acknowledges and agrees that
the Liquidity Provider's source of funds may derive in part from its
participants. Accordingly, references in this Agreement and the other
Operative Agreements to determinations, reserve and capital adequacy
requirements, increased costs, reduced receipts and the like as they pertain to
the Liquidity Provider shall be deemed also to include those of each of its
participants (subject, in each case, to the maximum amount that would have been
incurred by or attributable to the Liquidity Provider directly if the Liquidity
Provider, rather than the participant, had held the interest participated).
(b) If, pursuant to Section 7.08(a) above, the Liquidity
Provider sells any participation in this Agreement to any bank or other entity
(each, a "Participating Institution"), then, concurrently with the
effectiveness of such participation, the Participating Institution shall (i)
represent to the Liquidity Provider (for the benefit of the Liquidity Provider
and the Borrower) either (A) that it is incorporated under the laws of the
United States or a state thereof or (B) that under applicable law and treaties,
no taxes shall be required to be withheld by the Borrower or the Liquidity
Provider with respect to any payments to be made to such Participating
Institution in respect of this Agreement, (ii) furnish to the Liquidity
Provider and the Borrower either (x) a statement that it is incorporated under
the laws of the United States or a state thereof or (y) if it is not so
incorporated, two copies of a properly completed United States Internal Revenue
Service Form 4224 or Form 1001, as appropriate, or other applicable form,
certificate or document
22
<PAGE> 27
prescribed by the Internal Revenue Service certifying, in each case, such
Participating Institution's entitlement to a complete exemption from United
States federal withholding tax in respect to any and all payments to be made
hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the
Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or
Form 1001, as appropriate, (A) on or before the date that any such form expires
or becomes obsolete or (B) after the occurrence of any event requiring a change
in the most recent form previously delivered by it and prior to the immediately
following due date of any payment by the Borrower hereunder, certifying in the
case of a Form 1001 or Form 4224 that such Participating Institution is
entitled to a complete exemption from United States federal withholding tax on
payments under this Agreement. Unless the Borrower has received forms or other
documents reasonably satisfactory to it (and required by applicable law) from
the Participating Institution indicating that payments hereunder are not
subject to United States federal withholding tax, the Borrower shall withhold
taxes as required by law from such payments at the applicable statutory rate
without any obligation to make additional payments under Section 3.03.
(c) Notwithstanding the other provisions of this Section
7.08, the Liquidity Provider may assign and pledge all or any portion of the
Advances owing to it to any Federal Reserve Bank or the United States Treasury
as collateral security pursuant to Regulation A of the Board of Governors of
the Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank, provided that any payment in respect of such assigned Advances
made by the Borrower to the Liquidity Provider in accordance with the terms of
this Agreement shall satisfy the Borrower's obligations hereunder in respect
of such assigned Advance to the extent of such payment. No such assignment
shall release the Liquidity Provider from its obligations hereunder.
Section 7.09 Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating
the remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN
SECTION 5- 1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 7.11 Submission to Jurisdiction; Waiver of Jury
Trial; Waiver of Immunity.
(a) Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any
legal action or proceeding relating to this Agreement or any
other Operative Agreement, or for recognition and enforcement
of any judgment in respect hereof or thereof, to the
non-exclusive
23
<PAGE> 28
general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern
District of New York, and the appellate courts from any
thereof;
(ii) consents that any such action or proceeding
may be brought in such courts, and waives any objection that
it may now or hereafter have to the venue of any such action
or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof
by registered or certified mail (or any substantially similar
form and mail), postage prepaid, to each party hereto at its
address set forth in Section 7.02, or at such other address of
which the Liquidity Provider shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the
right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any other
jurisdiction.
(b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS
BEING ESTABLISHED, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. The
Borrower and the Liquidity Provider each warrant and represent that it has
reviewed this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with such legal
counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
(c) The Liquidity Provider hereby waives any immunity it
may have from the jurisdiction of the courts of the United States or of any
State and waives any immunity any of its properties located in the United
States may have from attachment or execution upon a judgment entered by any
such court under the United States Foreign Sovereign Immunities Act of 1976 or
any similar successor legislation.
Section 7.12 Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by different parties hereto
on separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
24
<PAGE> 29
Section 7.13 Entirety. This Agreement and the other
Operative Agreements constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior understandings
and agreements of such parties.
Section 7.14 Headings. Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose.
Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE
ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF
THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO
DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL
BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
25
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first set forth above.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Subordination Agent and Trustee, as Borrower
By: /s/ C. SCOTT NIELSEN
------------------------------------------
Name: C. Scott Nielsen
Title: Vice President
REVOLVING CREDIT AGREEMENT
UNITED AIRLINES 1997-1A
S-1 PASS THROUGH TRUST
<PAGE> 31
KREDITANSTALT FUR
WIEDERAUFBAU,
as Liquidity Provider
By: /s/ DR. CHRISTIAN STAAB
------------------------------------------
Name: Dr. Christian Staab
Title: VP
By: /s/ WOLFGANG BEHLER
------------------------------------------
Name: Wolfgang Behler
Title: Senior Project Manager
REVOLVING CREDIT AGREEMENT
UNITED AIRLINES 1997-1A
S-2 PASS THROUGH TRUST
<PAGE> 32
Annex I to
Revolving Credit Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau
(the "Liquidity Provider"), with reference to the Revolving Credit Agreement,
dated as of December 23, 1997, between the Borrower and the Liquidity Provider
(the "Liquidity Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(2) The Borrower is delivering this Notice of Borrowing
for the making of an Interest Advance by the Liquidity Provider to be
used for the payment of interest on the Class A Certificates which was
payable on _____________________ in accordance with the terms and
provisions of the Class A Trust Agreement and the Class A Certificates
pursuant to clause fifth of Section 3.2 of the Intercreditor Agreement
or clause seventh of Section 3.3 of the Intercreditor Agreement, which
Advance is requested to be made on _______________.
(3) The amount of the Interest Advance requested hereby
(i) is $__________, to be applied in respect of the payment of
interest which was due and payable on the Class A Certificates on such
Distribution Date, (ii) does not include any amount with respect to
the payment of principal of, or Additional Payments on, the Class A
Certificates, the Class B Certificates, the Class C Certificates or
the Class D Certificates, or interest on the Class B Certificates, the
Class C Certificates or the Class D Certificates, (iii) was computed
in accordance with the provisions of the Class A Certificates, the
Class A Trust Agreement and the Intercreditor Agreement (a copy of
which computation is attached hereto as Schedule I), (iv) does not
exceed the Interest Period Available Amount on the date hereof, and
(v) has not been and is not the subject of a prior or contemporaneous
Notice of Borrowing.
(4) Upon receipt by or on behalf of the Borrower of the
amount requested hereby, (a) the Borrower shall apply the same in
accordance with the terms of Section 3.2 or 3.3 of the Intercreditor
Agreement, as the case may be, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of
such amount until so applied shall be commingled with other funds held
by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, the making of the Interest Advance as requested by this Notice of
Borrowing shall automatically reduce, subject to reinstatement in accordance
with the terms of the Liquidity Agreement, the Available Commitment by an
amount equal to the amount of the Interest Advance requested to be made hereby
as set forth in clause (i) of paragraph (3) of this Certificate and such
reduction shall automatically
<PAGE> 33
result in corresponding reductions in the amounts available to be borrowed
pursuant to a subsequent Advance.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ____ day of ____________, ___.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Subordination Agent, as Borrower
By:
-------------------------------------------
Name:
Title:
I-2
<PAGE> 34
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Interest Advance Notice of Borrowing]
<PAGE> 35
Annex II to
Revolving Credit Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau
(the "Liquidity Provider"), with reference to the Revolving Credit Agreement
dated as of December 23, 1997, between the Borrower and the Liquidity Provider
(the "Liquidity Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(2) The Borrower is delivering this Notice of Borrowing
for the making of the Downgrade Advance by the Liquidity Provider to
be used for the funding of the Class A Cash Collateral Account in
accordance with Section 3.6(c) of the Intercreditor Agreement by
reason of the downgrading of the long-term unsecured debt rating of
the Liquidity Provider issued by either Rating Agency below the
Threshold Rating, which Advance is requested to be made on
______________.
(3) The amount of the Downgrade Advance requested hereby
(i) is $________, which equals the Remaining Commitment Amount on the
date hereof and is to be applied in respect of the funding of the
Class A Cash Collateral Account in accordance with Section 3.6(c) of
the Intercreditor Agreement, (ii) does not include any amount with
respect to the payment of principal of, or Additional Payments on, the
Class A Certificates, or principal of or interest or Additional
Payments on, the Class B Certificates, the Class C Certificates or the
Class D Certificates, (iii) was computed in accordance with the
provisions of the Class A Certificates, the Class A Trust Agreement
and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule 1), and (iv) has not been and is not the
subject of a prior or contemporaneous Notice of Borrowing under the
Liquidity Agreement.
(4) Upon receipt by or on behalf of the Borrower of the
amount requested hereby, (a) the Borrower shall deposit such amount in
the Class A Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(c) of the Intercreditor Agreement, (b)
no portion of such amount shall be applied by the Borrower for any
other purpose and (c) no portion of such amount until so applied shall
be commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Downgrade Advance as requested by
this Notice of Borrowing shall automatically and irrevocably terminate the
obligation of the Liquidity Provider to make further Advances under the
Liquidity Agreement; and (B) following the making by the Liquidity Provider of
the Downgrade
<PAGE> 36
Advance requested by this Notice of Borrowing, the Borrower shall not be
entitled to request any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered
this Notice of Borrowing as of the _____ day of _________, _____.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Subordination Agent, as Borrower
By:
----------------------------------------------
Name:
Title:
II-2
<PAGE> 37
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Downgrade Advance Notice of Borrowing]
<PAGE> 38
Annex III to
Revolving Credit Agreement
FINAL ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the
undersigned borrower (the "Borrower"), hereby certifies to Kreditanstalt fur
Wiederaufbau (the "Liquidity Provider"), with reference to the Revolving Credit
Agreement, dated as of December 23, 1997, between the Borrower and the
Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined or
referenced), that:
(1) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(2) The Borrower is delivering this Notice of Borrowing
for the making of the Final Advance by the Liquidity Provider to be
used for the funding of the Class A Cash Collateral Account in
accordance with Section 3.6(i) of the Intercreditor Agreement by
reason of the receipt by the Borrower of a Termination Notice from the
Liquidity Provider with respect to the Liquidity Agreement, which
Advance is requested to be made on _______________.
(3) The amount of the Final Advance requested hereby (i)
is $______, which equals the Remaining Commitment Amount on the date
hereof and is to be applied in respect of the funding of the Class A
Cash Collateral Account in accordance with Section 3.6(i) of the
Intercreditor Agreement upon receipt by the Borrower of a Termination
Notice from the Liquidity Provider in respect of the Liquidity
Agreement, (ii) does not include any amount with respect to the
payment of principal of, or Additional Payments on, the Class A
Certificates, or principal of, or interest or Additional Payments on,
the Class B Certificates, the Class C Certificates or the Class D
Certificates, (iii) was computed in accordance with the provisions of
the Class A Certificates, the Class A Trust Agreement and the
Intercreditor Agreement (a copy of which computation is attached
hereto as Schedule I), and (iv) has not been and is not the subject
of a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Borrower of the
amount requested hereby, (a) the Borrower shall deposit such amount
in the Class A Cash Collateral Account and apply the same in
accordance with the terms of Section 3.6(i) of the Intercreditor
Agreement, (b) no portion of such amount shall be applied by the
Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the
Borrower.
<PAGE> 39
The Borrower hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Final Advance as requested by this
Notice of Borrowing shall automatically and irrevocably terminate the
obligation of the Liquidity Provider to make further Advances under the
Liquidity Agreement; and (B) following the making by the Liquidity Provider of
the Final Advance requested by this Notice of Borrowing, the Borrower shall not
be entitled to request any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered
this Notice of Borrowing as of the _____ day of ___________, _____.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but solely
as Subordination Agent, as Borrower
By:
---------------------------------------
Name:
Title:
III-2
<PAGE> 40
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Final Advance Notice of Borrowing]
<PAGE> 41
Annex IV to
Revolving Credit Agreement
NOTICE OF TERMINATION
[Date]
First Security Bank, National Association,
as Subordination Agent, as Borrower
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Revolving Credit Agreement, dated as of December 23, 1997, between First
Security Bank, National Association, as Subordination Agent,
as agent and trustee for the United Airlines 1997-1A
Pass Through Trust, as Borrower, and Kreditanstalt fur
Wiederaufbau (the "Liquidity Agreement")
Ladies and Gentlemen:
You are hereby notified that pursuant to Section 6.01 of the
Liquidity Agreement, by reason of the occurrence of a Liquidity Event of
Default and a Performing Note Deficiency (each as defined therein), we are
giving this notice to you in order to cause (i) our obligations to make
Advances (as defined therein) under such Liquidity Agreement to terminate on
the fifth Business Day after the date on which you receive this notice and (ii)
you to request a Final Advance under the Liquidity Agreement pursuant to
Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity
Agreement) as a consequence of your receipt of this notice.
THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER
THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY
AGREEMENT SHALL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE THIS NOTICE.
Very truly yours,
KREDITANSTALT FUR WIEDERAUFBAU,
as Liquidity Provider
By:
-----------------------------------
Name:
Title:
cc: First Security Bank, National Association,
as Trustee
<PAGE> 42
Annex V to
Revolving Credit Agreement
NOTICE OF REPLACEMENT BORROWER
[Date]
Attention:
Revolving Credit Agreement, dated as of December 23, 1997,
between First Security Bank, National Association as
Subordination Agent, as agent and trustee for the
United Airlines 1997-1A Pass Through Trust, as Borrower,
and Kreditanstalt fur Wiederaufbau (the "Liquidity Agreement")
Ladies and Gentlemen:
For value received, the undersigned hereby irrevocably transfers to:
------------------------------
[Name of Transferee]
------------------------------
[Address of Transferee]
all rights of the undersigned as Borrower under the Liquidity Agreement
referred to above. The transferee has succeeded the undersigned as
Subordination Agent under the Intercreditor Agreement referred to in the first
paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of
the Intercreditor Agreement.
By this transfer, all rights of the undersigned as Borrower
under the Liquidity Agreement are transferred to the transferee and the
transferee shall hereafter have the sole rights as Borrower thereunder. The
undersigned shall pay any costs and expenses of such transfer, including, but
not limited to, transfer taxes or governmental charges.
We ask that this transfer be effective as of ____________,
____.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but solely
as Subordination Agent, as Borrower
By:
-----------------------------------------
Name:
Title:
VI-2
<PAGE> 1
EXHIBIT 4.7
- --------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
Dated as of December 23, 1997
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent,
as agent and trustee for the
United Airlines 1997-1B Pass Through Trust,
as Borrower
and
KREDITANSTALT FUR WIEDERAUFBAU,
as Liquidity Provider
- --------------------------------------------------------------------------------
Relating to
United Airlines 1997-1B Pass Through Trust
United Airlines Enhanced Pass Through Certificates, Series 1997-1B
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01 The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.02 Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.03 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.04 Automatic Adjustments and Termination of the Commitment. . . . . . . . . . . . . . . . . . . 8
Section 2.05 Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . 9
Section 2.06 Repayments of Downgrade Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.07 Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . 10
Section 2.08 Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.09 Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
OBLIGATIONS OF THE BORROWER
Section 3.01 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.02 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.03 Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.04 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.05 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.06 Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.07 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.08 Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.09 Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Effectiveness of Section 2.01. . . . . . . . . . . . . . . . . . . 15
Section 4.02 Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
COVENANTS
Section 5.01 Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.02 Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT
Section 6.01 Liquidity Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
MISCELLANEOUS
Section 7.01 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.02 Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.05 Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.06 Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.07 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.08 Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.09 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 22
Section 7.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.13 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION
TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
ii
<PAGE> 4
Annex I Interest Advance Notice of Borrowing
Annex II Downgrade Advance Notice of Borrowing
Annex III Final Advance Notice of Borrowing
Annex IV Notice of Termination
Annex V Notice of Replacement Borrower
iii
<PAGE> 5
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT, dated as of December 23,
1997, between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Subordination Agent
under the Intercreditor Agreement (each as defined below), as agent and trustee
for the Class B Trust (as defined below) (the "Borrower"), and KREDITANSTALT
FUR WIEDERAUFBAU, a corporation organized under the public law of the Federal
Republic of Germany ("KfW" or the "Liquidity Provider").
WHEREAS, pursuant to the Class B Trust Agreement (as defined
below), the Class B Trust is issuing the Class B Certificates; and
WHEREAS, the Borrower, in order to support the timely payment
of a portion of the interest on the Class B Certificates in accordance with
their terms, has requested the Liquidity Provider to enter into this Agreement,
providing in part for the Borrower to request in specified circumstances that
Advances be made hereunder.
NOW, THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. (a) Definitions. As used
in this Agreement and unless otherwise expressly indicated, the following
capitalized terms shall have the following respective meanings for all purposes
of this Agreement:
"Additional Costs" has the meaning specified in Section 3.01.
"Advance" means an Interest Advance, a Final Advance, a
Downgrade Advance, an Applied Downgrade Advance or an Unpaid Advance, as the
case may be.
"Applicable Liquidity Rate" has the meaning specified in
Section 3.07(g).
"Applicable Margin" means (w) with respect to any Unpaid
Advance (including an Applied Downgrade Advance) that is a LIBOR Advance, 1.00%
and (x) with respect to any Unpaid Advance (including an Applied Downgrade
Advance) that is a Base Rate Advance, 1.00%.
"Applied Downgrade Advance" has the meaning specified in
Section 2.06(a).
"Available Commitment" means, at any time of determination, an
amount equal to (i) the Commitment at such time, less (ii) subject to the
proviso contained in the last sentence
1
<PAGE> 6
of Section 2.02(a), the aggregate amount of each Interest Advance outstanding
at such time; provided, however, that following a Downgrade Advance or a Final
Advance, the Available Commitment shall be zero.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal to
(a) the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing selected by
it, plus (b) one-quarter of one percent (.25)%.
"Base Rate Advance" means an Advance that bears interest at a
rate based upon the Base Rate.
"Borrower" has the meaning specified in the recitals to this
Agreement.
"Borrowing" means the making of Advances requested by delivery
of a Notice of Borrowing.
"Business Day" means any day (x) other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close
in Chicago, Illinois, New York, New York, Frankfurt, Germany or the city and
state in which the Trustee, the Subordination Agent or any Indenture Trustee
maintains its corporate trust office or receives and disburses funds, and (y)
on which dealings are carried on in the London interbank market.
"Calculation Agent" means the Liquidity Provider.
"Capped Interest Rate" means Capped LIBOR plus 0.325% per
annum.
"Capped LIBOR" means 10.04% per annum; provided, however, that
the Capped LIBOR means 9.57% per annum (i) in the event no Registration Event
(as defined in the Registration Rights Agreement) occurs on or prior to the
180th day after the Closing Date, from July 1, 1998 through but excluding the
date on which such Registration Event occurs or (ii) in the event the Shelf
Registration Statement (as defined in the Registration Rights Agreement) ceases
to be effective for more than 60 days, whether or not consecutive during any
12-month period, during the period from the 61st day of such applicable
12-month period until such time as the Shelf Registration Statement again
becomes effective.
"Commitment" means initially $16,881,773 ("Initial
Commitment"), as the same may be reduced or increased from time to time in
accordance with Section 2.04(a).
"Downgrade Advance" means an Advance made pursuant to Section
2.02(b).
"Effective Date" has the meaning specified in Section 4.01.
2
<PAGE> 7
"Excluded Taxes" means (i) any Taxes imposed on, based on, or
measured by the overall net income, capital, franchises, or receipts (other
than Taxes which are or are in the nature of sales or use Taxes or value added
Taxes) of the Liquidity Provider or any of its Lending Offices, (ii)
withholding Taxes imposed under laws in effect on the date hereof by the United
States on payments to a recipient in the jurisdiction in which the Liquidity
Provider's initial Lending Office is located, and (iii) withholding Taxes
imposed by the United States on payments to a recipient in any other
jurisdiction to which such Lending Office is moved if, under the laws in effect
at the time of such move, such laws would require greater withholding of Taxes
on payments to such Liquidity Provider acting from an office in such
jurisdiction than would be required on payments to such Liquidity Provider
acting from an office in the jurisdiction from which such Lending Office was
moved.
"Expenses" means liabilities, obligations, damages,
settlements, penalties, claims, actions, suits, costs, expenses, and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel and costs of investigation).
"Expiry Date" means March 2, 2004.
"Final Advance" means an Advance made pursuant to Section
2.02(c).
"Indenture Trustee" means, with respect to any Indenture, the
Indenture Trustee thereunder.
"Initial Commitment" has the meaning specified in the
definition of "Commitment" in this Section 1.01.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated as of December 23, 1997, among the Trustee, each Liquidity Provider, each
Above-Cap Liquidity Provider and the Subordination Agent, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"Interest Advance" means an Advance made pursuant to Section
2.02(a).
"Interest Period" means, with respect to any LIBOR Advance,
each of the following periods:
(1) the period beginning on the third Business Day
following the Liquidity Provider's receipt of the Notice of Borrowing
for such LIBOR Advance and ending on the next Regular Distribution
Date; and
(2) each subsequent period commencing on the last day of
the preceding Interest Period and ending on the next Regular
Distribution Date;
provided, however, that if (x) the Final Advance shall have been made,
or (y) other outstanding Advances shall have been converted into the Final
Advance, then the Interest Periods shall be successive periods of one month
beginning on the third Business Day following the
3
<PAGE> 8
Liquidity Provider's receipt of the Notice of Borrowing for such Final Advance
(in the case of clause (x) above) or the Regular Distribution Date following
such conversion (in the case of clause (y) above).
"Interest Period Available Amount" means, at any time, the
lesser of (i) the Interest Period Commitment and (ii) the Available Commitment.
"Interest Period Commitment" means, at any time, an amount
equal to the product of the Commitment at such time times 1/6.
"KfW" has the meaning specified in the recital of parties to
this Agreement.
"Leased Aircraft Participation Agreement" means, with respect
to the Indenture pertaining to each Leased Aircraft, the "Participation
Agreement" referred to therein.
"Lending Office" means the lending office of the Liquidity
Provider, presently located at Frankfurt, Germany, or such other lending office
as the Liquidity Provider from time to time shall notify the Borrower as its
lending office hereunder.
"LIBOR" means, with respect to any Interest Period, the
interest rate per annum (calculated on the basis of a 360-day year and actual
days elapsed) at which deposits in United States dollars are offered to prime
banks in the London interbank market as indicated on display page 3750 (British
Bankers Association-LIBOR) of the Dow Jones Markets Service (or such other page
as may replace such display page 3750 for the purpose of displaying London
interbank offered rates for United States dollar deposits) or, if not so
indicated, the average (rounded upwards to the nearest 1/100%), as determined
by the Calculation Agent, of such rates as indicated on the Reuters Screen LIBO
Page (or such other page as may replace such Reuters Screen LIBO Page for the
purpose of displaying London interbank offered rates for United States dollar
deposits) or, if neither such alternative is indicated, the average (rounded
upwards to the nearest 1/100%), as determined by the Calculation Agent, of such
rates offered by the London Reference Banks to prime banks in the London
interbank market, in each case at or about 11:00 a.m. (London time) on the day
two LIBOR Business Days prior to the first day of such Interest Period for
deposits of a duration equal to such Interest Period (or such other period most
nearly corresponding to such period) in an amount substantially equal to the
principal amount of the applicable LIBOR Advance as of the first day of such
Interest Period. The Calculation Agent will, if necessary, request that each
of the London Reference Banks provide a quotation of its rate. If at least two
such quotations are provided, the rate will be the average of the quotations
(rounded upwards to the nearest 1/100%). If no such quotation can be obtained,
the rate will be LIBOR for the immediately preceding Interest Period.
"LIBOR Advance" means an Advance bearing interest at a rate
based upon LIBOR.
"LIBOR Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close
in New York, New York or London, England.
4
<PAGE> 9
"London Reference Banks" means the principal London offices of
National Westminster Bank Plc, Barclays Bank Plc and Bayrische Landesbank
Girozentrale, or such other bank or banks as may from time to time be agreed to
by United and the Calculation Agent.
"Liquidity Event of Default" means the occurrence of either
(a) the acceleration of all of the Equipment Notes or (b) a United Bankruptcy
Event.
"Liquidity Indemnitee" means (i) the Liquidity Provider, (ii)
each Affiliate of the Liquidity Provider, (iii) the directors, officers,
employees, servants and agents of the Liquidity Provider and its Affiliates,
and (iv) the successors and permitted assigns of the persons described in
clauses (i) through (iii), inclusive.
"Liquidity Provider" has the meaning specified in the recital
of parties to this Agreement.
"Non-Excluded Tax" has the meaning specified in Section 3.03.
"Notice of Borrowing" has the meaning specified in Section
2.02(d).
"Notice of Replacement Borrower" has the meaning specified in
Section 3.08.
"Offering Memorandum" means the Offering Memorandum, dated
December 18, 1997, relating to the Certificates, as such Offering Memorandum
may be amended or supplemented.
"Owned Aircraft Participation Agreement" means, with respect
to the Indenture pertaining to each Owned Aircraft, the "Participation
Agreement" referred to therein.
"Participating Institution" has the meaning specified in
Section 7.08(b).
"Performing Note Deficiency" means any time that less than 65%
of the then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.
"Registration Event" has the meaning set forth in the
Registration Rights Agreements.
"Regulatory Change" has the meaning specified in Section 3.01.
"Remaining Commitment Amount" means, at any time of
determination, an amount equal to (i) the Commitment, less (ii) the product of
(A) the Interest Period Commitment times (B) the number of Unpaid Advances that
are Interest Advances.
"Replenishment Amount" has the meaning assigned to such term
in Section 2.06(b).
5
<PAGE> 10
"Required Amount" means, for any day, the sum of the aggregate
amount of interest, calculated at the rate per annum equal to the Capped
Interest Rate for the Class B Certificates, that would be payable on the Class
B Certificates on each of the six successive quarterly Regular Distribution
Dates following such day or, if such day is a Regular Distribution Date, on
such day and the succeeding five quarterly Regular Distribution Dates, in each
case calculated on the basis of the Pool Balance of the Class B Certificates on
such day and without regard to expected future payments of principal on the
Class B Certificates.
"Termination Date" means the earliest to occur of the
following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to
the Liquidity Provider a certificate, signed by a Responsible Officer of the
Borrower, certifying that all of the Class B Certificates have been paid in
full (or provision has been made for such payment in accordance with the
Intercreditor Agreement and the Trust Agreement) or are otherwise no longer
entitled to the benefits of this Agreement; (iii) the date on which the
Borrower delivers to the Liquidity Provider a certificate, signed by a
Responsible Officer of the Borrower, certifying that a Replacement Primary
Liquidity Facility has been substituted for this Agreement in full pursuant to
Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day
following the receipt by the Borrower of a Termination Notice from the
Liquidity Provider pursuant to Section 6.01; and (v) the date on which no
Advance is or may (including by reason of reinstatement as herein provided)
become available for a Borrowing hereunder.
"Termination Notice" means the Notice of Termination
substantially in the form of Annex IV to this Agreement.
"Unpaid Advance" has the meaning specified in Section 2.05.
(b) Terms Defined in the Intercreditor Agreement. For
all purposes of this Agreement, the following terms shall have the respective
meanings assigned to such terms in the Intercreditor Agreement:
"Above-Cap Liquidity Provider," "Additional Payments," "Affiliate,"
"Certificates," "Class A Certificates,""Class B Cash Collateral
Account," "Class B Certificateholders,""Class B Certificates," "Class
B Trust," "Class B Trust Agreement," "Class C Certificates," "Class D
Certificates," "Closing Date," "Distribution Date," "Equipment Notes,"
"Fee Letter," "Indenture," "Initial Purchasers," "Investment
Earnings," "Leased Aircraft", "Primary Liquidity Facility," "Moody's,"
"Note Purchase Agreement," "Operative Agreements," "Owned Aircrafts",
"Participation Agreements," "Performing Equipment Note," "Performing
Note Deficiency," "Person," "Pool Balance," "Purchase Agreement,"
"Rating Agency," "Registration Rights Agreement," "Regular
Distribution Date," "Replacement Primary Liquidity Facility,"
"Responsible Officer," "Scheduled Payment," "Special Payment,"
"Standard & Poor's," "Stated Interest Rate," "Subordination Agent,"
"Taxes," "Threshold Rating," "Triggering Event," "Trust Agreement,"
"Trustee," "United," "United Bankruptcy Event" and "Written Notice."
6
<PAGE> 11
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01 Advances. The Liquidity Provider hereby
irrevocably agrees, on the terms and conditions hereinafter set forth, to make
Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date until 12:00 noon (New York City time) on the
Expiry Date (unless the obligations of the Liquidity Provider shall be earlier
terminated in accordance with the terms of Section 2.04) in an aggregate amount
at any time outstanding not to exceed the Commitment.
Section 2.02 Making the Advances. (a) Each "Interest
Advance" shall be made in a single Borrowing by delivery to the Liquidity
Provider of a written and completed Notice of Borrowing in substantially the
form of Annex I, signed by a Responsible Officer of the Borrower, such Interest
Advance in an amount not exceeding the Interest Period Available Amount at such
time and shall be used solely for the payment when due of interest on the Class
B Certificates at the Stated Interest Rate therefor in accordance with Section
3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder
shall automatically reduce the Available Commitment and the amount available to
be borrowed hereunder by subsequent Advances by the amount of such Interest
Advance (subject to reinstatement as provided in the next sentence). Upon
repayment to the Liquidity Provider in full of the amount of any Interest
Advance made pursuant to this Section 2.02(a), together with accrued interest
thereon (as provided herein), the Available Commitment shall be reinstated by
the amount of such repaid Interest Advance; provided, however, that the
Available Commitment shall not be so reinstated at any time if (i) a Triggering
Event shall have occurred and be continuing and (ii) there is a Performing Note
Deficiency.
(b) A "Downgrade Advance" shall be made in a single
Borrowing upon a downgrading of the Liquidity Provider's long-term unsecured
debt rating issued by any Rating Agency below the Threshold Rating (as provided
for in Section 3.6(c) of the Intercreditor Agreement) unless a Replacement
Primary Liquidity Facility shall have been delivered to the Borrower in
accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a
written and completed Notice of Borrowing in substantially the form of Annex
II, signed by a Responsible Officer of the Borrower, in an amount equal to the
Remaining Commitment Amount at such time (but not to exceed the Available
Commitment at such time), and shall be used to fund the Class B Cash Collateral
Account in accordance with Section 3.6(f). Upon such downgrading, the
Liquidity Provider shall promptly deliver notice thereof to the Borrower, the
Trustee and United.
(c) A "Final Advance" shall be made in a single Borrowing
upon the receipt by the Borrower of a Termination Notice from the Liquidity
Provider pursuant to Section 6.01, by delivery to the Liquidity Provider of a
written and completed Notice of Borrowing in substantially the form of Annex
III, signed by a Responsible Officer of the Borrower, in an amount equal to the
Remaining Commitment Amount at such time (but not to exceed the Available
Commitment at such time), and shall be used to fund the Class B Cash Collateral
Account (in accordance with Section 3.6(i) of the Intercreditor Agreement).
7
<PAGE> 12
(d) Each Borrowing shall be made on notice in writing (a
"Notice of Borrowing") in substantially the form required by Section 2.02(a),
2.02(b) or 2.02(c), as the case may be, given not later than 12:00 Noon
(Chicago time) on the second Business Day prior to the day of the proposed
Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the
conditions precedent set forth in Section 4.02 with respect to a requested
Borrowing, the Liquidity Provider shall, before 12:00 Noon (Chicago time) on
the date of such Borrowing or on such later Business Day specified by the
Borrower in such Notice of Borrowing, make available for the account of its
Lending Office, in U.S. dollars and in immediately available funds, the amount
of such Borrowing to be paid to the Borrower in accordance with its payment
instructions. If a Notice of Borrowing is delivered by the Borrower in respect
of any Borrowing after 12:00 Noon (Chicago time) on a Business Day, the
Liquidity Provider shall, before 12:00 Noon (Chicago time) on the third
Business Day following the day of receipt of such Notice of Borrowing or on
such later Business Day specified by the Borrower in such Notice of Borrowing,
make available to the Borrower, in accordance with its payment instructions, in
U.S. dollars and in immediately available funds, the amount of such Borrowing.
Payments of proceeds of a Borrowing shall be made by wire transfer of
immediately available funds to the Borrower in accordance with such wire
transfer instructions as the Borrower shall furnish from time to time to the
Liquidity Provider for such purpose. Each Notice of Borrowing shall be
irrevocable and binding on the Borrower.
(e) Upon the making of any Advance requested pursuant to
a Notice of Borrowing in accordance with the Borrower's payment instructions,
the Liquidity Provider shall be fully discharged of its obligation hereunder
with respect to such Notice of Borrowing, and the Liquidity Provider shall not
thereafter be obligated to make any further Advances hereunder in respect of
such Notice of Borrowing to the Borrower or to any other person (including the
holder of any Class B Certificate or the Trustee) who makes to the Trustee or
the Borrower a demand for payment with respect to any Class B Certificate.
Following the making of any Advance pursuant to Section 2.02(b) or Section
2.02(c) to fund the Class B Cash Collateral Account, the Liquidity Provider
shall have no interest in or rights to the Class B Cash Collateral Account,
such Advance or any other amounts from time to time on deposit in the Class B
Cash Collateral Account; provided, however, that the foregoing shall not affect
or impair the obligations of the Subordination Agent to make the distributions
contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By
paying to the Borrower proceeds of Advances requested by the Borrower in
accordance with the provisions of this Agreement, the Liquidity Provider makes
no representation as to, and assumes no responsibility for, the correctness or
sufficiency for any purpose of the amount of the Advances so made and
requested.
Section 2.03 Fees. The Borrower agrees to pay to the
Liquidity Provider the fees set forth in the Fee Letter.
Section 2.04 Automatic Adjustments and Termination of the
Commitment.
(a) Automatic Adjustments. Promptly following each date
on which the Required Amount is reduced or increased, as the case may be, as a
result of a reduction or increase, respectively, in the Pool Balance of the
Class B Certificates or otherwise, the Commitment shall automatically be
reduced or increased to an amount determined in accordance
8
<PAGE> 13
with the following formula (provided that the Commitment shall in no event
exceed the Initial Commitment): the product of (x) 1.5, multiplied by, (y) the
Capped Interest Rate, multiplied by (z) the Pool Balance of the Class B
Certificates (as calculated by the Borrower). The Borrower shall give notice
of any such automatic reduction or increase of the Commitment to the Liquidity
Provider within two Business Days thereof. The failure by the Borrower to
furnish any such notice shall not affect such automatic reduction or increase
of the Commitment.
(b) Termination. Upon the making of any Downgrade
Advance or Final Advance hereunder or the occurrence of the Termination Date,
the obligation of the Liquidity Provider to make further Advances hereunder
shall automatically and irrevocably terminate, and the Borrower shall not be
entitled to request any further Borrowing hereunder.
Section 2.05 Repayments of Interest Advances or the
Final Advance. Subject to Sections 2.07 and 2.09, the Borrower hereby agrees
to pay, or to cause to be paid, to the Liquidity Provider on each date on which
the Liquidity Provider shall make an Interest Advance or the Final Advance, an
amount equal to (a) the amount of such Advance (any such Advance, until repaid,
is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount
of each such Unpaid Advance as provided in Section 3.07. Subject to Sections
2.06, 2.07 and 2.09, unless otherwise waived by the Liquidity Provider, the
Borrower shall be obligated, without notice of an Advance or demand for
repayment from the Liquidity Provider (which notice and demand are hereby
waived by the Borrower), to repay the Liquidity Provider for all Advances on
the same day as made. The Borrower and the Liquidity Provider agree that the
repayment in full of each Interest Advance and Final Advance on the date such
Advance is made is intended to be a contemporaneous exchange for new value
given to the Borrower by the Liquidity Provider.
Section 2.06 Repayments of Downgrade Advances. (a)
Amounts advanced hereunder in respect of a Downgrade Advance shall be deposited
in the Class B Cash Collateral Account, invested and withdrawn from the Class B
Cash Collateral Account as set forth in Sections 3.6(c) and (f) of the
Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider,
on each Regular Distribution Date, commencing on the first Regular Distribution
Date after the making of a Downgrade Advance, interest on the principal amount
of any such Downgrade Advance as provided in Section 3.07; provided, however,
that amounts in respect of a Downgrade Advance withdrawn from the Class B Cash
Collateral Account for the purpose of paying interest on the Class B
Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement
(the amount of any such withdrawal being, an "Applied Downgrade Advance") shall
be treated as an Interest Advance under this Agreement for purposes of
determining the Applicable Liquidity Rate for interest payable thereon; and
provided, further, that if, following the making of a Downgrade Advance, the
Liquidity Provider delivers a Termination Notice to the Borrower pursuant to
Section 6.01, such Downgrade Advance shall thereafter be treated as a Final
Advance under this Agreement for purposes of determining the Applicable
Liquidity Rate for interest payable thereon. Immediately upon the withdrawal
of any amounts from the Class B Cash Collateral Account on account of a
reduction in the Required Amount and Commitment, the Borrower shall repay to
the Liquidity Provider a portion of the Downgrade Advances in a principal
amount equal to the amount of such reduction, plus interest on the principal
amount prepaid as provided in Section 3.07. Immediately upon any increase in
the
9
<PAGE> 14
Required Amount and Commitment, the Liquidity Provider shall advance to the
Borrower as a portion of the Downgrade Advances, for deposit into the Class B
Cash Collateral Account, a principal amount equal to the amount of such
increase.
(b) At any time when an Applied Downgrade Advance (or any
portion thereof) is outstanding, upon the deposit in the Class B Cash
Collateral Account of any amount pursuant to clause third of Section 2.4(b) of
the Intercreditor Agreement, clause third of Section 3.2 of the Intercreditor
Agreement or clause fourth of Section 3.3 of the Intercreditor Agreement (any
such amount being a "Replenishment Amount") for the purpose of replenishing the
balance thereof up to the amount of the Commitment, (i) the aggregate
outstanding principal amount of all Applied Downgrade Advances shall be
automatically reduced by the amount of such Replenishment Amount and (ii) the
principal amount of the outstanding Downgrade Advance shall be automatically
increased by the amount of such Replenishment Amount.
(c) Upon the provision of a Replacement Primary Liquidity
Facility in replacement of this Agreement in accordance with Section 3.6(e) of
the Intercreditor Agreement, amounts remaining on deposit in the Class B Cash
Collateral Account after giving effect to any application of funds therefrom to
any payment of interest on the Class B Certificates on the date of such
replacement shall be reimbursed to the Liquidity Provider, but only to the
extent such amounts are necessary to repay in full to the Liquidity Provider
all amounts owing to it hereunder.
Section 2.07 Payments to the Liquidity Provider Under
the Intercreditor Agreement. In order to provide for payment or repayment to
the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement
provides that amounts available and referred to in Articles II and III of the
Intercreditor Agreement, to the extent payable to the Liquidity Provider
pursuant to the terms of the Intercreditor Agreement (including, without
limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to
the Liquidity Provider in accordance with the terms thereof. Amounts so paid
to the Liquidity Provider shall be applied by the Liquidity Provider in the
order of priority required by the applicable provisions of Articles II and III
of the Intercreditor Agreement.
Section 2.08 Book Entries. The Liquidity Provider
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower resulting from Advances made from
time to time and the amounts of principal and interest payable hereunder and
paid from time to time in respect thereof; provided, however, that the failure
by the Liquidity Provider to maintain such account or accounts shall not affect
the obligations of the Borrower in respect of Advances.
Section 2.09 Payments from Available Funds Only. All
payments to be made by the Borrower under this Agreement shall be made only from
amounts received by it that constitute Scheduled Payments or Special Payments or
payments under Section 7(c) of the Leased Aircraft Participation Agreement,
Section 5(b) of the Owned Participation Agreement and Section 9 of the Note
Purchase Agreement, and only to the extent that the Borrower shall have
sufficient income or proceeds therefrom to enable the Borrower to make payments
in accordance with the terms hereof after giving effect to the priority of
payments provisions set forth in the
10
<PAGE> 15
Intercreditor Agreement. The Liquidity Provider agrees that it shall look
solely to such amounts to the extent available for distribution to it as
provided in the Intercreditor Agreement and this Agreement and that the
Borrower, in its individual capacity, is not personally liable to it for any
amounts payable or liability under this Agreement except as expressly provided
in this Agreement or the Intercreditor Agreement. Amounts on deposit in the
Class B Cash Collateral Account shall be available to the Borrower to make
payments only to the extent and for the purposes expressly contemplated in
Section 3.6(f) of the Intercreditor Agreement.
ARTICLE III
OBLIGATIONS OF THE BORROWER
Section 3.01 Increased Costs. The Borrower shall pay
to the Liquidity Provider from time to time such amounts as may be necessary to
compensate the Liquidity Provider for any costs incurred by the Liquidity
Provider which are attributable to its making or maintaining any LIBOR Advances
hereunder or its obligation to make any such Advances hereunder, or any
reduction in any amount receivable by the Liquidity Provider under this
Agreement or the Intercreditor Agreement in respect of any such Advances or
such obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any change after the
date of this Agreement in U.S. federal, state, or municipal, or any foreign
laws or regulations, or the adoption or making after such date of any
interpretation, regulation, directive, guideline, requirement or request
whether or not having the force of law, by any court or governmental or
monetary authority charged with the interpretation or administration thereof (a
"Regulatory Change"), which: (1) changes the basis of taxation of any amounts
payable to the Liquidity Provider under this Agreement in respect of any such
Advances (other than Excluded Taxes or any taxes described in Section 3.03); or
(2) imposes or modifies any reserve, special deposit, compulsory loan or
similar requirements relating to any extensions of credit or other assets of,
or any deposits with other liabilities of, the Liquidity Provider (including
any such Advances or any deposits referred to in the definition of LIBOR or
related definitions). The Liquidity Provider agrees to use reasonable efforts
(consistent with applicable legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any amount payable under this Section 3.01 that
may thereafter accrue and would not, in the reasonable judgment of the
Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider.
The Liquidity Provider shall notify the Borrower of any event
occurring after the date of this Agreement that shall entitle the Liquidity
Provider to compensation pursuant to this Section 3.01 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation, which notice shall describe in reasonable detail the calculation
of the amounts owed under this Section 3.01. Determinations by the Liquidity
Provider for purposes of this Section 3.01 of the effect of any Regulatory
Change on its costs of making or maintaining Advances or on amounts receivable
by it in respect of Advances, and of the additional amounts required to
compensate the Liquidity Provider in respect of any Additional Costs, shall be
prima facie evidence of the amount owed under this Section 3.01.
11
<PAGE> 16
Section 3.02 Capital Adequacy. If (1) compliance with
any judicial, administrative or other governmental interpretation of any law or
regulation or (2) compliance by the Liquidity Provider or any corporation
controlling the Liquidity Provider with any guideline or request from any
central bank or other governmental authority (whether or not having the force
of law) has the effect of requiring an increase in the amount of capital
required or expected to be maintained by the Liquidity Provider or any
corporation controlling the Liquidity Provider, and such increase is based upon
the Liquidity Provider's obligations hereunder and other similar obligations,
the Borrower shall pay to the Liquidity Provider such additional amount as
shall be reasonably allocable to the Liquidity Provider's obligations to the
Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts
(consistent with applicable legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any amount payable under this Section 3.02 that
may thereafter accrue and would not, in the reasonable judgment of the
Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider.
The Liquidity Provider shall notify the Borrower of any event
occurring after the date of this Agreement that shall entitle the Liquidity
Provider to compensation pursuant to this Section 3.02 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation, which notice shall describe in reasonable detail the calculation
of the amounts owed under this Section 3.02. Determinations by the Liquidity
Provider for purposes of this Section 3.02 of the effect of any increase in the
amount of capital required to be maintained by the bank and of the amount
allocable to the Liquidity Provider's obligations to the Borrower hereunder
shall be prima facie evidence of the amounts owed under this Section 3.02.
Section 3.03 Payments Free of Deductions. All
payments made by the Borrower under this Agreement shall be made free and clear
of, and without reduction for or on account of, any Taxes, excluding Excluded
Taxes (such non-excluded taxes being referred to herein, collectively, as
"Non-Excluded Taxes"). If any Non-Excluded Taxes are required to be withheld
or deducted from any amounts payable to the Liquidity Provider under this
Agreement, the Borrower shall (a) within the time prescribed therefor by
applicable law pay to the appropriate governmental or taxing authority the full
amount of any such Non-Excluded Taxes (and any additional Non-Excluded Taxes in
respect of the payment required under clause (b) below) and make such reports
or returns in connection therewith at the time or times and in the manner
prescribed by applicable law, and (b) pay to the Liquidity Provider an
additional amount which (after deduction of all such Non-Excluded Taxes) shall
be sufficient to yield to the Liquidity Provider the full amount which would
have been received by it had no such withholding or deduction been made.
Within 30 days after the date of each payment hereunder, the Borrower shall
furnish to the Liquidity Provider the original or a certified copy of (or other
documentary evidence of) the payment of the Non-Excluded Taxes applicable to
such payment. The Liquidity Provider agrees to use reasonable efforts
(consistent with applicable legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of the Liquidity Provider, be
otherwise materially disadvantageous to the Liquidity Provider or require the
Liquidity Provider to incur any cost or expenses for which it is not
indemnified by the Borrower. The Liquidity Provider shall deliver to the
Borrower such certificates and documents as may be reasonably requested by the
Borrower
12
<PAGE> 17
and required by applicable law to establish that payments hereunder are exempt
from (or entitled to a reduced rate of) withholding Tax.
Section 3.04 Payments. The Borrower shall make or
cause to be made each payment to the Liquidity Provider under this Agreement so
as to cause the same to be received by the Liquidity Provider not later than
1:00 P.M. (Chicago time) on the day when due. The Borrower shall make all such
payments in lawful money of the United States of America, to the Liquidity
Provider in immediately available funds, by wire transfer to the office of
Citibank, N.A. New York City, for credit to KfW, Account No. 109-260-93.
Section 3.05 Computations. All computations of
interest based on the Base Rate shall be made on the basis of a year of 365 or
366 days, as the case may be, and all computations of interest based on the
LIBOR shall be made on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 3.06 Payment on Non-Business Days. Whenever
any payment to be made hereunder shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next Business Day and such
extension of time shall in such case be included in the computation of payment
of interest or fees, as the case may be. If any payment in respect of interest
on an Advance is so deferred to the next Business Day, such deferral shall not
delay the commencement of the next Interest Period for such Advance (if such
Advance is a LIBOR Advance) or reduce the number of days for which interest
shall be payable on such Advance on the next interest payment date for such
Advance.
Section 3.07 Interest. (a) The Borrower shall pay,
or shall cause to be paid, interest on (i) the unpaid principal amount of each
Advance from and including the date of such Advance (or, in the case of an
Applied Downgrade Advance, from and including the date on which the amount
thereof was withdrawn from the Class B Cash Collateral Account to pay interest
on the Class B Certificates) to but excluding the date such principal amount
shall be paid in full (or, in the case of an Applied Downgrade Advance, the
date on which the Class B Cash Collateral Account is fully replenished in
respect of such Advance) and (ii) any other amount due hereunder (whether fees,
commissions, expenses or other amounts or, installments of interest on Advances
or any such other amount) which is not paid when due (whether at stated
maturity, by acceleration or otherwise) from and including the due date thereof
to but excluding the date such amount is paid in full, in each such case, at a
fluctuating interest rate per annum for each day equal to the Applicable
Liquidity Rate (as defined below) for such Advance or such other amount as in
effect for such day, but in no event at a rate per annum greater than the
maximum rate permitted by applicable law; provided, however, that, if at any
time the otherwise applicable interest rate as set forth in this Section 3.07
shall exceed the maximum rate permitted by applicable law, then any subsequent
reduction in such interest rate shall not reduce the rate of interest payable
pursuant to this Section 3.07 below the maximum rate permitted by applicable
law until the total amount of interest accrued equals the amount of interest
that would have accrued if such otherwise applicable interest rate as set forth
in this Section 3.07 had at all times been in effect. Nothing contained in
this Section 3.07 shall require the Borrower to pay any
13
<PAGE> 18
amount under this Section 3.07 other than to the extent the Borrower shall have
funds available therefor.
(b) Except as provided in Section 3.07(e), each Advance
shall be either a Base Rate Advance or a LIBOR Advance as provided in this
Section or Section 3.10. Each Advance will be a Base Rate Advance for the
period from the date of its borrowing to (but excluding) the third Business Day
following the Liquidity Provider's receipt of the Notice of Borrowing for such
Advance. Thereafter, such Advance shall be a LIBOR Advance.
(c) Each LIBOR Advance shall bear interest during each
Interest Period at the LIBOR for such Interest Period plus the Applicable
Margin for such LIBOR Advance, payable in arrears on the last day of such
Interest Period and, in the event of the payment of principal of such LIBOR
Advance on a day other than such last day, on the date of such payment (to the
extent of interest accrued on the amount of principal repaid).
(d) Each Base Rate Advance shall bear interest at the
Base Rate plus the Applicable Margin for such Base Rate Advance, payable in
arrears on each Regular Distribution Date and, in the event of the payment of
principal of such Base Rate Advance on a day other than a Regular Distribution
Date, on the date of such payment (to the extent of interest accrued on the
amount of principal repaid).
(e) Each Downgrade Advance other than an Applied
Downgrade Advance shall bear interest during the period from and including the
date of the making of such Downgrade Advance through but excluding the Expiry
Date (or, if earlier, the date of repayment thereof or of conversion thereof
into a Final Advance), in an amount equal to the Investment Earnings on amounts
on deposit in the Class B Cash Collateral Account for such period, payable in
arrears on each Regular Distribution Date.
(f) Each amount not paid when due hereunder (whether
fees, commissions, expenses or other amounts or, to the extent permitted by
applicable law, installments of interest on Advances) shall bear interest at
the Base Rate plus 1.00% per annum.
(g) Each change in the Base Rate shall become effective
immediately. The rates of interest specified in this Section 3.07 with respect
to any Advance or other amount shall be referred to as the "Applicable
Liquidity Rate."
Section 3.08 Replacement of Borrower. Subject to
Section 5.02, from time to time and subject to the successor Borrower's meeting
the eligibility requirements set forth in Section 6.9 of the Intercreditor
Agreement applicable to the Subordination Agent, upon the effective date and
time specified in a written and completed Notice of Replacement Borrower in
substantially the form of Annex V (a "Notice of Replacement Borrower")
delivered to the Liquidity Provider by the then Borrower, the successor
Borrower designated therein shall be substituted for as the Borrower for all
purposes hereunder.
Section 3.09 Funding Loss Indemnification. The
Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity
Provider, such amount or amounts as shall
14
<PAGE> 19
be sufficient (in the reasonable opinion of the Liquidity Provider) to
compensate it for any loss, cost, or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by the
Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of
anticipated profits) incurred as a result of:
(1) Any repayment of a LIBOR Advance, any
conversion of a LIBOR Advance to a Base Rate Advance or a conversion
of a LIBOR Advance to an Advance bearing interest in accordance with
Section 3.07(e), in any case on a date other than the last day of the
Interest Period for such Advance; or
(2) Any failure by the Borrower to borrow a LIBOR
Advance on the date for Borrowing specified in the relevant notice
under Section 2.02.
Section 3.10 Illegality. Notwithstanding any other
provision in this Agreement, if any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Liquidity
Provider (or its Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for the Liquidity Provider (or its
Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the
Borrower by the Liquidity Provider, the outstanding principal amount of the
LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon
demand of the Liquidity Provider, if such change or compliance with such
request, in the judgment of the Liquidity Provider, requires immediate
repayment; or (b) at the expiration of the last Interest Period to expire after
the effective date of any such change or request.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Effectiveness of
Section 2.01. Section 2.01 of this Agreement shall become effective on and as
of the first date (the "Effective Date") on which the following conditions
precedent have been satisfied or waived:
(a) The Liquidity Provider shall have received on or
before the Closing Date each of the following, each dated such date,
and in the case of each document delivered pursuant to paragraphs (i),
(ii) and (iii), in form and substance satisfactory to the Liquidity
Provider:
(i) This Agreement duly executed on behalf of
the Borrower;
(ii) The Intercreditor Agreement duly executed
on behalf of each of the parties thereto;
15
<PAGE> 20
(iii) Fully executed copies of each of the
Operative Agreements (other than this Agreement and the
Intercreditor Agreement);
(iv) A copy of the Offering Memorandum and
specimen copies of the Class B Certificates;
(v) An executed copy of each opinion,
document, instrument and certificate delivered pursuant to the
Class B Trust Agreement, the Intercreditor Agreement, the Note
Purchase Agreement and the other Operative Agreements
(together with, in the case of each such opinion, other than
the opinion of counsel for the Initial Purchasers, a letter
from the counsel rendering such opinion to the effect that the
Liquidity Provider is entitled to rely on such opinion as if
it were addressed to the Liquidity Provider);
(vi) Evidence that there shall have been made
and shall be in full force and effect, all filings, recordings
and/or registrations, and there shall have been given or taken
any notice or other similar action as may be reasonably
necessary or, to the extent reasonably requested by the
Liquidity Provider, reasonably advisable, in order to
establish, perfect, protect and preserve the right, title and
interest, remedies, powers, privileges, liens and security
interests of, or for the benefit of, the Trustee and the
Liquidity Provider created by the Operative Agreements;
(vii) Evidence that, on the Effective Date, the
Class A Certificates and the Class B Certificates shall
receive long-term credit ratings from Moody's of not lower
than "AAa2" and "A1," respectively, and from Standard & Poor's
of not lower than "AAA" and "AA-," respectively;
(viii) An agreement from United, pursuant to
which United agrees to provide copies of its Quarterly Reports
on Form 10-Q and Annual Reports on Form 10-K to the Liquidity
Provider promptly after becoming publicly available; and
(ix) Such other documents, instruments,
opinions and approvals as the Liquidity Provider shall have
reasonably requested.
(b) The following statements shall be true on and as of
the Effective Date:
(i) The representations and warranties in the
Note Purchase Agreement and each of the Participation
Agreements are true and correct on and as of the Effective
Date as though made on and as of the Effective Date;
(ii) No event has occurred and is continuing, or
would result from the entering into of this Agreement or the
making of any Advance, which constitutes a Liquidity Event of
Default; and
16
<PAGE> 21
(iii) There has been no material adverse change in
the financial condition or results of operations of United and
its subsidiaries taken as a whole since September 30, 1997.
(c) The Liquidity Provider shall have received payment in
full of all fees and other sums required to be paid to or for the
account of the Liquidity Provider on or prior to the Effective Date.
(d) All conditions precedent to the issuance of the
Certificates under the Trust Agreements shall have been satisfied, all
conditions precedent to the effectiveness of the other Liquidity
Facilities shall have been satisfied, and all conditions precedent to
the purchase of the Certificates by the Initial Purchasers under the
Purchase Agreement shall have been satisfied (unless any of such
conditions precedent shall have been waived by the Initial
Purchasers).
Section 4.02 Conditions Precedent to Borrowing. The
obligation of the Liquidity Provider to make an Advance on the occasion of each
Borrowing shall be subject to the conditions precedent that the Effective Date
shall have occurred and, prior to the date of such Borrowing, the Borrower
shall have delivered a Notice of Borrowing which conforms to the terms and
conditions of this Agreement and has been completed as may be required by the
relevant form of the Notice of Borrowing for the type of Advances requested.
ARTICLE V
COVENANTS
Section 5.01 Affirmative Covenants of the Borrower.
So long as any Advance shall remain unpaid or the Liquidity Provider shall have
any Commitment hereunder or the Borrower shall have any obligation to pay any
amount to the Liquidity Provider hereunder, the Borrower shall, unless the
Liquidity Provider shall otherwise consent in writing:
(a) Performance of Agreements. Punctually pay or
cause to be paid all amounts payable by it under this Agreement and the other
Operative Agreements and observe and perform in all material respects the
conditions, covenants and requirements applicable to it contained in this
Agreement and the other Operative Agreements.
(b) Reporting Requirements. Furnish to the
Liquidity Provider with reasonable promptness, such other information and data
with respect to the transactions contemplated by the Operative Agreements as
from time to time may be reasonably requested by the Liquidity Provider; and
permit the Liquidity Provider, upon reasonable notice, to inspect the
Borrower's books and records with respect to such transactions and to meet with
officers and employees of the Borrower to discuss such transactions.
(c) Certain Operative Agreements. Furnish to the
Liquidity Provider with reasonable promptness any Operative Agreement entered
into after the date hereof.
17
<PAGE> 22
Section 5.02 Negative Covenants of the Borrower. So
long as any Advance shall remain unpaid or the Liquidity Provider shall have
any Commitment hereunder or the Borrower shall have any obligation to pay any
amount to the Liquidity Provider hereunder, the Borrower shall not appoint or
permit or suffer to be appointed any successor Borrower without the written
consent of the Liquidity Provider, which consent shall not be unreasonably
withheld or delayed.
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT
Section 6.01 Liquidity Events of Default. If (a) any
Liquidity Event of Default occurs and (b) there is a Performing Note Deficiency,
the Liquidity Provider may, in its discretion, deliver to the Borrower a
Termination Notice, the effect of which shall be to cause (i) this Agreement to
expire on the fifth Business Day after the date on which such Termination Notice
is received by the Borrower, (ii) the Borrower to promptly request, and the
Liquidity Provider to promptly make, a Final Advance in accordance with Section
2.02(c) and Section 3.6(i) of the Intercreditor Agreement, (iii) all other
outstanding Advances to be automatically converted into Final Advances for
purposes of determining the Applicable Liquidity Rate for interest payable
thereon, and (iv) subject to Sections 2.07 and 2.09, all Advances, any accrued
interest thereon and any other amounts outstanding hereunder to become
immediately due and payable to the Liquidity Provider.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Amendments, Etc. No amendment or waiver
of any provision of this Agreement, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Liquidity Provider, and, in the case of an amendment,
the Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 7.02 Notices, Etc. Except as otherwise
expressly provided herein, all notices and other communications provided for
hereunder shall be in writing (including sent by telecopier):
Borrower: FIRST SECURITY BANK, NATIONAL ASSOCIATION
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopy: (801) 246-5053
18
<PAGE> 23
Liquidity
Provider: KREDITANSTALT FUR WIEDERAUFBAU
Palmengartenstrasse 5-9
D-60325 Frankfurt am Main
Germany
Attention: Head of Aircraft
Finance Department K 111 b 1
Telephone: 011-49-69-7431-0
Telecopy: 011-49-69-7431-2944
or, as to each of the foregoing, at such other address as shall be designated
by such Person in a Written Notice to the others. All such notices and
communications shall be effective (i) if given by telecopier, when transmitted
to the telecopier number specified above with receipt confirmed, (ii) if given
by mail, when deposited in the mails addressed as specified above, and (iii) if
given by other means, when delivered at the address specified above, except
that Written Notices to the Liquidity Provider pursuant to the provisions of
Articles II and III shall not be effective until received by the Liquidity
Provider. A copy of all notices delivered hereunder to either party shall in
addition be delivered to each of the parties to the Participation Agreements at
their respective addresses set forth therein.
Section 7.03 No Waiver; Remedies. No failure on the
part of the Liquidity Provider to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under this Agreement preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
Section 7.04 Further Assurances. The Borrower agrees
to do such further acts and things and to execute and deliver to the Liquidity
Provider such additional assignments, agreements, powers and instruments as the
Liquidity Provider may reasonably require or deem advisable to carry into
effect the purposes of this Agreement and the other Operative Agreements or to
better assure and confirm unto the Liquidity Provider its rights, powers and
remedies hereunder and under the other Operative Agreements.
Section 7.05 Indemnification; Survival of Certain
Provisions. The Liquidity Provider shall be indemnified hereunder to the
extent and in the manner described in Section 7(c) of the Leased Aircraft
Participation Agreement and Section 5(b) of the Owned Participation Agreement.
In addition, the Borrower agrees to indemnify, protect, defend and hold
harmless the Liquidity Provider from, against and in respect of, and shall pay
on demand, all Expenses of any kind or nature whatsoever that may be imposed,
incurred by or asserted against any Liquidity Indemnitee, in any way relating
to, resulting from, or arising out of or in connection with any action, suit or
proceeding by any third party against such Liquidity Indemnitee and relating to
this Agreement, the Intercreditor Agreement, the Fee Letter, the Intercreditor
Agreement or any Participation Agreement; provided, however, that the Borrower
shall not be required to indemnify, protect, defend and hold harmless any
Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee to
the extent such Expense is (i) attributable to the
19
<PAGE> 24
gross negligence or willful misconduct of such Liquidity Indemnitee or any
other Liquidity Indemnitee, (ii) ordinary and usual operating overhead expense
or (iii) attributable to the failure by such Liquidity Indemnitee or any other
Liquidity Indemnitee to perform or observe any agreement, covenant or condition
on its part to be performed or observed in this Agreement, the Intercreditor
Agreement, the Fee Letter or any other Operative Agreement to which it is a
party. The provisions of Sections 3.01, 3.02, 3.03, 3.09 7.05 and 7.07 shall
survive the termination of this Agreement.
Section 7.06 Liability of the Liquidity Provider. (a)
Neither the Liquidity Provider nor any of its officers or directors shall be
liable or responsible for: (i) the use which may be made of the Advances or any
acts or omissions of the Borrower or any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; or
(iii) the making of Advances by the Liquidity Provider against delivery of a
Notice of Borrowing and other documents which do not comply with the terms
hereof; provided, however, that the Borrower shall have a claim against the
Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower,
to the extent of any damages suffered by the Borrower which were the result of
(A) the Liquidity Provider's willful misconduct or negligence (except to the
extent that such conduct would otherwise be indemnified pursuant to Section
7.05, in which case gross negligence shall apply) in determining whether
documents presented hereunder comply with the terms hereof, or (B) any breach
by the Liquidity Provider of any of the terms of this Agreement, including, but
not limited to, the Liquidity Provider's failure to make lawful payment
hereunder after the delivery to it by the Borrower of a Notice of Borrowing
complying with the terms and conditions hereof.
(b) Neither the Liquidity Provider nor any of its
officers, employees, directors or Affiliates shall be liable or responsible in
any respect for (i) any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with this Agreement or any Notice of Borrowing delivered hereunder,
or (ii) any action, inaction or omission which may be taken by it in good
faith, absent willful misconduct or negligence (except to the extent that such
conduct would otherwise be indemnified pursuant to Section 7.05, in which case
gross negligence shall apply) (in which event the extent of the Liquidity
Provider's potential liability to the Borrower shall be limited as set forth in
the preceding paragraph), in connection with this Agreement or any Notice of
Borrowing.
Section 7.07 Costs, Expenses and Taxes. The Borrower
agrees to pay, or cause to be paid (A) on the Effective Date and on such later
date or dates on which the Liquidity Provider shall make demand, all reasonable
out-of-pocket costs and expenses of the Liquidity Provider in connection with
the preparation, negotiation, execution, delivery, filing and recording of this
Agreement, any other Operative Agreement and any other documents which may be
delivered in connection with this Agreement, including, without limitation, the
reasonable fees and expenses of outside counsel for the Liquidity Provider and
(B) on demand, all reasonable costs and expenses of the Liquidity Provider
(including reasonable counsel fees and expenses) in connection with (i) the
enforcement of this Agreement or any other Operative Agreement, (ii) the
modification or amendment of, or supplement to, this Agreement or any other
Operative Agreement or such other documents which may be delivered in
connection herewith or therewith
20
<PAGE> 25
(whether or not the same shall become effective) or (iii) any action or
proceeding relating to any order, injunction, or other process or decree
restraining or seeking to restrain the Liquidity Provider from paying any
amount under this Agreement, the Intercreditor Agreement or any other Operative
Document or otherwise affecting the application of funds in the Cash Collateral
Accounts. In addition, the Borrower shall pay any and all recording, stamp and
other similar taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement any other
Operative Agreement and such other documents, and agrees to save the Liquidity
Provider harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
Section 7.08 Binding Effect; Participations. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower
and the Liquidity Provider and their respective successors and assigns, except
that neither the Liquidity Provider (except as otherwise provided in this
Section 7.08) nor the Borrower shall have the right to assign its rights
hereunder or any interest herein without the prior written consent of the other
party, subject to the requirements of Section 7.08(b). The Liquidity Provider
may grant participations herein or in any of its rights or security hereunder
and under the other Operative Agreements to such Persons as the Liquidity
Provider may in its sole discretion select, subject to the requirements of
Section 7.08(b). No such participation by the Liquidity Provider, however,
shall relieve the Liquidity Provider of its obligations hereunder. In
connection with any participation or any proposed participation, the Liquidity
Provider may disclose to the participant or the proposed participant any
information that the Borrower is required to deliver or to disclose to the
Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and
agrees that the Liquidity Provider's source of funds may derive in part from
its participants. Accordingly, references in this Agreement and the other
Operative Agreements to determinations, reserve and capital adequacy
requirements, increased costs, reduced receipts and the like as they pertain to
the Liquidity Provider shall be deemed also to include those of each of its
participants (subject, in each case, to the maximum amount that would have been
incurred by or attributable to the Liquidity Provider directly if the Liquidity
Provider, rather than the participant, had held the interest participated).
(b) If, pursuant to Section 7.08(a) above, the Liquidity
Provider sells any participation in this Agreement to any bank or other entity
(each, a "Participating Institution"), then, concurrently with the
effectiveness of such participation, the Participating Institution shall (i)
represent to the Liquidity Provider (for the benefit of the Liquidity Provider
and the Borrower) either (A) that it is incorporated under the laws of the
United States or a state thereof or (B) that under applicable law and treaties,
no taxes shall be required to be withheld by the Borrower or the Liquidity
Provider with respect to any payments to be made to such Participating
Institution in respect of this Agreement, (ii) furnish to the Liquidity
Provider and the Borrower either (x) a statement that it is incorporated under
the laws of the United States or a state thereof or (y) if it is not so
incorporated, two copies of a properly completed United States Internal Revenue
Service Form 4224 or Form 1001, as appropriate, or other applicable form,
certificate or document prescribed by the Internal Revenue Service certifying,
in each case, such Participating Institution's entitlement to a complete
exemption from United States federal withholding tax in respect to any and all
payments to be made hereunder, and (iii) agree (for the benefit of the
Liquidity Provider and the Borrower) to provide the Liquidity Provider and the
Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the
date that any such form expires
21
<PAGE> 26
or becomes obsolete or (B) after the occurrence of any event requiring a change
in the most recent form previously delivered by it and prior to the immediately
following due date of any payment by the Borrower hereunder, certifying in the
case of a Form 1001 or Form 4224 that such Participating Institution is
entitled to a complete exemption from United States federal withholding tax on
payments under this Agreement. Unless the Borrower has received forms or other
documents reasonably satisfactory to it (and required by applicable law) from
the Participating Institution indicating that payments hereunder are not
subject to United States federal withholding tax, the Borrower shall withhold
taxes as required by law from such payments at the applicable statutory rate
without any obligation to make additional payments under Section 3.03.
(c) Notwithstanding the other provisions of this Section
7.08, the Liquidity Provider may assign and pledge all or any portion of the
Advances owing to it to any Federal Reserve Bank or the United States Treasury
as collateral security pursuant to Regulation A of the Board of Governors of
the Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank, provided that any payment in respect of such assigned Advances
made by the Borrower to the Liquidity Provider in accordance with the terms of
this Agreement shall satisfy the Borrower's obligations hereunder in respect
of such assigned Advance to the extent of such payment. No such assignment
shall release the Liquidity Provider from its obligations hereunder.
Section 7.09 Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating
the remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 7.11 Submission to Jurisdiction; Waiver of
Jury Trial; Waiver of Immunity.
(a) Each of the parties hereto hereby irrevocably
and unconditionally:
(i) submits for itself and its property
in any legal action or proceeding relating to this Agreement
or any other Operative Agreement, or for recognition and
enforcement of any judgment in respect hereof or thereof, to
the non-exclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America
for the Southern District of New York, and the appellate
courts from any thereof;
22
<PAGE> 27
(ii) consents that any such
action or proceeding may be brought in such courts, and waives
any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(iii) agrees that service of
process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any
substantially similar form and mail), postage prepaid, to each
party hereto at its address set forth in Section 7.02, or at
such other address of which the Liquidity Provider shall have
been notified pursuant thereto; and
(iv) agrees that nothing herein
shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue
in any other jurisdiction.
(b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. The Borrower and the Liquidity Provider each warrant and
represent that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
(c) The Liquidity Provider hereby waives any
immunity it may have from the jurisdiction of the courts of the United States
or of any State and waives any immunity any of its properties located in the
United States may have from attachment or execution upon a judgment entered by
any such court under the United States Foreign Sovereign Immunities Act of 1976
or any similar successor legislation.
Section 7.12 Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
Section 7.13 Entirety. This Agreement and the other
Operative Agreements constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior understandings
and agreements of such parties.
23
<PAGE> 28
Section 7.14 Headings. Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE
ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF
THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO
DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL
BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
24
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first set forth above.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Subordination Agent and Trustee, as Borrower
By: /s/ C. SCOTT NIELSEN
----------------------------------------
Name: C. Scott Nielsen
Title: Vice President
REVOLVING CREDIT AGREEMENT
UNITED AIR LINES 1997-1B
S-1 PASS THROUGH TRUST
<PAGE> 30
KREDITANSTALT FUR
WIEDERAUFBAU,
as Liquidity Provider
By: /s/ DR. CHRISTIAN STAAB
------------------------------
Name: Dr. Christian Staab
Title: VP
By: /s/ WOLFGANG BEHLER
------------------------------
Name: Wolfgang Behler
Title: Senior Project Manager
REVOLVING CREDIT AGREEMENT
UNITED AIR LINES 1997-1B
S-2 PASS THROUGH TRUST
<PAGE> 31
Annex I to
Revolving Credit Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau
(the "Liquidity Provider"), with reference to the Revolving Credit Agreement,
dated as of December 23, 1997, between the Borrower and the Liquidity Provider
(the "Liquidity Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Subordination Agent under
the Intercreditor Agreement.
(2) The Borrower is delivering this Notice of
Borrowing for the making of an Interest Advance by the Liquidity
Provider to be used for the payment of interest on the Class B
Certificates which was payable on _____________________ in accordance
with the terms and provisions of the Class B Trust Agreement and the
Class B Certificates pursuant to clause sixth of Section 3.2 of the
Intercreditor Agreement or clause eighth of Section 3.3 of the
Intercreditor Agreement, which Advance is requested to be made on
_______________.
(3) The amount of the Interest Advance requested hereby
(i) is $__________, to be applied in respect of the payment of
interest which was due and payable on the Class A Certificates on such
Distribution Date, (ii) does not include any amount with respect to
the payment of principal of, or Additional Payments on, the Class A
Certificates, the Class B Certificates, the Class C Certificates or
the Class D Certificates, or interest on the Class A Certificates, the
Class C Certificates or the Class D Certificates, (iii) was computed
in accordance with the provisions of the Class B Certificates, the
Class B Trust Agreement and the Intercreditor Agreement (a copy of
which computation is attached hereto as Schedule I), (iv) does not
exceed the Interest Period Available Amount on the date hereof, and
(v) has not been and is not the subject of a prior or contemporaneous
Notice of Borrowing.
(4) Upon receipt by or on behalf of the Borrower of the
amount requested hereby, (a) the Borrower shall apply the same in
accordance with the terms of Section 3.2 or 3.3 of the Intercreditor
Agreement, as the case may be, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of
such amount until so applied shall be commingled with other funds held
by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, the making of the Interest Advance as requested by this Notice of
Borrowing shall automatically reduce, subject to reinstatement in accordance
with the terms of the Liquidity Agreement, the Available Commitment by an
amount equal to the amount of the Interest Advance requested to be made hereby
as set forth in clause (i) of paragraph (3) of this Certificate and such
reduction shall
<PAGE> 32
automatically result in corresponding reductions in the amounts available to be
borrowed pursuant to a subsequent Advance.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ____ day of ____________, ___.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Subordination Agent, as Borrower
By:
-----------------------------------------------
Name:
Title:
I-2
<PAGE> 33
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Interest
Advance Notice of Borrowing]
<PAGE> 34
Annex II to
Revolving Credit Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "Borrower"), hereby certifies to Kreditanstalt fur Wiederaufbau
(the "Liquidity Provider"), with reference to the Revolving Credit Agreement
dated as of December 23, 1997, between the Borrower and the Liquidity Provider
(the "Liquidity Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(2) The Borrower is delivering this Notice of Borrowing
for the making of the Downgrade Advance by the Liquidity Provider to
be used for the funding of the Class B Cash Collateral Account in
accordance with Section 3.6(c) of the Intercreditor Agreement by
reason of the downgrading of the long-term unsecured debt rating of
the Liquidity Provider issued by either Rating Agency below the
Threshold Rating, which Advance is requested to be made on __________.
(3) The amount of the Downgrade Advance requested hereby
(i) is $________, which equals the Remaining Commitment Amount on the
date hereof and is to be applied in respect of the funding of the
Class B Cash Collateral Account in accordance with Section 3.6(c) of
the Intercreditor Agreement, (ii) does not include any amount with
respect to the payment of principal of, or Additional Payments on, the
Class B Certificates, or principal of or interest or Additional
Payments on, the Class A Certificates, the Class C Certificates or the
Class D Certificates, (iii) was computed in accordance with the
provisions of the Class B Certificates, the Class B Trust Agreement
and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule 1), and (iv) has not been and is not the
subject of a prior or contemporaneous Notice of Borrowing under the
Liquidity Agreement.
(4) Upon receipt by or on behalf of the Borrower of the
amount requested hereby, (a) the Borrower shall deposit such amount in
the Class B Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(c) of the Intercreditor Agreement, (b)
no portion of such amount shall be applied by the Borrower for any
other purpose and (c) no portion of such amount until so applied shall
be commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Downgrade Advance as requested by
this Notice of Borrowing shall automatically and irrevocably terminate the
obligation of the Liquidity
<PAGE> 35
Provider to make further Advances under the Liquidity Agreement; and (B)
following the making by the Liquidity Provider of the Downgrade Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered
this Notice of Borrowing as of the _____ day of _________, _____.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Subordination Agent, as Borrower
By:
----------------------------------------------
Name:
Title:
II-2
<PAGE> 36
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Downgrade Advance Notice of Borrowing]
<PAGE> 37
Annex III to
Revolving Credit Agreement
FINAL ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the
undersigned borrower (the "Borrower"), hereby certifies to Kreditanstalt fur
Wiederaufbau (the "Liquidity Provider"), with reference to the Revolving Credit
Agreement, dated as of December 23, 1997, between the Borrower and the
Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined or
referenced), that:
(1) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(2) The Borrower is delivering this Notice of Borrowing
for the making of the Final Advance by the Liquidity Provider to be
used for the funding of the Class B Cash Collateral Account in
accordance with Section 3.6(i) of the Intercreditor Agreement by
reason of the receipt by the Borrower of a Termination Notice from the
Liquidity Provider with respect to the Liquidity Agreement, which
Advance is requested to be made on _______________.
(3) The amount of the Final Advance requested hereby (i)
is $______, which equals the Remaining Commitment Amount on the date
hereof and is to be applied in respect of the funding of the Class B
Cash Collateral Account in accordance with Section 3.6(i) of the
Intercreditor Agreement upon receipt by the Borrower of a Termination
Notice from the Liquidity Provider in respect of the Liquidity
Agreement, (ii) does not include any amount with respect to the
payment of principal of, or Additional Payments on, the Class B
Certificates, or principal of, or interest or Additional Payments on,
the Class A Certificates, the Class C Certificates or the Class D
Certificates, (iii) was computed in accordance with the provisions of
the Class B Certificates, the Class B Trust Agreement and the
Intercreditor Agreement (a copy of which computation is attached
hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Borrower of the
amount requested hereby, (a) the Borrower shall deposit such amount in
the Class B Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(i) of the Intercreditor Agreement, (b)
no portion of such amount shall be applied by the Borrower for any
other purpose and (c) no portion of such amount until so applied shall
be commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Final Advance as requested by this
Notice of Borrowing shall
<PAGE> 38
automatically and irrevocably terminate the obligation of the Liquidity
Provider to make further Advances under the Liquidity Agreement; and (B)
following the making by the Liquidity Provider of the Final Advance requested
by this Notice of Borrowing, the Borrower shall not be entitled to request any
further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered
this Notice of Borrowing as of the _____ day of ___________, _____.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but solely
as Subordination Agent, as Borrower
By:
---------------------------------------
Name:
Title:
III-2
<PAGE> 39
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Final Advance Notice of Borrowing]
<PAGE> 40
Annex IV to
Revolving Credit Agreement
NOTICE OF TERMINATION
[Date]
First Security Bank, National Association,
as Subordination Agent, as Borrower
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Revolving Credit Agreement, dated as of December 23, 1997, between First
Security Bank, National Association, as Subordination Agent, as
agent and trustee for the United Airlines 1997-1B Pass
Through Trust, as Borrower, and Kreditanstalt fur
Wiederaufbau (the "Liquidity Agreement")
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
You are hereby notified that pursuant to Section 6.01 of the
Liquidity Agreement, by reason of the occurrence of a Liquidity Event of
Default and a Performing Note Deficiency (each as defined therein), we are
giving this notice to you in order to cause (i) our obligations to make
Advances (as defined therein) under such Liquidity Agreement to terminate on
the fifth Business Day after the date on which you receive this notice and (ii)
you to request a Final Advance under the Liquidity Agreement pursuant to
Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity
Agreement) as a consequence of your receipt of this notice.
THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER
THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY
AGREEMENT SHALL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE THIS NOTICE.
Very truly yours,
KREDITANSTALT FUR WIEDERAUFBAU,
as Liquidity Provider
By:
---------------------------------------
Name:
Title:
cc: First Security Bank, National Association,
as Trustee
<PAGE> 41
Annex V to
Revolving Credit Agreement
NOTICE OF REPLACEMENT BORROWER
[Date]
Attention:
Revolving Credit Agreement, dated as of December 23, 1997,
between First Security Bank, National Association as
Subordination Agent, as agent and trustee for the
United Airlines 1997-1B Pass Through Trust, as
Borrower, and Kreditanstalt fur Wiederaufbau
(the "Liquidity Agreement")
Ladies and Gentlemen:
For value received, the undersigned hereby irrevocably transfers to:
----------------------------------
[Name of Transferee]
----------------------------------
[Address of Transferee]
all rights of the undersigned as Borrower under the Liquidity Agreement
referred to above. The transferee has succeeded the undersigned as
Subordination Agent under the Intercreditor Agreement referred to in the first
paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of
the Intercreditor Agreement.
By this transfer, all rights of the undersigned as Borrower
under the Liquidity Agreement are transferred to the transferee and the
transferee shall hereafter have the sole rights as Borrower thereunder. The
undersigned shall pay any costs and expenses of such transfer, including, but
not limited to, transfer taxes or governmental charges.
We ask that this transfer be effective as of __________, ____.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but solely
as Subordination Agent, as Borrower
By:
-----------------------------------
Name:
Title:
VI-2
<PAGE> 1
Exhibit 4.8
(MULTICURRENCY-CROSS BORDER)
ISDA
International Swaps & Derivatives Association, Inc.
MASTER AGREEMENT
dated as of 23rd December 1997
CREDIT SUISSE FINANCIAL PRODUCTS and UNITED AIR LINES, INC. have entered
and/or anticipate entering into one or more transactions (each a "Transaction")
that are or will be governed by this Master Agreement, which includes the
schedule (the "Schedule"), and the documents and other confirming evidence
(each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant
Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
Copyright(c) 1992 by International Swaps & Derivatives Association, Inc.
<PAGE> 2
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to
which such change applies unless such other party gives timely notice of a
reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to
make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been
payable by one party exceeds the aggregate amount that would otherwise have
been payable by the other party, replaced by an obligation upon the party by
whom the larger aggregate amount would have been payable to pay to the other
party the excess of the larger aggregate amount over the smaller aggregate
amount.
The parties may elect in respect of two or more Transactions that a net
amount will be determined in respect of all amounts payable on the same date
in the same currency in respect of such Transactions, regardless of whether
such amounts are payable in respect of the same Transaction. The election
may be made in the Schedule or a Confirmation by specifying that
subparagraph (ii) above will not apply to the Transactions identified as
being subject to the election, together with the starting date (in which
case subparagraph (ii) above will not, or will cease to, apply to such
Transactions from such date). This election may be made separately for
different groups of Transactions and will apply separately to each pairing of
Offices through which the parties make and receive payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted
or withheld from any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date
on which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this
Agreement) or (II) a Change in Tax Law.
2
<PAGE> 3
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make any
deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount of
such liability (including any related liability for interest, but including
any related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation
will, to the extent permitted by law and subject to Section 6(c), be required
to pay interest (before as well as after judgment) on the overdue amount to the
other party on demand in the same currency as such overdue amount, for the
period from (and including) the original due date for payment to (but
excluding) the date of actual payment, at the Default Rate. Such interest will
be calculated on the basis of daily compounding and the actual number of days
elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in
the performance of any obligation required to be settled by delivery, it will
compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be
deemed to be repeated by each party on each date on which a Transaction is
entered into and, in the case of the representations in Section 3(f), at all
times until the termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it, any
provision of its constitutional documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets
or any contractual restriction binding on or affecting it or any of its
assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
3
<PAGE> 4
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a
result of its entering into or performing its obligations under this Agreement
or any Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency
or official or any arbitrator that is likely to affect the legality, validity
or enforceability against it of this Agreement or any Credit Support Document
to which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of the
date of the information, true, accurate and complete in every material
respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of such
demand), with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be executed and
to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section ll, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated,
4
<PAGE> 5
organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this
Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other
party against any Stamp Tax levied or imposed upon the other party or in
respect of the other party's execution or performance of this Agreement by any
such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with
respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each Transaction
to which such Credit Support Document relates without the written
consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
5
<PAGE> 6
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on the
due date thereof in an aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments (after giving effect
to any applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant
to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets;
(7) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration
or other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within 30 days thereafter; (8) causes or
is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to any
of the events specified in clauses (1) to (7) (inclusive); or (9)
takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
6
<PAGE> 7
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into, or
due to the promulgation of, or any change in, the interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or
such Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to pay
an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party such party ("X"), any
Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers all
or substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will not
constitute an Event of Default.
7
<PAGE> 8
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions. If,
however, "Automatic Early Termination" is specified in the Schedule as applying
to a party, then an Early Termination Date in respect of all outstanding
Transactions will occur immediately upon the occurrence with respect to such
party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6)
or, to the extent analogous thereto, (8), and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence with respect to such party of an Event of
Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,
(8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party
is the Affected Party, the Affected Party will, as a condition to its right
to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will
give notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)( 1 ) or
a Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax
Event Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a Credit
Event Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then
8
<PAGE> 9
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section 2(a)(i)
or 2(e) in respect of the Terminated Transactions will be required to be
made, but without prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event
of Default:--
(1) First Method and Marker Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over
(B) the Termination Currency Equivalent of the Unpaid Amounts owing
to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the sum
of the Settlement Amount (determined by the
9
<PAGE> 10
Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Termination Currency Equivalent
of the Unpaid Amounts owing to the Defaulting Party. If that amount
is a positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the Defaulting
Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) ONE AFFECTED PARTY. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the Transactions
are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with the
higher Settlement Amount ("X") and the Settlement Amount of the
party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions
are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise provided in
this Agreement neither party will be entitled to recover any additional damages
as a consequence of such losses.
10
<PAGE> 11
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of
the other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be
void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered
into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts payable in respect of this Agreement. If for any reason the
amount in the Contractual Currency so received falls short of the amount in
the Contractual Currency payable in respect of this Agreement, the party
required to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual
Currency payable in respect of this Agreement, the party receiving the payment
will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party
is entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid
in such other currency if such shortfall or such excess arises or results from
any variation between the rate of exchange at which the Contractual Currency
is converted into the currency of the judgment or order for the purposes of
such judgment or order and the rate of exchange at which such party is able,
acting in a reasonable manner and in good faith in converting the currency
received into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation, any
premiums and costs of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
11
<PAGE> 12
9. MISCELLANEOUS
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced
by a facsimile transmission) and executed by each of the parties or confirmed
by an exchange of telexes or electronic messages on an electronic messaging
system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive
the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of
booking office or jurisdiction of incorporation or organisation of such
party, the obligations of such party are the same as if it had entered into
the Transaction through its head or home office. This representation will be
deemed to be repeated by such party on each date on which a Transaction is
entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including legal
fees and Stamp Tax, incurred by such other party by reason of the enforcement
and protection of its rights under this Agreement or any Credit Support
Document
12
<PAGE> 13
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(c) GOVERNING LAB. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the
Civil Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to
service of process given in the manner provided for notices in Section 12.
Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues
and assets (irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of
any judgment to which it or its revenues or assets might otherwise be
entitled in any Proceedings in the courts of any jurisdiction and irrevocably
agrees, to the extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b)
with respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of
the entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after
the date on which the relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified
as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
<PAGE> 15
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed
in respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"LAW " includes any treaty, law, rule or regulation (as modified, in the case
of tax matters, by the practice of any relevant governmental revenue authority)
and "lawful" and "unlawful" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and
foreign currency deposits) (a) in relation to any obligation under Section
2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so
specified, as otherwise agreed by the parties in writing or determined pursuant
to provisions contained, or incorporated by reference, in this Agreement, (b)
in relation to any other payment, in the place where the relevant account is
located and, if different, in the principal financial centre, if any, of the
currency of such payment, (c) in relation to any notice or other communication,
including notice contemplated under Section 5(a)(i), in the city specified in
the address for notice provided by the recipient and, in the case of a notice
contemplated by Section 2(b), in the place where the relevant new account is to
be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations
for performance with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating, liquidating,
obtaining or reestablishing any hedge or related trading position (or any gain
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 11. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition
precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for the
occurrence of the relevant Early Termination Date, have
15
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is
to be included. The Replacement Transaction would be subject to such
documentation as such party and the Reference Market-maker may, in good faith,
agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time
zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if
more than one quotation has the same highest value or lowest value, then one
of such quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of such
Terminated Transaction or group of Terminated Transactions cannot be
determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head
or home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention
or withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or
imposed on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not
(in the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16
<PAGE> 17
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any Transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of
such party or any applicable Specified Entity of such party) and the other
party to this Agreement (or any Credit Support Provider of such other party or
any applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction, cross-currency
rate swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions), (b) any
combination of these transactions and (c) any other transaction identified as a
Specified Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Agreement other than a stamp, registration,
documentation or similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination
Date (a) if resulting from a Termination Event, all Affected Transactions and
(b) if resulting from an Event of Default, all Transactions (in either case) in
effect immediately before the effectiveness of the notice designating that
Early Termination Date (or, if "Automatic Early Termination" applies,
immediately before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount
denominated in the Termination Currency, such Termination Currency amount and,
in respect of any amount denominated in a currency other than the Termination
Currency (the "Other Currency"), the amount in the Termination Currency
determined by the party making the relevant determination as being required to
purchase such amount of such Other Currency as at the relevant Early
Termination Date, or, if the relevant Market Quotation or Loss (as the case may
be), is determined as of a later date, that later date, with the Termination
Currency at the rate equal to the spot exchange rate of the foreign exchange
agent (selected as provided below) for the purchase of such Other Currency with
the Termination Currency at or about 11:00 a.m. (in the city in which such
foreign exchange agent is located) on such date as would be customary for the
determination of such a rate for the purchase of such Other Currency for value
on the relevant Early Termination Date or that later date. The foreign exchange
agent will, if only one party is obliged to make a determination under Section
6(e), be selected in good faith by that party and otherwise will be agreed by
the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon
Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of
the cost (without proof or evidence of any actual cost) to each party (as
certified by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under
Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to such party on or prior to such Early
Termination Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market
17
<PAGE> 18
value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding)
such Early Termination Date, at the Applicable Rate. Such amounts of interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CREDIT SUISSE FINANCIAL PRODUCTS UNITED AIR LINES, INC.
- -------------------------------- -----------------------------------------
(Name of Party) (Name of Party)
By: /s/ Jeanette Whomersley By:
---------------------------- --------------------------------------
Name: Jeanette Whomersley Name:
Title: Vice President Title:
Date: Date:
By: /s/ Antony C. Blunden
----------------------------
Name: Antony C. Blunden
Title: Director of Compliance Department
Date:
18
<PAGE> 19
value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding)
such Early Termination Date, at the Applicable Rate. Such amounts of interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CREDIT SUISSE FINANCIAL PRODUCTS UNITED AIR LINES, INC.
- -------------------------------- -----------------------------------------
(Name of Party) (Name of Party)
By: By: /s/ Thomas A. Mutryn
---------------------------- --------------------------------------
Name: Name: Thomas A. Mutryn
Title: Title: Vice President and Treasurer
Date: Date:
18
<PAGE> 20
SCHEDULE
to the
MASTER AGREEMENT
dated as of 23 December 1997
between
CREDIT SUISSE FINANCIAL PRODUCTS, an AND UNITED AIR LINES, INC., a
unlimited company incorporated under corporation incorporated under
the laws of England and Wales the laws of Delaware,
("CSFP") ("UA")
PART 1
TERMINATION PROVISIONS
In this Agreement:
(A) SPECIFIED ENTITY. No entity shall be a "Specified Entity" with respect to
CSFP or UA.
(B) SPECIFIED TRANSACTION. Specified Transaction will have the meaning
specified in Section 14.
(C) CROSS DEFAULT. The "Cross Default" provision (Section 5(a)(vi)) will not
apply to UA and will apply to CSFP.
(D) CREDIT EVENT UPON MERGER. The "Credit Event Upon Merger" provisions of
Section 5(b)(iv) will not apply to UA and will apply to CSFP.
(E) AUTOMATIC EARLY TERMINATION. The "Automatic Early Termination" provision
of Section 6(a) will not apply.
(F) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e), the Second
Method and Market Quotation will apply.
(G) TERMINATION CURRENCY. "Termination Currency" means United States Dollars.
(H) ADDITIONAL TERMINATION EVENT. Additional Termination Event will not apply
except as set forth in any Confirmation.
<PAGE> 21
PART 2
TAX REPRESENTATIONS
(A) PAYER TAX REPRESENTATIONS. For the purpose of Section 3(e), CSFP and UA
each make the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e)) to be
made by it to the other party under this Agreement. In making this
representation, it may rely on:
(i) the accuracy of any representation made by the other party pursuant
to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained in
Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of
any document provided by the other party pursuant to Section 4(a)(i)
or 4(a)(iii); and
provided that it shall not be a breach of this representation where
reliance is placed on clause (ii), and the other party does not deliver a
form or document under Section 4(a)(iii) by reason of material prejudice to
its legal or commercial position.
(B) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f),
(i) CSFP represents that (A) it is entering into each Transaction
in the ordinary course of its trade as, and is, a recognized U.K.
bank and (B) it will bring into account payments made and received
in respect of each Transaction in computing its income for United
Kingdom tax purposes.
(ii) UA represents that it is a corporation created or organized under the
laws of the State of Delaware.
2
<PAGE> 22
PART 3
AGREEMENT TO DELIVER DOCUMENTS
Each party agrees to deliver the following documents as applicable:
(a) For the purpose of Section 4(a)(i), tax forms, documents or certificates
to be delivered are:
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE
DELIVER DOCUMENTS CERTIFICATE DELIVERED
<S> <C> <C>
CSFP Duly executed IRS Upon execution of this
Form W-8 Agreement
</TABLE>
(b) For the purpose of Section 4(a)(ii), other documents to be delivered are:
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION 3(D)
DELIVER DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
<S> <C> <C> <C>
CSFP and UA Evidence reasonably Upon execution of this Yes
satisfactory to the Agreement and, if
other party as to the requested, upon
names, true signatures execution of any
and authority of the Confirmation.
officer or officials
signing this Agreement
or any Confirmation on
its behalf
UA A copy of the most Upon request, promptly Yes
recent Form 10-Q and after such reports
Form 10-K filed by UA become publicly
available
CSFP A copy of the annual Upon request, promptly Yes
report for CSFP after such reports
containing audited or become publicly
certified financial available
statements for the most
recently ended
financial year
UA Opinion of counsel to Upon execution of this No
UA in form and Agreement
substance satisfactory
to CSFP.
</TABLE>
3
<PAGE> 23
PART 4
MISCELLANEOUS
(A) ADDRESSES FOR NOTICES. For the purpose of Section 12(a):
(i) (1) Address for notices or communications to CSFP (other than by
facsimile):
Office: London Attention: (1) Global Risk Manager;
Address: One Cabot Square (2) Director - Operations
London E14 4QJ Department;
England (3) Director - Legal Department
Telex No.: 264521 Answerback: CSFINP G
with a copy to:
CSFP Capital Inc.
Eleven Madison Avenue
New York, NY 10010
Attention: Head Structured Options Trader
(For all purposes.)
(2) For the purposes of facsimile notices or communications under this
Agreement (other than a notice or communication under Section 5 or 6):
Facsimile No.: 44 171 516 2686
Attention: Director - Legal Department
Telephone number for oral confirmation of receipt of facsimile in legible
form: 44 171 888 2028 Designated responsible employee for the purposes of
Section 12(a)(iii): Senior Legal Secretary
(ii) Address for notices or communications to UA:
Address: United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove, Illinois 60007
Attention: Vice-President and Treasurer
Telephone No.: 847 700 4849
Facsimile No.: 847 700 7117
(For all purposes.)
(B) PROCESS AGENT. For the purpose of Section 13(c):
CSFP appoints CSFP Capital, Inc., Eleven Madison Avenue, New York, New York
10010 as its Process Agent.
(C) OFFICES. The provisions of Section 10(a) will apply to this
Agreement.
(D) MULTIBRANCH PARTY. For the purpose of Section 10(c):
4
<PAGE> 24
CSFP is not a Multibranch Party.
FSB is not a Multibranch Party.
(E) CALCULATION AGENT. The Calculation Agent is CSFP, unless otherwise
agreed in a Confirmation in relation to the relevant Transaction, and unless an
Event of Default with respect to CSFP has occurred and is continuing, in which
case UA may appoint at its own expense one of the following five entities as
Calculation Agent: The Chase Manhattan Bank, Morgan Guaranty Trust Company,
Merrill Lynch Capital Services, Bankers Trust Company, or Citibank, N.A..
(F) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document: The
Credit Support Annex appended hereto.
(G) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to CSFP: None.
Credit Support Provider means in relation to UA: None.
(H) GOVERNING LAW. This Agreement and each Confirmation will be
governed by and construed in accordance with the laws of the State of New York
without reference to choice of law doctrine.
(I) NETTING OF PAYMENTS. Section 2(c)(ii) of this Agreement will apply.
(J) AFFILIATE. Affiliate will have the meaning specified in Section 14.
5
<PAGE> 25
PART 5
OTHER PROVISIONS
(A) DEFINITIONS. Unless otherwise specified in a Confirmation, this Agreement
and each Transaction between the parties are subject to the 1991 ISDA
Definitions as published by the International Swap Dealers Association, Inc.
(the "Definitions"), and will be governed in all relevant respects by the
provisions set forth in the Definitions, without regard to any amendment to the
Definitions subsequent to the date hereof. The provisions of the Definitions
are incorporated by reference in and shall be deemed a part of this Agreement,
except that references in the Definitions to a "Swap Transaction" shall be
deemed references to a "Transaction" for purposes of this Agreement. In the
event of any inconsistency between the provisions of this Agreement and the
Definitions, this Agreement will prevail.
(B) CONFIRMATIONS. Each Confirmation shall be substantially in the form of one
of the Exhibits to the Definitions or in such other form as the parties may
agree.
(C) INDEPENDENT RELIANCE. Except as provided in Section 3 of this Agreement,
each of CSFP and UA represents to the other that it is entering into this
Agreement and will enter into each Transaction in reliance upon such tax,
accounting, regulatory, legal, and financial advice as it deems necessary and
not upon any view expressed by the other.
(D) NEGATIVE INTEREST RATES. "Swap Transaction" means, for the purposes of
this provision concerning negative interest rates, a rate exchange or swap
transaction or swaptions where the underlying and /or Related Transaction is a
rate exchange or swap transaction, including transactions involving two or more
currencies.
CSFP and UA agree that:
(i) if, with respect to a Calculation Period for a Swap Transaction, a
party ("X") is obligated to pay a Floating Amount that is a negative
number (either by reason of a negative Floating Rate or the
subtraction of a Spread from the Floating Rate), the Floating Amount
with respect to X for that Calculation Period will be deemed to be
zero, and the other party ("Y") will pay to X the absolute value of
the negative Floating Amount, in addition to any amounts otherwise
owned by Y to X, on the Payment Date such Floating Amount would have
been a positive number. Any amounts paid by Y to X pursuant to this
provision will be paid to such account as X may designate (unless Y
gives timely notice of a reasonable objection to such disignation) in
the currency in which that Floating Amount would have been paid if it
had been a positive number (and without regard to the currency in
which Y is otherwise obligated to make payments).
(ii) if with respect to one or more Compounding Periods for a Swap
Transaction for which "Compounding" or "Flat Compounding" is specified
to be applicable, the Compounding Period Amount, the Basic Compounding
Period Amount or the Additional Compounding Period Amount is a
negative number (either by reason of a negative Floating Rate or by
the subtraction of a Spread from the Floating Rate), then the Floating
Amount for the Calculation Period in which that Compounding Period or
those Compounding Periods occur will be either the sum of all the
Compounding Period Amounts, or the sum of all Basic Compounding Period
Amounts and all Additional Compounding Period Amounts in that
Calculation Period (whether positive or negative). If such sum is a
negative number, subparagraph (i) of this provision shall apply in
respect of such Floating Amount.
6
<PAGE> 26
(E) CONDITIONS PRECEDENT. The condition precedent set forth in Section
2(a)(iii)(1) of this Agreement shall not apply to payments or deliveries
scheduled to be made by a party pursuant to Section 2(a)(i) of this Agreement
at a time when the other party has no further payment or delivery obligations
(whether absolute or contingent) under this Agreement.
(F) EARLY TERMINATION. Notwithstanding the terms of Sections 5 and 6 of this
Agreement, if at any time and so long as one of the parties to this Agreement
("X") shall have satisfied in full all of its payment obligations under Section
2(a)(i) of this Agreement and shall at the time have no future payment
obligations, whether absolute or contingent, under such Section, then unless
the other party ("Y") is required pursuant to appropriate proceedings to return
to X or otherwise returns to X upon demand of X any portion of any payment
theretofore made by or on behalf of X to Y, (i) the occurrence of an event
described in Section 5(a) of this Agreement with respect to X or any Specified
Entity of X shall not constitute an Event of Default or a Potential Event of
Default with respect to X as the Defaulting Party and (ii) Y shall be entitled
to designate an Early Termination Date pursuant to Section 6 of this Agreement
only as a result of a Termination Event set forth in (A) either Section 5(b)(i)
or 5(b)(ii) of this Agreement with respect to Y as the Affected Party or (B)
Section 5(b)(iii) of this Agreement with respect to Y as the Burdened Party.
7
<PAGE> 27
(BILATERAL FORM) (ISDA AGREEMENTS SUBJECT TO NEW YORK LAW ONLY)
ISDA(R)
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
CREDIT SUPPORT ANNEX
TO THE SCHEDULE TO THE
ISDA MASTER AGREEMENT
dated as of 23rd December 1997
between
CREDIT SUISSE FINANCIAL PRODUCTS and UNITED AIR LINES, INC.
("Party A") ("Party B")
This Annex supplements, forms part of, and is subject to, the above-referenced
Agreement, is part of its Schedule and is a Credit Support Document under this
Agreement with respect to each party.
Accordingly, the parties agree as follows:--
PARAGRAPH 1. INTERPRETATION
(a) DEFINTIONS AND INCONSISTENCY. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.
(b) SECURED PARTY AND PLEDGOR. All references in this Annex to the "Secured
Party" will be to either party when acting in that capacity and all
corresponding references to the "Pledgor" will be to the other party when
acting in that capacity; provided, however, that if Other Posted Support is
held by a party to this Annex, all references herein to that party as the
Secured Party with respect to that Other Posted Support will be to that party
as the beneficiary thereof and will not subject that support or that party as
the beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
PARAGRAPH 2. SECURITY INTEREST
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party
hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted
Collateral, the security interest and lien granted hereunder on that Posted
Collateral will be released immediately and, to the extent possible, without
any further action by either party.
Copyright(C) 1994 by International Swaps and Derivatives Association, Inc.
<PAGE> 28
PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS
(a) DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Secured Party on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer
Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit
Support having a Value as of the date of Transfer at least equal to the
applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise
specified in Paragraph 13, the "DELIVERY AMOUNT" applicable to the Pledgor for
any Valuation Date will equal the amount by which:
(i) the Credit Support Amount.
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held
by the Secured Party.
(b) RETURN AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount,
then the Secured Party will Transfer to the Pledgor Posted Credit Support
specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"RETURN AMOUNT" applicable to the Secured Party for any Valuation Date will
equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held
by the Secured Party
exceeds
(ii) the Credit Support Amount.
"CREDIT SUPPORT AMOUNT" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date
plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor,
if any, minus (iii) all Independent Amounts applicable to the Secured Party, if
any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit
Support Amount will be deemed to be zero whenever the calculation of Credit
Support Amount yields a number less than zero.
PARAGRAPH 4. CONDITIONS PRECEDENT, TRANSFER TIMING, CALCULATIONS AND
SUBSTITUTIONS
(a) CONDITIONS PRECEDENT. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified Condition
has occured and is continuing with respect to the other party; and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an Event
of Default or Specified Condition with respect to the other party.
(b) TRANSFER TIMING. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or Posted
Credit Support is made by the Notification Time, then the relevant Transfer
will be made not later than the close of business on the next Local Business
Day; if a demand is made after the Notification Time, then the relevant Transfer
will be made not later than the close of business on the second Local Business
Day thereafter.
(c) CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).
2
<PAGE> 29
(d) SUBSTITUTIONS.
(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured
Party specifying the items of Posted Credit Support to be exchanged,
the Pledgor may, on any Local Business Day, Transfer to the Secured
Party substitute Eligible Credit Support (the "Substitute Credit
Support"); and
(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the
Pledgor the items of Posted Credit Support specified by the Pledgor
in its notice not later than the Local Business Day following the
date on which the Secured Party receives the Substitute Credit
Support, unless otherwise specified in Paragraph 13 (the "Substitution
Date"); provided that the Secured Party will only be obligated to
Transfer Posted Credit Support with a Value as of the date of Transfer of
that Posted Credit Support equal to the Value as of that date of the
Substitute Credit Support.
PARAGRAPH 5. DISPUTE RESOLUTION
If a party (a "Disputing Party") disputes (I) the Valuation Agent's
calculation of a Delivery Amount or a Return Amount or (II) the Value of any
Transfer of Eligible Credit Support or Posted Credit Support, the (1) the
Disputing Party will notify the other party and the Valuation Agent (if the
Valuation Agent is not the other party) not later than the close of business on
the Local Business Day following (X) the date that the demand is made under
Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of
(II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer
the undisputed amount to the other party not later than the close of business
on the Local Business Day following (X) the date that the demand is made under
Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of
(II) above, (3) the parties will consult with each other in an attempt to
resolve the dispute and (4) if they fail to resolve the dispute by the
Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,
unless otherwise specified in Paragraph 13, the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date by:
(A) utilizing any calculations of Exposure for the Transactions (or Swap
Transactions) that the parties have agreed are not in dispute;
(B) calculating the Exposure for the Transactions (or Swap Transactions)
in dispute by seeking four actual quotations at mid-market from
Reference Market-makers for purposes of calculating Market Quotation, and
taking the arithmetic average of those obtained; provided that if four
quotations are not available for a particular Transaction (or Swap
Transaction), then fewer than four quotations may be used for that
Transaction (or Swap Transaction), and if no quotations are available
for a particular Transaction (or Swap Transaction), then the Valuation
Agent's original calculations will be used for that Transaction (or
Swap Transaction); and
(C) utilizing the procedures specified in Paragraph 13 for calculating
the Value, if disputed, of Posted Credit Support.
(ii) In the case of a dispute involving the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, the Valuation Agent will
recalculate the Value as of the date of Transfer pursuant to Paragraph 13.
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.
3
<PAGE> 30
PARAGRAPH 6. HOLDING AND USING POSTED COLLATERAL
(a) CARE OF POSTED COLLATERAL. Without limiting the Secured Party's rights
under Paragraph 6(c), the Secured Party will exercise reasonable care to assure
the safe custody of all Posted Collateral to the extent required by applicable
law, and in any event the Secured Party will be deemed to have exercised
reasonable care if it exercises at least the same degree of care as it would
exercise with respect to its own property. Except as specified in the preceding
sentence, the Secured Party will have no duty with respect to Posted Collateral
including, without limitation, any duty to collect any Distributions, or
enforce or preserve any rights pertaining thereto.
(b) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS.
(i) GENERAL. Subject to the satisfaction of any conditions specified in
Paragraph 13 for holding Posted Collateral, the Secured Party will be
entitled to hold Posted Collateral or to appoint an agent (a "Custodian")
to hold Posted Collateral for the Secured Party. Upon notice by the Secured
Party to the Pledgor of the appointment of a Custodian, the Pledgor's
obligations to make any Transfer will be discharged by making the Transfer
to that Custodian. The holding of Posted Collateral by a Custodian will be
deemed to be the holding of that Posted Collateral by the Secured Party for
which the Custodian is acting.
(ii) FAILURE TO SATISFY CONDITIONS. If the Secured Party or its Custodian
fails to satisfy any conditions for holding Posted Collateral, then upon a
demand made by the Pledgor, the Secured Party will, not later than five
Local Business Days after the demand, Transfer or cause its Custodian to
Transfer all Posted Collateral held by it to a Custodian that satisfies
those conditions or to the Secured Party if it satisfies those conditions.
(iii) LIABILITY. The Secured Party will be liable for the acts or
omissions of its Custodian to the same extent that the Secured Party would
be liable hereunder for its own acts or omissions.
(c) USE OF POSTED COLLATERAL. Unless otherwise specified in Paragraph 13 and
without limiting the rights and obligations of the parties under Paragraphs 3,
4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature whatsoever
of the Pledgor, including any equity or right of redemption by the Pledgor;
and
(ii) register any Posted Collateral in the name of the Secured Party, its
Custodian or a nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue
to hold all Posted Collateral and to receive Distributions made thereon,
regardless of whether the Secured Party has exercised any rights with respect
to any Posted Collateral pursuant to (i) or (ii) above.
(d) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) DISTRIBUTIONS. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on a Local Business Day, it
will Transfer to the Pledgor not later than the following Local Business
Day any Distributions it receives or is deemed to receive to the extent
that a Delivery Amount would not be created or increased by that Transfer,
as calculated by the Valuation Agent (and the date of calculation will be
deemed to be a Valuation Date for this purpose).
4
<PAGE> 31
(ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph 13 and
subject to Paragraph 4(a), in lieu of any interest, dividends or other
amounts paid or deemed to have been paid with respect to Posted Collateral
in the form of Cash (all of which may be retained by the Secured Party),
the Secured Party will Transfer to the Pledgor at the times specified in
Paragraph 13 the Interest Amount to the extent that a Delivery Amount would
not be created or increased by that Transfer, as calculated by the
Valuation Agent (and the date of calculation will be deemed to be a
Valuation Date for this purpose). The Interest Amount or portion thereof
not Transferred pursuant to this Paragraph will constitute Posted
Collateral in the form of Cash and will be subject to the security interest
granted under Paragraph 2.
PARAGRAPH 7. EVENTS OF DEFAULT
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default
will exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make, when due,
any Transfer of Eligible Collateral, Posted Collateral or the Interest
Amount, as applicable, required to be made by it and that failure continues
for two Local Business Days after notice of that failure is given to that
party;
(ii) that party fails to comply with any restriction or prohibition
specified in this Annex with respect to any of the rights specified
in Paragraph 6(c) and that failure continues for five Local Business
Days after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or
obligation other than those specified in Paragraphs 7(i) and 7(ii) and that
failure continues for 30 days after notice of that failure is given to
that party.
PARAGRAPH 8. CERTAIN RIGHTS AND REMEDIES
(a) SECURED PARTY'S RIGHTS AND REMEDIES. If at any time (1) an Event of
Default or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following
rights and remedies:
(i) all rights and remedies available to a secured party under applicable
law with respect to Posted Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under
the terms of Other Posted Support, if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect
to any Obligations against any Posted Collateral or the Cash equivalent of
any Posted Collateral held by the Secured Party (or any obligation of the
Secured Party to Transfer that Posted Collateral); and
(iv) the right to liquidate any Posted Collateral held by the Secured
Party through one or more public or private sales or other dispositions with
such notice, if any, as may be required under applicable law, free from any
claim or right of any nature whatsoever of the Pledgor, including any equity or
right of redemption by the Pledgor (with the Secured Party having the right to
purchase any or all of the Posted Collateral to be sold) and to apply the
proceeds (or the Cash equivalent thereof) from the liquidation of the Posted
Collateral to any amounts payable by the Pledgor with respect to any
Obligations in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Pledgor is not entitled to prior
notice of any sale of that Posted Collateral by the Secured Party, except any
notice that is required under applicable law and cannot be waived.
5
<PAGE> 32
(b) PLEDGOR'S RIGHTS AND REMEDIES. If at any time an Early Termination Date
has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then (except in the case
of an Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to a
pledgor under applicable law with respect to Posted Collateral held by the
Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to
the Pledgor under the terms of Other Posted Support, if any;
(iii) the Secured Party will be obligated immediately to Transfer all
Posted Collateral and the Interest Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount is not so
Transferred pursuant to (iii) above, the Pledgor may;
(A) Set-off any amounts payable by the Pledgor with respect to any
Obligations against any Posted Collateral or the Cash equivalent of
any Posted Collateral held by the Secured Party (or any obligation of
the Secured Party to Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under (iv)(A)
above, withhold payment of any remaining amounts payable by the
Pledgor with respect to any Obligations, up to the Value of any
remaining Posted Collateral held by the Secured Party, until that
Posted Collateral is Transferred to the Pledgor.
(c) DEFICIENCIES AND EXCESS PROCEEDS. The Secured Party will Transfer to the
Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction
in full of all amounts payable by the Pledgor with respect to any
Obligations; the Pledgor in all events will remain liable for any amounts
remaining unpaid after any liquidation, Set-off and/or application under
Paragraphs 8(a) and 8(b).
(d) FINAL RETURNS. When no amounts are or thereafter may become payable by the
Pledgor with respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.
PARAGRAPH 9. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated as of each date on which it, as the Pledgor, Transfers Eligible
Collateral) that:
(i) it has the power to grant a security interest in and lien on any
Eligible collateral it Transfers as the Pledgor and has taken all
necessary actions to authorize the granting of that security interest and
lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all
Eligible Collateral it Transfers to the Secured Party hereunder, free and
clear of any security interest, lien, encumbrance or other restrictions
other than the security interest and lien granted under Paragraph 2;
(iii) upon Transfer of any Eligible Collateral to the Secured Party under
the terms of this Annex, the Secured Party will have a valid and
perfected first priority security interest therein (assuming that any
central clearing corporation or any third-party financial intermediary or
other entity not within the control of the Pledgor involved in the
Transfer of that Eligible Collateral gives the notices and takes the
action required of it under applicable law for perfection of that
interest); and
(iv) the performance by it of its obligations under this Annex will not
result in the creation of any security interest, lien or other
encumbrance on any Posted Collateral other than the security interest and
lien granted under Paragraph 2.
6
<PAGE> 33
PARAGRAPH 10. EXPENSES
(a) GENERAL. Except as otherwise provided in Paragraphs 10(b) and 10(c), each
party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.
(b) POSTED CREDIT SUPPORT. The Pledgor will promptly pay when due all taxes,
assessments or charges of any nature that are imposed with respect to Posted
Credit Support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).
(c) LIQUIDATION/APPLICATION OF POSTED CREDIT SUPPORT. All reasonable costs
and expenses incurred by or on behalf of the Secured Party or the Pledgor in
connection with the liquidation and/or application of any Posted Credit Support
under Paragraph 8 will be payable, on demand and pursuant to the Expenses
Section of this Agreement, by the Defaulting Party or, if there is no Defaulting
Party, equally by the parties.
PARAGRAPH 11. MISCELLANEOUS
(a) DEFAULT INTEREST. A Secured Party that fails to make, when due, any
Transfer of Posted Collateral or the Interest Amount will be obligated to pay
the Pledgor (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property
that were required to be Transferred, from (and including) the date that Posted
Collateral or Interest Amount was required to be Transferred to (but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This
interest will be calculated on the basis of daily compounding and the actual
number of days elapsed.
(b) FURTHER ASSURANCES. Promptly following a demand made by a party, the
other party will execute, deliver, file and record any financing statement,
specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create,
preserve, perfect or validate any security interest or lien granted under
Paragraph 2, to enable that party to exercise or enforce its rights under this
Annex with respect to Posted Credit Support or an Interest Amount or to effect
or document a release of a security interest on Posted Collateral or an Interest
Amount.
(c) FURTHER PROTECTION. The Pledgor will promptly give notice to the Secured
Party of, and defend against, any suit, action, proceeding or lien that
involves Posted Credit Support Transferred by the Pledgor or that could
adversely affect the security interest and lien granted by it under Paragraph
2, unless that suit, action, proceeding or lien results from the exercise of
the Secured Party's rights under Paragraph 6(c).
(d) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in commercially reasonable manner.
(e) DEMANDS AND NOTICES. All demands and notices made by a party under this
Annex will be made as specified in the Notices Section of this Agreement,
except as otherwise provided in Paragraph 13.
(f) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
7
<PAGE> 34
PARAGRAPH 12. DEFINITIONS
As used in this Annex:-
"CASH" means the lawful currency of the United States of America.
"CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3.
"CUSTODIAN" has the meaning specified in Paragraphs 6(b)(i) and 13.
"DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a).
"DISPUTING PARTY" has the meaning specified in Paragraph 5.
"DISTRIBUTIONS" means with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral
in the form of Cash, any distributions on that collateral, unless otherwise
specified herein.
"ELIGIBLE COLLATERAL" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"ELIGIBLE CREDIT SUPPORT" means Eligible Collateral and Other Eligible Support
"EXPOSURE" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").
"INDEPENDENT AMOUNT" means, with respect to a party, the amount specified as
such for that party in Paragraph 13; if no amount is specified, zero.
"INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum
of the amounts of interest calculated for each day in that Interest Period
on the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:
(x) the amount of that Cash on that day; multipled by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
"INTEREST PERIOD" means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.
"INTEREST RATE" means the rate specified in Paragraph 13.
"LOCAL BUSINESS DAY", unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
8
<PAGE> 35
"MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount
specified as such for that party in Paragraph 13; if no amount is specified,
zero.
"NOTIFICATION TIME" has the meaning specified in Paragraph 13.
"OBLIGATIONS" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.
"OTHER ELIGIBLE SUPPORT" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"OTHER POSTED SUPPORT" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
"PLEDGOR" means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).
"POSTED COLLATERAL" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been Transferred to or
received by the Secured Party under this Annex and not Transferred to the
Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the
Secured Party under Paragraph 8. Any Interest Amount or portion thereof not
Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in
the form of Cash.
"POSTED CREDIT SUPPORT" means Posted Collateral and Other Posted Support.
"RECALCULATION DATE" means the Valuation Date that gives rise to the dispute
under Paragraph 5; provided however, that if a subsequent Valuation Date
occurs under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.
"RESOLUTION TIME" has the meaning specified in Paragraph 13.
"RETURN AMOUNT" has the meaning specified in Paragraph 3(b).
"SECURED PARTY" means either party, when that party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds
or is deemed to hold Posted Credit Support.
"SPECIFIED CONDITION" means, with respect to a party, any event specified as
such for that party in Paragraph 13.
"SUBSTITUTE CREDIT SUPPORT" has the meaning specified in Paragraph 4(d)(i).
"SUBSTITUTION DATE" has the meaning specified in Paragraph 4(d)(ii).
"THRESHOLD" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.
"TRANSFER" means, with respect to any Eligible Credit Support, Posted Credit
Support, or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one or
more bank accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid or
delivered by book-entry, payment or delivery in appropriate physical form
to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any
other documents necessary to constitute a legally valid transfer to the
recipient;
(iii) in the case of securities that can be paid or delivered by
book-entry, the giving of written instructions to the relevant depository
institution or other entity specified by the recipient, together with a
written copy thereof to the recipient, sufficient if complied with to
result in a legally effective transfer of the relevant interest to the
recipient; and
(iv) in the case of the Other Eligible Support or Other Posted Support, as
specified in Paragraph 13.
9
<PAGE> 36
"VALUATION AGENT" has the meaning specified in Paragraph 13.
"VALUATION DATE" means each date specified in or otherwise determined pursuant
to Paragraph 13.
"VALUATION PERCENTAGE" means, for any item of Eligible Collateral, the
percentage specified in Paragraph 13.
"VALUATION TIME" has the meaning specified in Paragraph 13.
"VALUE" means for any Valuation Date or other date for which Value is
calculated and subject to Paragraph 5 in the case of a dispute, with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation Agent
multiplied by the applicable Valuation Percentage, if any;
(ii) Posted Collateral that consists of items that are not specified as
Eligible Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified in
Paragraph 13.
10
<PAGE> 37
ELECTIONS AND VARIABLES
TO THE ISDA CREDIT SUPPORT ANNEX
dated as of 23 December 1997
between
CREDIT SUISSE FINANCIAL PRODUCTS, AND UNITED AIR LINES, INC., a
an unlimited company incorporated corporation incorporated under
under the laws of England and Wales the laws of Delaware,
("CSFP") ("UA")
PARAGRAPH 13.
(a) SECURITY INTEREST FOR "OBLIGATIONS".
The term "OBLIGATIONS" as used in this Annex includes the following
additional obligations:
With respect to CSFP: None.
With respect to UA: None.
(b) CREDIT SUPPORT OBLIGATIONS.
(i) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT.
(A) "DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a).
(B) "RETURN AMOUNT" has the meaning specified in Paragraph 3(b).
(C) "CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph
3 with respect to CSFP as the Secured Party and means zero with
respect to UA as the Secured Party.
(ii) ELIGIBLE COLLATERAL. On any date, the following items will
qualify as "ELIGIBLE COLLATERAL" for each party:
VALUATION
PERCENTAGE
(A) Cash 100%
(B) negotiable debt obligations 100%
issued by the U.S. Treasury
Department having a residual
maturity on such date of less
than 1 year
(C) negotiable debt obligations issued 97%
by the U.S. Treasury Department
11
<PAGE> 38
having a residual maturity on such date
equal to or greater than 1 year but less
than 5 years
(D) negotiable debt obligations issued 95%
by the U.S. Treasury Department
having a residual maturity on such date
equal to or greater than 5 years but less
than 10 years
(E) In respect of a party, such other assets as Such percentage
the other party may, from time to time, as shall, from
specify in writing as qualifying as time to time, be
Eligible Collateral for the purpose be specified by
of this Annex (provided that any the other party
such assets shall cease to qualify as as applying to
Eligible Collateral if such other party such eligible
subsequently specifies in writing that Collateral
they shall no longer qualify as
Eligible Collateral). For the avoidance
of doubt there are no other assets which,
as of the date of this Annex, qualify as
Eligible Collateral for either party.
(iii) OTHER ELIGIBLE SUPPORT. With respect to a party, such
Other Eligible Support as the other party may from time to
time specify in writing as qualifying as "OTHER ELIGIBLE
SUPPORT" and for the avoidance of doubt there are no items
which qualify as Other Eligible Support for either party as of
the date of this Annex.
(iv) THRESHOLDS.
(A) "INDEPENDENT AMOUNT" means with respect to CSFP: Zero
"INDEPENDENT AMOUNT" means with respect to UA: Zero
(B) "THRESHOLD" means, with respect to UA, the amount
specified as such in Table 1 opposite the lower of the
long term, unsecured and unsubordinated debt ratings
assigned by either Moody's or S&P to UA; provided that
if UA has no such ratings, UA's Threshold shall be zero.
(C) "MINIMUM TRANSFER AMOUNT" means, with respect to UA, the
amount specified as such in Table 1 opposite the lower
of the long term, unsecured and unsubordinated debt
ratings assigned by either Moody's or S&P to UA;
provided that if UA has no such ratings, UA's Minimum
Transfer Amount shall be zero.
"MINIMUM TRANSFER AMOUNT" means, with respect to CSFP,
$250,000.
TABLE 1: UA THRESHOLDS AND MINIMUM TRANSFER AMOUNTS
12
<PAGE> 39
RATINGS MINIMUM TRANSFER
MOODY'S S&P THRESHOLD AMOUNT
- ------- --- --------- ------
[S] [C] [C] [C]
A1 A+ $35,000,000 $1,000,000
A2 A $30,000,000 $1,000,000
A3 A- $25,000,000 $1,000,000
Baa1 BBB+ $20,000,000 $1,000,000
Baa2 BBB $15,000,000 $500,000
Baa3 BBB- $10,000,000 $500,000
Ba1 BB+ $6,000,000 $500,000
Ba2 BB $2,000,000 $100,000
Ba3 BB- $0 $0
(D) ROUNDING. The Delivery Amount and the Return Amount
each will, if a positive number but not an integral
multiple of the Minimum Transfer Amount, be rounded down
to the nearest integral multiple of the Minimum Transfer
Amount unless the Minimum Transfer Amount is zero.
(c) VALUATION AND TIMING.
(i) "VALUATION AGENT" means CSFP.
(ii) "VALUATION DATE" means
(A) in the case that the long term, unsecured and
unsubordinated debt ratings assigned to UA by Moody's
and S&P are at least "Ba2" and "BB", respectively, the
first Local Business Day of each week;
(B) in any other case, each Local Business Day.
(iii) "VALUATION TIME" means the close of business in the city of
the Valuation Agent on the Local Business Day before the
Valuation Date or date of calculation, as applicable, provided
that the calculations of Value and Exposure will be made as of
approximately the same time on the same date.
(iv) "NOTIFICATION TIME" means 4:00 p.m., London time, on a Local
Business Day.
(d) CONDITIONS PRECEDENT AND SECURED PARTY'S RIGHTS AND REMEDIES.
(i) Subject to Paragraphs 13(d)(ii) and 13(d)(iii), for the
purposes of this Annex there shall be no "SPECIFIED CONDITION"
hereunder.
(ii) For the purposes of sub-Paragraphs 4(a)(ii), 8(a)(2) and 8(b),
the words "SPECIFIED CONDITION" shall be deleted and the words
"Termination Event" shall be substituted therefor;
furthermore, for the purposes of Paragraph 8(b) the words "or
been designated" shall be deleted in their entirety;
13
<PAGE> 40
(iii) For the purposes of sub-Paragraph 8(a)(1) the words "SPECIFIED
CONDITION" shall be deleted in their entirety.
(e) SUBSTITUTION.
(i) "SUBSTITUTION DATE" has the meaning specified in Paragraph
4(d)(ii).
(ii) CONSENT. The Pledgor must obtain the Secured Party's prior
consent to any substitution pursuant to Paragraph 4(d) and shall
give to the Secured Party not less than two (2) Local Business Days
notice thereof specifying the items of Posted Credit Support
intended for substitution.
(iii) RETURN PROCEDURE. In Paragraph 4(d)(ii) the words "not
later than the Local Business Day following" shall be deleted and
replaced with the words "as soon as is practical after".
(f) DISPUTE RESOLUTION.
(i) "RESOLUTION TIME" means 4:00 p.m. London time on the Local
Business Day following the date on which the notice of the dispute
is given under Paragraph 5.
(ii) VALUE. For the purpose of Paragraphs 5(i)(C) and 5(ii), on
any date, the Value of Eligible Collateral and Posted Collateral
will be calculated as follows:
(A) with respect to any Cash; the amount thereof;
(B) with respect to any Eligible Collateral comprising securities;
the sum of (a)(x) the last bid price on such date for such
securities on the principal national securities exchange on
which such securities are listed, multiplied by the applicable
Valuation Percentage or (y) where any such securities are not
listed on a national securities exchange, the bid price for
such securities quoted as at the close of business on such date
by any principal market maker for such securities chosen by the
Valuation Agent, multiplied by the applicable Valuation
Percentage or (z) if no such bid price is listed or quoted for
such date, the last bid price listed or quoted (as the case may
be), as of the day next preceding such date on which such
prices were available; multiplied by the applicable Valuation
Percentage; plus (b) the accrued interest on such securities
(except to the extent that such interest shall have been paid
to the Pledgor pursuant to Paragraph 6(d)(ii) or included in
the applicable price referred to in subparagraph (a) above)
as of such date; and
(C) with respect to any Eligible Collateral other
than Cash and securities; the fair market value of such
Eligible Collateral on such date, as determined in any
reasonable manner chosen by the Valuation Agent, multiplied by
the applicable Valuation Percentage.
(g) HOLDING AND USING POSTED COLLATERAL.
(i) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS:
CSFP or its Custodian will be entitled to hold Posted Collateral
pursuant to Paragraph 6(b); provided that
14
<PAGE> 41
(1) whichever of CSFP or its Custodian is holding Posted
Collateral shall at all times have either a long term debt or
deposit rating of at least A- from Standard & Poor's Ratings
Group, a division of McGraw-Hill Inc. and at least A3 from
Moody's Investors Service, Inc. (or their respective
successors) or have net capital in excess of US$500 million;
(2) the Custodian for CSFP shall first be approved by
UA and shall be, or shall engage a sub-custodian who is, an
account holder in the US Federal Reserve System; and
(3) if CSFP is holding Posted Collateral, CSFP is not
a Defaulting Party.
Initially, the Custodian for CSFP is CS First Boston Corporation.
(ii) USE OF POSTED COLLATERAL. The provisions of Paragraph 6(c)
will apply to CSFP.
(h) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) INTEREST RATE. The "INTEREST RATE" will be:
(1) in the case of time deposits, LIBOR less 0.05%;
and
(2) in the case of all other funds, the effective
rate for Federal Funds, as published on Telerate Page 118,
provided that if, for any reason, Telerate Page 118 should be
unavailable the Interest Rate shall be such rate as the
Secured Party shall reasonably determine.
(ii) TRANSFER OF INTEREST AMOUNT. The Transfer of the Interest Amount
will be made monthly in arrears and on any Local Business Day on
which Posted Collateral in the form of Cash is Transferred to the
Pledgor pursuant to Paragraph 3(b).
(iii) ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph
6(d)(ii) will apply and for the purposes of calculating the Interest
Amount the amount of interest calculated for each day of the
Interest Period shall be compounded on each New York Business Day
falling on a Monday, Tuesday, Wednesday or Thursday.
(i) ADDITIONAL REPRESENTATION(S).
There are no additional representations by either party.
(j) OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT.
(i) "Value" with respect to Other Eligible Support and Other
Posted Support shall have such meaning as the parties shall agree in
writing from time to time.
(ii) "Transfer" with respect to Other Eligible Support and Other
Posted Support shall have such meaning as the parties shall agree in
writing from time to time.
(k) DEMANDS AND NOTICES.
15
<PAGE> 42
All demands, specifications and notices under this Annex will be made pursuant
to the Notices Section of this Agreement, save that any demand, specification
or notice:
(i) shall be given to or made at the following addresses:
If to CSFP:
Address: One Cabot Square,
London E14 4QJ
England.
Tel: 0171 516 2502
Facsimile: 0171 516 3866
Telex: 264521 Answerback: CSFINP G
Swift: CSFP GB 2L
Attention: CSFP Operations Settlements.
If to UA:
Address: 1200 East Algonquin Road
Elk Grove, Illinois 60007
Attention
Tel: 847 700 4849
Facsimile: 847 700 7117
or at such other address as the relevant party may from time to time
designate by giving notice (in accordance with the terms of this
paragraph) to the other party;
(ii) shall (unless otherwise stated in this Annex) be deemed to be
effective at the time such notice is actually received unless such
notice is received on a day which is not a Local Business Day or
after the Notification Time on any Local Business Day in which event
such notice shall be deemed to be effective on the next succeeding
Local Business Day.
(l) ADDRESS FOR TRANSFERS.
CSFP: Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Attention: [______________]
UA: First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Trust Administrator
16
<PAGE> 43
(m) OTHER PROVISIONS.
(i) ADDITIONAL DEFINITIONS
As used in this Annex:
"EQUIVALENT COLLATERAL" means, with respect to any security
constituting Posted Collateral, a security of the same issuer and,
as applicable, representing or having the same class, series,
maturity, interest rate, principal amount or liquidation value and
such other provisions as are necessary for that security and the
security constituting Posted Collateral to be treated as equivalent
in the market for such securities;
"LOCAL BUSINESS DAY" means: (i) any day on which commercial banks
are open for business (including dealings in foreign exchange and
foreign currency deposits) in New York and London, and (ii) in
relation to a Transfer of Eligible Collateral, a day on which the
clearance system agreed between the parties for the delivery of
Eligible Collateral is open for acceptance and execution of
settlement instructions (or in the case of a Transfer of Cash or
other Eligible Collateral for which delivery is contemplated by
other means, a day on which commercial banks are open for business
(including dealings for foreign exchange and foreign deposits) in
New York and London);
"MOODY'S" means Moody's Investors Service, Inc., or any successor
thereto;
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill Inc., or any successor thereto;
(ii) TRANSFER TIMING
(a) Paragraph 4(b) shall be deleted and replaced in its entirety by
the following paragraph:
"Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit
Support or Posted Credit Support is made by the Notification
Time, then the relevant Transfer will be made not later than
the close of business on the second Local Business Day
thereafter; if a demand is made after the Notification Time
then the relevant Transfer will be made not later than the
close of business on the third Local Business Day
thereafter."
(b) Paragraph 6(d)(1) shall be amended so that the
reference therein to "the following Local Business Day" shall
be replaced by reference to "the second Local Business Day
thereafter".
(iii) EVENTS OF DEFAULT
Paragraph 7 shall be amended so that the references in Paragraph
7(i), Paragraph 7(ii) and Paragraph 7(iii) to "two Local Business
Days", "five Local Business Days" and "thirty days" respectively,
shall instead be replaced by "one Local Business Day", "three Local
Business Days" and "three Local Business Days" respectively.
17
<PAGE> 44
(iv) RETURN OF FUNGIBLE SECURITIES
In lieu of returning to the Pledgor pursuant to Paragraphs 3(b),
4(d),5 and 8(d) any Posted Collateral comprising securities the
Secured Party may return Equivalent Collateral.
(v) COVENANTS OF THE PLEDGOR
So long as the Agreement is in effect, the Pledgor covenants that
it will keep the Posted Collateral free from all security interests
or other encumbrances created by the Pledgor, except the security
interest created hereunder and any security interests or other
encumbrances created by the Secured Party; and will not sell,
transfer, assign, deliver or otherwise dispose of, or grant any
option with respect to any Posted Collateral or any interest
therein, or create, incur or permit to exist any pledge, lien,
mortgage, hypothecation, security interest, charge, option or any
other encumbrance with respect to any Posted Collateral or any
interest therein, without the prior written consent of the Secured
Party.
(vi) NO COUNTERCLAIM
A party's rights to demand and receive the Transfer of Eligible
Collateral as provided hereunder and its rights as Secured Party
against the Posted Collateral or otherwise shall be absolute and
subject to no counterclaim, set off, deduction or defence in favour
of the Pledgor except as contemplated in Sections 2 and 6 of the
Agreement and Paragraph 8 of this Annex.
(vii) COSTS OF TRANSFER ON SUBSTITUTION
Notwithstanding Paragraph 10(a), the Pledgor will be responsible
for, and will reimburse the Secured Party for, all transfer and
other taxes and other costs involved in the Transfer of Collateral
either from the Pledgor to the Secured Party (or any agent or
custodian for safekeeping of the Secured Party) or from the Secured
Party (or any agent or custodian for safekeeping of the Secured
Party) to the Pledgor pursuant to Paragraph 4(d).
(viii) HOLDING COLLATERAL
The Secured Party shall cause any Custodian appointed hereunder to
open and maintain a segregated account and to hold, record and
identify all the Posted Collateral in such segregated account and,
subject to Paragraphs 6(c) and 8(a), such Posted Collateral shall
at all times be and remain the property of the Pledgor and shall at
no time constitute the property of, or be commingled with the
property of, the Secured Party or the Custodian.
(ix) SECURITY AND PERFORMANCE ASSURANCE
Eligible Collateral Transferred to the Secured Party:
(i) if in the form of Cash, is not, and shall not be
deemed to be, "client money" for the purposes of the
Financial Services (Client Money) Regulations 1991 and the
Secured Party shall not hold such Cash as "client money" as
contemplated by those regulations; and
18
<PAGE> 45
(ii) constitutes security and performance assurance without
which the Secured Party would not otherwise enter into and
continue any and all Transactions.
19
<PAGE> 1
[CREDIT SUISSE LETTERHEAD]
Exhibit 4.9
Date: 23 December 1997
To: United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove, Illinois 60007
Attn: Eugene D. Juba
From: Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
Subject: ABOVE-CAP LIQUIDITY FACILITY SUPPLEMENTAL CONFIRMATION
Transaction Reference Number: 5284908
- --------------------------------------------------------------------------------
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between Credit Suisse Financial
Products ("CSFP") and United Air Lines, Inc. ("UA") on the Trade Date referred
to in Paragraph 2 below (the "Transaction"). This letter agreement constitutes
a "Confirmation" as referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "Definitions") are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. References herein to a
"Transaction" shall be deemed to be references to a "Swap Transaction" for
the purposes of the Definitions.
This Confirmation supplements, forms a part of, and is subject to the 1992
ISDA Master Agreement (including the Schedule and Credit Support Annex
thereto), dated as of 23 December 1997 as amended and supplemented from
time to time (collectively, the "Agreement"), between us. All provisions
contained in the Agreement govern this Confirmation except as modified
below. In the event of any inconsistency between the Agreement and this
Confirmation, this Confirmation will govern. This Confirmation refers to,
and incorporates by such reference, certain terms defined in the
confirmation of even date attached hereto as Exhibit A (the "Above Cap
Liquidity Facility Confirmation") relating to an interest rate cap
transaction between CSFP and First Security Bank, N.A. ("FSB") in its
capacity as Subordination Agent on behalf of the Pass-Through Trustee
under the Pass-Through Trust Agreement dated as of 23 December 1997
between FSB and UA.
<PAGE> 2
[LETTERHEAD]
Capitalized terms not defined in the Agreement or this Confirmation
(including the incorporated provisions of the Above Cap Liquidity Facility
Confirmation) shall have the meanings ascribed to them in the Offering
Memorandum dated December 18, 1997, relating to the United Airlines
Enhanced Pass-Through Certificates, Series 1997-1 (the "Offering
Memorandum").
The Agreement and this Confirmation will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
Each of CSFP and UA represents to the other that it has entered into this
Transaction in reliance upon such independent accounting, regulatory,
legal, tax and financial advice as it deems necessary and not upon any
view expressed by the other.
2. CSFP and UA have entered into a Transaction with the following terms that
provides for a series of contingent payments based on the Above Cap
Liquidity Facility:
General Terms:
Trade Date: 23 December 1997
Effective Date: 23 December 1997
CSFP Payment Dates: Every Payment Date under the Above Cap
Liquidity Facility after the Contingent Cap
Payment Date
CSFP Payment Amount: The Excess Interest Amount
UA Payment Dates: The Effective Date and the Contingent Cap
Payment Date
Contingent Cap Payment Two Business Days after the first Contingent
Date: Cap Payment Event to occur
UA Payment Amount: As of the Effective Date, the External Legal
Fee Payment, and as of any subsequent UA
Payment Date, the Cap Offered Side Value as
of such UA Payment Date.
Cap Offered Side Value: As of any date, the amount, as reasonably
determined by CSFP in good faith, at which
CSFP would sell the Above Cap Liquidity
Facility,
2
<PAGE> 3
[LETTERHEAD]
assuming that the Pool Balance were to
remain fixed at the then-current Pool
Balance as of such date without amortization
Excess Interest Amount As of any CSFP Payment Date, the greater of
zero and (i) the Full Cap Payment Amount
minus the Floating Amount (each as defined
in the Above Cap Liquidity Facility
Confirmation, regardless of whether such
Confirmation is still in force), minus (ii)
any Outstanding Cap Payment Balance. Any
amounts subtracted from the Excess Interest
Amount pursuant to clause (ii) above on any
CSFP Payment Date shall be applied to the
reduction of the Outstanding Cap Payment
Balance.
External Legal Fee Payment: United shall pay CSFP's reasonable external
legal fees with Cleary, Gottlieb, Steen &
Hamilton in connection with both this
Transaction and the Above Cap Liquidity
Facility, up to a maximum of USD 40,000.
Outstanding Cap Payment On any date after a Contingent Cap Payment
Balance Event, the greater of zero and
(i) (a) the Cap Offered Side Value as of the
date of the Contingent Cap Payment
Event, minus
(b) any amounts paid directly by UA to
CSFP in satisfaction of UA's
obligation to paythe amount
described in clause (i)(a), minus
(c) the proceeds of any liquidation of
Collateral related to UA's
obligation to pay the amount
described in clause (i)(a), minus
(d) any prior deductions from the CSFP
Payment Amount attributable to the
Outstanding Cap Payment Balance, plus
3
<PAGE> 4
[LETTERHEAD]
(ii) interest from the Settlement Date on
the then-current Outstanding Cap Payment
Balance, calculated at the Default Rate and
accrued daily.
Currency Unit: USD
Business Day: "Business Day" shall have the meaning set
forth in the Offering Memorandum
Business Day Convention: Following; provided, however, that any CSFP
Payment Amount the payment of which is
deferred in accordance with the Following
Business Day Convention shall bear interest
during the period of such deferral at the
interest rate on the Class A Certificates
during the immediately preceding Calculation
Period
Contingent Cap Payment Each of the following events is a Contingent
Events: Cap Payment Event:
(i) a decline in UA's long-term debt rating
(a) by Moody's Investors Services, Inc.
("Moody's"), below Ba3 or (b) by Standard &
Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc. ("S&P"), below
BB-;
(ii) the occurrence of any event described
in Section 5(a)(v) or 5(a)(vii) of the
Agreement with respect to UA;
(iii) after giving effect to any Interest
Drawing to be made under the relevant
Primary Liquidity Facility,
(a) the failure by the relevant Trust to
pay interest due on any of the Class A
Certificates by the close of business
on the third Business Day following
the relevant Regular Distribution Date,
or
(b) an insufficiency of funds available to
the Subordination Agent to pay
interest on any of the Class A
Certificates,
4
<PAGE> 5
[LETTERHEAD]
it being agreed that for purposes of this
clause (iii), the amount of any Interest
Drawing shall be deemed to have been paid to
her or not such payment has in fact been
made;
(iv) the occurrence of any event described in
Section 5(a)(iii) of the Agreement with
respect to UA; and
(v) CSFP's receipt of a notice from UA
declaring that UA elects to trigger a
Contingent Cap Payment Event.
Notice: UA shall provide notice to CSFP of the
occurrence of any Contingent Cap Payment
Event within two Business Days.
3. Role of CSFP; Role of Calculation Agent
(i) UA acknowledges that: (a) CSFP has acted in the capacity of an
arm's-length contractual counterparty and not as its financial
advisor or fiduciary; and (b) in exercising its rights or performing
any of its duties under this Agreement, CSFP will act as principal
and not as a fiduciary of UA.
(ii) The Calculation Agent shall have no responsibility for good
faith errors or omissions in making any determination or calculation
as provided herein. The calculations and determinations of the
Calculation Agent shall be made in accordance with terms of this
Confirmation having regard in each case to the criteria stipulated
herein and (where relevant) on the basis of information provided to
or obtained by it and such further inquiries as it deems necessary
and will, in the absence of manifest error, be final, conclusive and
binding on UA and CSFP.
(iii)In performing the duties referred to herein, the Calculation
Agent shall act as principal and not as agent or fiduciary of UA or
any other person. Each calculation and determination performed by
the Calculation Agent hereunder is performed in reliance upon the
preceding statement and subject thereto. If by performing any such
calculation or determination the Calculation Agent is rendered an
agent or fiduciary for one or more persons under applicable law, then
in relation to such parties the Calculation Agent's right and
obligation to perform such calculation or duty may be suspended at
the option of the Calculation Agent (or, if already performed, its
application may be suspended) until such calculation or
5
<PAGE> 6
[LETTERHEAD]
determination may be performed by the Calculation Agent as principal
and not as agent or fiduciary (or until it may be performed by an
appropriate third party that is willing and able to perform it).
4. Credit Downgrade of CSFP
Notwithstanding the provisions of Part 7 of the Agreement, CSFP shall
transfer its rights and obligations under this Transaction in connection
with any assignment and transfer of its rights and obligations under the
"Credit Downgrade of CSFP" provisions of the Above Cap Liquidity Facility.
5. Cap Repurchase
CSFP agrees with UA that, upon UA's request at any time after the
Contingent Cap Payment Date, it will repurchase UA's rights to receive payments
following the Contingent Cap Payment Date at a price equal to the amount, as
reasonably determined by CSFP in good faith, at which CSFP would buy the Above
Cap Liquidity Facility, assuming that the Pool Balance were to remain fixed at
the then-current Pool Balance as of the date of the occurrence of the
Contingent Cap Purchase Event, provided that the following conditions hold
true:
(a) there is no Contingent Cap Payment Event, Event of Default, or
Termination Event with respect to UA that has occurred and is continuing;
(b) the Outstanding Cap Payment Balance is equal to zero;
(c) CSFP is, at the time of repurchase, a dealer in dollar-denominated
interest rate options; and
(d) UA, at the time of repurchase, meets CSFP's credit criteria, as
reasonably determined by CSFP in good faith, for entering into a
transaction with the terms of this Transaction.
If CSFP repurchases UA's rights as outlined above, then this Transaction shall
continue in force as if no Contingent Cap Payment Event had occurred prior to
the date of such repurchase.
6. Additional Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set forth below:
6
<PAGE> 7
[LETTERHEAD]
"Business Day" and "Local Business Day" mean, with respect to the
Transactions set forth in this Confirmation, "Business Day" as defined in the
Offering Memorandum for all purposes under the Agreement.
"Credit Support Amount" means, with respect to CSFP as the Secured Party,
the UA Credit Support Amount plus the UA Supplemental Credit Support Amount.
"CSFP Credit Downgrade Period" means any continuous period in which either
(i) the short term, unsecured and unsubordinated debt rating assigned
to CSFP by Moody's is below "P1", or the long term unsecured debt
rating assigned to CSFP by Moody's is below "Aa3" if there is no
such short term rating;
(ii) the short term, unsecured and unsubordinated debt rating assigned to
CSFP by S&P is below "A1+", or the long term unsecured debt rating
assigned to CSFP by S&P is below "AA-" if there is no such short
term rating;
(iii) CSFP has no rating from Moody's; or
(iv) CSFP has no rating from S&P.
"Return Amount" shall have the meaning set forth in Paragraph 3(b) of the
Credit Support Annex, provided, however, that with respect to calculations
relating to the Supplemental UA Credit Support Amount, the Return Amount shall
equal zero if an event described in Section 5(a)(iii) has occurred and is
continuing with respect to FSB under the transaction described in the Above Cap
Liquidity Facility Confirmation.
"UA Credit Support Amount" means
(i) if no Contingent Cap Payment Event has yet occurred, the greater of
zero and
(a) the Cap Offered Side Value, plus
(b) an additional amount to provide for inter-week or inter-day
movements in the Cap Offered Side Value, to be reasonably
calculated by the Calculation Agent acting in good faith, minus
(c) the Pledgor's Threshold; and
(ii) if a Contingent Cap Payment Event has occurred, the related
Contingent Cap Payment Date has passed, and there is no Outstanding Cap
Payment Balance, zero.
7
<PAGE> 8
[LETTERHEAD]
"Supplemental UA Credit Support Amount" means, for the entire term of this
Transaction regardless of whether or not UA has any remaining payment
obligations hereunder:
(i) during the first thirty days, inclusive, of any CSFP Credit
Downgrade Period, zero;
(ii) during the period between the thirty-first day of any CSFP
Credit Downgrade Period to the end of such CSFP Credit Downgrade
Period, inclusive, the greater of zero and
(a) the greater of 12.29% and Three-Month LIBOR (as defined in the
Offering Memorandum), minus
(b) the Cap Rate, and such difference multiplied by
(c) the Notional Amount, and the resulting product multiplied by
(d) a fraction, the numerator of which is an amount equal to the
difference between (X) 18 and (Y) three times the number of
unreimbursed Interest Drawings under the Primary Liquidity
Facility, and the denominator of which is 12;
(iii) at all other times, zero.
7. Payments
CSFP hereby irrevocably instructs UA to make any payment due to CSFP
directly to the account specified below in the name of CSFP. UA hereby
irrevocably instructs CSFP to make any payments of Floating Amounts due to UA
directly to the account specified below in the name of UA.
8. Account Details
Payments to CSFP: Credit Suisse First Boston
ABA No. 026-009-179
a/c Credit Suisse Financial Products - London
a/c no. 32491401
Payments to UA: First Chicago National Bank
ABA No. 071-000-013
a/c UA Special Account
a/c no. 51-67795
8
<PAGE> 9
[LETTERHEAD]
9. Offices
The Office of CSFP for the Transaction is its office at the address
specified for notices to it in the Schedule to the Agreement. The Office of UA
for the Transaction is its office at the address specified for notices to it in
the Schedule to the Agreement.
Credit Suisse Financial Products is regulated by The Securities and
Futures Authority and has entered into this transaction as principal. The time
at which the above transaction was executed will be notified to UA on request.
10. Indemnification
UA will indemnify and hold harmless CSFP against any losses, claims,
damages or liabilities to which CSFP may become subject, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any provision or omission in, or action or failure to
act pursuant to, the Intercreditor Agreement, and will reimburse CSFP for any
legal or other expenses reasonably incurred by CSFP in connection with
investigating or defending any such action or claim.
Promptly following CSFP's receipt of notice of the commencement of any
action, CSFP shall, if a claim in respect thereof is to be made against UA
under this Paragraph 10, notify UA in writing of the commencement thereof; but
the failure so to notify UA shall not relieve UA from any liability which it
may have to CSFP otherwise than under this Paragraph 10 (except to the extent
the indemnification obligation of UA hereunder is increased because of such
failure). In case any such action shall be brought against CSFP and it shall
notify UA of the commencement thereof, UA shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof
with counsel reasonably satisfactory to CSFP, and, after notice from UA to CSFP
of its election so to assume the defense thereof, UA shall not be liable to
CSFP under this Paragraph 10 for any legal expenses of other counsel or any
other expenses subsequently incurred by CSFP, in connection with the defense of
such action other than reasonable costs of investigation.
9
<PAGE> 10
[LETTERHEAD]
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By: /s/ Signature
---------------------------
Name:
----------------------
Title:
---------------------
Confirmed as of the date first written above:
UNITED AIR LINES, INC.
By:
--------------------------
Name:
----------------------
Title:
---------------------
10
<PAGE> 11
[LETTERHEAD]
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By:
---------------------------
Name:
----------------------
Title:
---------------------
Confirmed as of the date first written above:
UNITED AIR LINES, INC.
By: /s/ Thomas A. Mutryn
--------------------------
Name: Thomas A. Mutryn
---------------------
Title: Vice President and Treasurer
-----------------------------
<PAGE> 12
[CREDIT SUISSE LETTERHEAD]
EXHIBIT A
Date: 23 December 1997
To: First Security Bank, National Association
Corporate Trust Department
79 South Main Street
Salt Lake City, Utah 84111
Attn: Mr. Greg Hawley
From: Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
Subject: ABOVE CAP LIQUIDITY FACILITY CONFIRMATION
Transaction Reference Number: 5284905
- --------------------------------------------------------------------------------
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into on the Trade Date referred to in
Paragraph 2 below (the "Transaction") between Credit Suisse Financial Products
("CSFP") and First Security Bank, National Association ("FSB"), in its capacity
as Subordination Agent on behalf of the Pass-Through Trustee under the
Pass-Through Trust Agreement dated as of 23 December 1997 between FSB and
United Air Lines, Inc. This letter agreement constitutes a "Confirmation" as
referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "Definitions") are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. References herein to a
"Transaction" shall be deemed to be references to a "Swap Transaction" for
the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to the 1992
ISDA Master Agreement (including the Schedule and Credit Support Annex
thereto), dated as of 23 December 1997 as amended and supplemented from
time to time (collectively, the "Agreement"), between us. All provisions
contained in the Agreement govern this Confirmation except as modified
below. In the event of any inconsistency between the Agreement and this
Confirmation, this Confirmation will govern. Capitalized terms not
11
<PAGE> 13
[LETTERHEAD]
defined in the Agreement or this Confirmation shall have the meanings
ascribed to them in the Offering Memorandum dated December 18, 1997,
relating to the United Airlines Enhanced Pass-Through Certificates, Series
1997-1 (the "Offering Memorandum").
The Agreement and each Confirmation will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
Each of CSFP and FSB represents to the other that it has entered into this
Transaction in reliance upon such independent accounting, regulatory,
legal, tax and financial advice as it deems necessary and not upon any
view expressed by the other.
2. CSFP and FSB have entered into a Transaction (the "Above Cap Liquidity
Facility") that provides an irrevocable interest rate cap. The terms of
the Above Cap Liquidity Facility are as follows:
General Terms:
Transaction Type: Rate Cap Transaction
Notional Amount: The Pool Balance for the Class A Certificates
Trade Date: 23 December 1997
Effective Date: 23 December 1997
Termination Date: The earlier of 2 March 2004 and the date upon
which the Pool Balance of the Class A
Certificates equals zero
Currency Unit: USD
Business Day: "Business Day" shall have the meaning set forth
in the Offering Memorandum
Business Day Convention: Following; provided, however, that any Floating
Amount the payment of which is deferred in
accordance with the Following Business Day
Convention shall bear interest during the
period of such deferral at the interest rate on
the Class A Certificates applicable during the
immediately preceding Calculation Period
Fixed Amounts:
12
<PAGE> 14
[LETTERHEAD]
Fixed Amount Payer: FSB
FSB Payment Date: 23 December 1997
Fixed Amount: USD 250,000
Floating Amounts:
Floating Rate Payer: CSFP
Floating Amount: On each Payment Date, the Floating Amount shall
be calculated as follows:
(i) in the event that the Interest Shortfall
(as defined in Paragraph 5 below) is equal to
zero, the Floating Amount shall equal zero;
(ii) in the event that there is a nonzero
Interest Shortfall and there are fewer than six
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating Amount
shall equal the lesser of
(a) such current nonzero Interest Shortfall,
and
(b) the Full Cap Payment Amount (as defined in
Paragraph 5 below);
(iii) in the event that there is a nonzero
Interest Shortfall and there are six or more
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating Amount
shall equal zero.
Period End Dates: Each 2 March, 2 June, 2 September, and 2
December, commencing on the Effective Date and
ending on the Termination Date, inclusive,
subject to adjustment in accordance with the
Following Business Day Convention.
Floating Amount Payment Each day that is two Business Days after a
Dates: Period End Date
13
<PAGE> 15
[LETTERHEAD]
Floating Rate Option: Three-Month LIBOR (as defined in the Offering
Memorandum)
Cap Rate: 10.04% per annum; provided, however, that the
Cap Rate shall be 9.57% per annum (i) in the
event no Registration Event (as defined in the
Registration Rights Agreement) occurs on or
prior to the 180th day after the Closing Date,
from July 1, 1998 through but excluding the date
on which such Registration Event occurs or (ii)
in the event the Shelf Registration Statement
(as defined in the Registration Rights
Agreement) ceases to be effective for more than
60 days, whether or not consecutive during any
12-month period, during the period from the 61st
day of such applicable 12-month period until
such time as the Shelf Registration Statement
again becomes effective
Designated Maturity: 3 months
Spread: None
Floating Rate Day Count Actual/360
Fraction:
Reset Dates: The first day of the relevant Calculation Period
Compounding: Inapplicable
Notice: FSB shall, on each Period End Date, provide
CSFP with notice of the then-current Pool
Balance and the then-current Interest
Shortfall; FSB shall also promptly provide CSFP
with notice of any Registration Event
3. Role of CSFP; Role of Calculation Agent
(i) FSB acknowledges that: (a) in connection with this Transaction
and this Agreement, CSFP has acted in the capacity of an arm's-length
contractual counterparty and not as its financial advisor or
fiduciary; and (b) in exercising its
14
<PAGE> 16
[LETTERHEAD]
rights or performing any of its duties under this Agreement, CSFP
will act as principal and not as a fiduciary of FSB.
(ii) The Calculation Agent shall have no responsibility for good
faith errors or omissions in making any determination or calculation
as provided herein. The calculations and determinations of the
Calculation Agent shall be made in accordance with terms of this
Confirmation having regard in each case to the criteria stipulated
herein and (where relevant) on the basis of information provided to
or obtained by it and such further inquiries as it deems necessary
and will, in the absence of manifest error, be final, conclusive and
binding on FSB and CSFP.
(iii) In performing the duties referred to herein, the Calculation
Agent shall act as principal and not as agent or fiduciary of FSB or
any other person. Each calculation and determination performed by
the Calculation Agent hereunder is performed in reliance upon the
preceding statement and subject thereto. If by performing any such
calculation or determination the Calculation Agent is rendered an
agent or fiduciary for one or more Certificateholders under
applicable law, then in relation to such parties the Calculation
Agent's right and obligation to perform such calculation or duty may
be suspended at the option of the Calculation Agent (or, if already
performed, its application may be suspended) until such calculation
or determination may be performed by the Calculation Agent as
principal and not as agent or fiduciary (or until it may be performed
by an appropriate third party that is willing and able to perform
it).
4. Credit Downgrade of CSFP
Notwithstanding any other provisions of this Agreement, within thirty days
of the commencement of any CSFP Credit Downgrade Period (as defined in
Paragraph 5 below), CSFP shall at its own expense assign and delegate, in whole
but not in part, its rights and obligations under this Agreement to another
financial institution with ratings equaling or exceeding the thresholds set
forth in the definition of CSFP Credit Downgrade Period below, or, failing such
assignment,
(i) transfer its rights and obligations under the Above-Cap
Liquidity Facility to an Affiliate that is eligible to become a
debtor under the United States Bankruptcy Code and reasonably
acceptable to the Rating Agencies, which Affiliate will provide to
FSB the Downgrade Collateral (as defined in Paragraph 5 below); or
(ii) provide to FSB such other assurances of creditworthiness as
will maintain the then-current ratings of the Class A Certificates by
the Rating Agencies.
15
<PAGE> 17
[LETTERHEAD]
5. Additional Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set forth below:
"Business Day" and "Local Business Day" mean, with respect to the
Transaction set forth in this Confirmation, "Business Day" as defined in the
Offering Memorandum for all purposes under the Agreement.
"Credit Support Amount" means
(i) in the case in which FSB is the Secured Party and CSFP has
transferred its rights and obligations to an Affiliate pursuant to
Paragraph 4 above, the Downgrade Collateral;
(ii) in all other cases, zero.
"CSFP Credit Downgrade Period" means any continuous period in which either
(i) the short term, unsecured and unsubordinated debt rating assigned to
CSFP by Moody's is below "P1," or the long term unsecured debt
rating assigned to CSFP by Moody's is below "Aa3" if there is no
such short term rating;
(ii) the short term, unsecured and unsubordinated debt rating
assigned to CSFP by S&P is below "A1+," or the long term unsecured
debt rating assigned to CSFP by S&P is below "AA-" if there is no
such short term rating;
(iii) CSFP has no rating from Moody's; or
(iv) CSFP has no rating from S&P.
"Downgrade Collateral" means
(i) during the first thirty days, inclusive, of any CSFP Credit
Downgrade Period, zero;
(ii) during the period between the thirty-first day of any CSFP
Credit Downgrade Period to the end of such CSFP Credit Downgrade
Period, inclusive, the greater of zero and
(a) the greater of 12.29% and Three-Month LIBOR (as
defined in the Offering Memorandum), minus
(b) the Cap Rate, and such difference multiplied by
16
<PAGE> 18
[LETTERHEAD]
(c) the Notional Amount, and the resulting product
multiplied by
(d) a fraction, the numerator of which is an amount
equal to the difference between (X) 18 and (Y) three times the
number of unreimbursed Interest Drawings under the Primary
Liquidity Facility, and the denominator of which is 12;
(iii) at all other times, zero.
"Full Cap Payment Amount" as of any date means the amount calculated
pursuant to Section 6.1 of the Definitions, provided, however, that for
purposes of calculating the Full Cap Payment Amount, the Notional Amount shall
be deemed to be the Notional Amount as of the date on which the Contingent Cap
Purchase Event occurs, as such term is defined in the Confirmation of even date
herewith relating to a Swap Transaction between CSFP and United Air Lines, Inc.
(the "Above-Cap Liquidity Facility Supplemental Confirmation"). CSFP shall,
promptly after learning of the occurrence of a Contingent Cap Payment Date,
provide FSB with notice thereof.
"Interest Shortfall" means, on any Floating Amount Payment Date, the
additional amount required in order for FSB to have sufficient funds to pay
interest due on any Class A certificates, after giving effect to the Interest
Drawing to be made under the Class A Primary Liquidity Facility. For purposes
of this definition, the amount of the Interest Drawing will be deemed to have
been paid to FSB whether or not such payment has in fact been made.
"Registration Rights Agreement" means the registration rights agreement
between UA, Kreditanstalt fur Wiederaufbau, FSB, and the Initial Purchasers,
dated as of 23 December 1997.
6. Payments
CSFP hereby irrevocably instructs FSB to make any payment due to CSFP
directly to the account specified below in the name of CSFP. FSB hereby
irrevocably instructs CSFP to make any payments of Floating Amounts due to FSB
directly to the account(s) specified below in the name of FSB. All payments by
CSFP of Floating Amounts due to FSB shall be made without set-off, deduction,
withholding, netting, or any other reduction.
7. Account Details
Payments to CSFP: Credit Suisse First Boston
ABA No. 026-009-179
a/c Credit Suisse Financial Products - London
a/c no. 32491401
17
<PAGE> 19
[LETTERHEAD]
Payments to FSB: First Security Bank, National Association
ABA No. 124-0000-12
a/c 051-0922115
Attn: Corporate Trust Department
Reference: Class A Pass-Through Trust Agreement
8. Offices
The Office of CSFP for the Transaction is its office at the address
specified for notices to it in the Schedule to the Agreement. The Office of
FSB for the Transaction is its office at the address specified for notices to
it in the Schedule to the Agreement.
Credit Suisse Financial Products is regulated by The Securities and
Futures Authority and has entered into this transaction as principal. The time
at which the above transaction was executed will be notified to FSB on request.
18
<PAGE> 20
[LETTERHEAD]
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By:
---------------------------
Name:
----------------------
Title:
---------------------
Confirmed as of the date first written above:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Subordination Agent on behalf of the
Pass-Through Trustee under the Pass-Through Trust
Agreement dated as of 23 December 1997 between
FSB and United Air Lines, Inc.
By:
---------------------------
Name:
----------------------
Title:
---------------------
19
<PAGE> 21
[CREDIT SUISSE LETTERHEAD]
Date: 23 December 1997
To: United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove, Illinois 60007
Attn: Eugene D. Juba
From: Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
Subject: ABOVE-CAP LIQUIDITY FACILITY SUPPLEMENTAL CONFIRMATION
Transaction Reference Number: 5284909
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between Credit Suisse Financial
Products ("CSFP") and United Air Lines, Inc. ("UA") on the Trade Date referred
to in Paragraph 2 below (the "Transaction"). This letter agreement constitutes
a "Confirmation" as referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "Definitions") are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. References herein to a
"Transaction" shall be deemed to be references to a "Swap Transaction" for
the purposes of the Definitions.
This Confirmation supplements, forms a part of, and is subject to the 1992
ISDA Master Agreement (including the Schedule and Credit Support Annex
thereto), dated as of 23 December 1997 as amended and supplemented from
time to time (collectively, the "Agreement"), between us. All provisions
contained in the Agreement govern this Confirmation except as modified
below. In the event of any inconsistency between the Agreement and this
Confirmation, this Confirmation will govern. This Confirmation refers to,
and incorporates by such reference, certain terms defined in the
confirmation of even date attached hereto as Exhibit A (the "Above Cap
Liquidity Facility Confirmation") relating to an interest rate cap
transaction between CSFP and First Security Bank, N.A. ("FSB") in its
capacity as Subordination Agent on behalf of the Pass-Through Trustee
under the Pass-Through Trust Agreement dated as of 23 December 1997
between FSB and UA. Capitalized terms not defined in the Agreement or
this Confirmation (including the incorporated provisions of the Above Cap
Liquidity Facility Confirmation) shall have the meanings ascribed to them
in the Offering
<PAGE> 22
[LETTERHEAD]
Memorandum dated December 18, 1997, relating to the United Airlines
Enhanced Pass-Through Certificates, Series 1997-1 (the "Offering
Memorandum").
The Agreement and this Confirmation will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
Each of CSFP and UA represents to the other that it has entered into this
Transaction in reliance upon such independent accounting, regulatory,
legal, tax and financial advice as it deems necessary and not upon any
view expressed by the other.
2. CSFP and UA have entered into a Transaction with the following terms that
provides for a series of contingent payments based on the Above Cap
Liquidity Facility:
General Terms:
Trade Date: 23 December 1997
Effective Date: 23 December 1997
CSFP Payment Dates: Every Payment Date under the Above Cap
Liquidity Facility after the Contingent Cap
Payment Date
CSFP Payment Amount: The Excess Interest Amount
UA Payment Dates: The Effective Date and the Contingent Cap
Payment Date
Contingent Cap Payment Two Business Days after the first Contingent
Date: Cap Payment Event to occur
UA Payment Amount: As of the Effective Date, the External Legal
Fee Payment, and as of any subsequent UA
Payment Date, the Cap Offered Side Value
as of such UA Payment Date.
Cap Offered Side Value: As of any date, the amount, as reasonably
determined by CSFP in good faith, at which
CSFP would sell the Above Cap Liquidity
Facility, assuming that the Pool Balance
were to remain fixed at the then-current
Pool Balance as of such date without
amortization.
2
<PAGE> 23
[LETTERHEAD]
Excess Interest Amount: As of any CSFP Payment Date, the greater of
zero and (i) the Full Cap Payment Amount
minus the Floating Amount (each as defined
in the Above Cap Liquidity Facility
Confirmation, regardless of whether such
Confirmation is still in force), minus (ii)
any Outstanding Cap Payment Balance. Any
amounts subtracted from the Excess Interest
Amount pursuant to clause (ii) above on any
CSFP Payment Date shall be applied to the
reduction of the Outstanding Cap Payment
Balance.
External Legal Fee Payment: United shall pay CSFP's reasonable external
legal fees with Cleary, Gottlieb, Steen &
Hamilton in connection with both this
Transaction and the Above Cap Liquidity
Facility, up to a maximum of USD 40,000.
Outstanding Cap Payment On any date after a Contingent Cap Payment
Balance: Event, the greater of zero and
(i) (a) the Cap Offered Side Value as of the
date of the Contingent Cap Payment
Event, minus
(b) any amounts paid directly by UA to
CSFP in satisfaction of UA's
obligation to pay the amount
described in clause (i)(a), minus
(c) the proceeds of any liquidation of
Collateral related to UA's
obligation to pay the amount
described in clause (i)(a), minus
(d) any prior deductions from the CSFP
Payment Amount attributable to the
Outstanding Cap Payment Balance, plus
(ii) interest from the Settlement Date on
the then-current Outstanding Cap
Payment Balance, calculated at the
Default Rate and accrued daily.
Currency Unit: USD
3
<PAGE> 24
[LETTERHEAD]
Business Day: "Business Day" shall have the meaning set
forth in the Offering Memorandum
Business Day Convention: Following; provided, however, that any CSFP
Payment Amount the payment of which is
deferred in accordance with the Following
Business Day Convention shall bear interest
during the period of such deferral at the
interest rate on the Class B Certificates
during the immediately preceding Calculation
Period
Contingent Cap Payment Each of the following events is a Contingent
Events: Cap Payment Event:
(i) a decline in UA's long-term debt rating
(a) by Moody's Investors Services, Inc.
("Moody's"), below Ba3 or (b) by Standard &
Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc. ("S&P"), below
BB-;
(ii) the occurrence of any event described
in Section 5(a)(v) or 5(a)(vii) of the
Agreement with respect to UA;
(iii) after giving effect to any Interest
Drawing to be made under the relevant
Primary Liquidity Facility,
(a) the failure by the relevant Trust to
pay interest due on any of the Class B
Certificates by the close of business
on the third Business Day following
the relevant Regular Distribution
Date, or
(b) an insufficiency of funds available to
the Subordination Agent to pay
interest on any of the Class B
Certificates,
it being agreed that for purposes of this
clause (iii), the amount of any Interest
Drawing shall be deemed to have been paid to
FSB whether or not such payment has in fact
been made;
(iv) the occurrence of any event described in
Section 5(a)(iii) of the Agreement with
respect to
4
<PAGE> 25
[LETTERHEAD]
UA; and
(v) CSFP's receipt of a notice from UA
declaring that UA elects to trigger a
Contingent Cap Payment Event.
Notice: UA shall provide notice to CSFP of the
occurrence of any Contingent Cap Payment
Event within two Business Days.
3. Role of CSFP; Role of Calculation Agent
(i) UA acknowledges that: (a) CSFP has acted in the capacity of
an arm's-length contractual counterparty and not as its financial
advisor or fiduciary; and (b) in exercising its rights or performing
any of its duties under this Agreement, CSFP will act as principal
and not as a fiduciary of UA.
(ii) The Calculation Agent shall have no responsibility for good
faith errors or omissions in making any determination or calculation
as provided herein. The calculations and determinations of the
Calculation Agent shall be made in accordance with terms of this
Confirmation having regard in each case to the criteria stipulated
herein and (where relevant) on the basis of information provided to
or obtained by it and such further inquiries as it deems necessary
and will, in the absence of manifest error, be final, conclusive and
binding on UA and CSFP.
(iii) In performing the duties referred to herein, the Calculation
Agent shall act as principal and not as agent or fiduciary of UA or
any other person. Each calculation and determination performed by
the Calculation Agent hereunder is performed in reliance upon the
preceding statement and subject thereto. If by performing any such
calculation or determination the Calculation Agent is rendered an
agent or fiduciary for one or more persons under applicable law,
then in relation to such parties the Calculation Agent's right and
obligation to perform such calculation or duty may be suspended at
the option of the Calculation Agent (or, if already performed, its
application may be suspended) until such calculation or
determination may be performed by the Calculation Agent as principal
and not as agent or fiduciary (or until it may be performed by an
appropriate third party that is willing and able to perform it).
4. Credit Downgrade of CSFP
Notwithstanding the provisions of Part 7 of the Agreement, CSFP shall
transfer its rights and obligations under this Transaction in connection with
any assignment and transfer of its rights and obligations under the "Credit
Downgrade of CSFP" provisions of the Above Cap Liquidity Facility.
5
<PAGE> 26
[LETTERHEAD]
5. Cap Repurchase
CSFP agrees with UA that, upon UA's request at any time after the
Contingent Cap Payment Date, it will repurchase UA's rights to receive payments
following the Contingent Cap Payment Date at a price equal to the amount, as
reasonably determined by CSFP in good faith, at which CSFP would buy the Above
Cap Liquidity Facility, assuming that the Pool Balance were to remain fixed at
the then-current Pool Balance as of the date of the occurrence of the
Contingent Cap Purchase Event, provided that the following conditions hold
true:
(a) there is no Contingent Cap Payment Event, Event of Default, or
Termination Event with respect to UA that has occurred and is continuing;
(b) the Outstanding Cap Payment Balance is equal to zero;
(c) CSFP is, at the time of repurchase, a dealer in dollar-denominated
interest rate options; and
(d) UA, at the time of repurchase, meets CSFP's credit criteria, as
reasonably determined by CSFP in good faith, for entering into a
transaction with the terms of this Transaction.
If CSFP repurchases UA's rights as outlined above, then this Transaction shall
continue in force as if no Contingent Cap Payment Event had occurred prior to
the date of such repurchase.
6. Additional Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set forth below:
"Business Day" and "Local Business Day" mean, with respect to the
Transactions set forth in this Confirmation, "Business Day" as defined in the
Offering Memorandum for all purposes under the Agreement.
"Credit Support Amount" means, with respect to CSFP as the Secured Party,
the UA Credit Support Amount plus the UA Supplemental Credit Support Amount.
"CSFP Credit Downgrade Period" means any continuous period in which either
(i) the short term, unsecured and unsubordinated debt rating assigned to
CSFP by Moody's is below "P1", or the long term unsecured debt rating
6
<PAGE> 27
[LETTERHEAD]
assigned to CSFP by Moody's is below "Aa3" if there is no such short
term rating;
(ii) the short term, unsecured and unsubordinated debt rating assigned to
CSFP by S&P is below "A1+", or the long term unsecured debt rating
assigned to CSFP by S&P is below "AA-" if there is no such short term
rating;
(iii) CSFP has no rating from Moody's; or
(iv) CSFP has no rating from S&P.
"Return Amount" shall have the meaning set forth in Paragraph 3(b) of the
Credit Support Annex, provided, however, that with respect to calculations
relating to the Supplemental UA Credit Support Amount, the Return Amount shall
equal zero if an event described in Section 5(a)(iii) has occurred and is
continuing with respect to FSB under the transaction described in the Above Cap
Liquidity Facility Confirmation.
"UA Credit Support Amount" means
(i) if no Contingent Cap Payment Event has yet occurred, the
greater of zero and
(a) the Cap Offered Side Value, plus
(b) an additional amount to provide for inter-week or inter-day
movements in the Cap Offered Side Value, to be reasonably
calculated by the Calculation Agent acting in good faith, minus
(c) the Pledgor's Threshold; and
(ii) if a Contingent Cap Payment Event has occurred, the related
Contingent Cap Payment Date has passed, and there is no Outstanding
Cap Payment Balance, zero.
"Supplemental UA Credit Support Amount" means, for the entire term of this
Transaction regardless of whether or not UA has any remaining payment
obligations hereunder:
(i) during the first thirty days, inclusive, of any CSFP Credit
Downgrade Period, zero;
(ii) during the period between the thirty-first day of any CSFP Credit
Downgrade Period to the end of such CSFP Credit Downgrade Period,
inclusive, the greater of zero and
7
<PAGE> 28
[LETTERHEAD]
(a) the greater of 12.29% and Three-Month LIBOR (as defined in the
Offering Memorandum), minus
(b) the Cap Rate, and such difference multiplied by
(c) the Notional Amount, and the resulting product multiplied by
(d) a fraction, the numerator of which is an amount equal to the
difference between (X) 18 and (Y) three times the number of
unreimbursed Interest Drawings under the Primary Liquidity
Facility, and the denominator of which is 12;
(iii) at all other times, zero.
7. Payments
CSFP hereby irrevocably instructs UA to make any payment due to CSFP
directly to the account specified below in the name of CSFP. UA hereby
irrevocably instructs CSFP to make any payments of Floating Amounts due to UA
directly to the account specified below in the name of UA.
8. Account Details
Payments to CSFP: Credit Suisse First Boston
ABA No. 026-009-179
a/c Credit Suisse Financial Products - London
a/c no. 32491401
Payments to UA: First Chicago National Bank
ABA No. 071-000-013
a/c UA Special Account
a/c no. 51-67795
9. Offices
The Office of CSFP for the Transaction is its office at the address
specified for notices to it in the Schedule to the Agreement. The Office of UA
for the Transaction is its office at the address specified for notices to it in
the Schedule to the Agreement.
Credit Suisse Financial Products is regulated by The Securities and
Futures Authority and has entered into this transaction as principal. The time
at which the above transaction was executed will be notified to UA on request.
8
<PAGE> 29
[LETTERHEAD]
10. Indemnification
UA will indemnify and hold harmless CSFP against any losses, claims,
damages or liabilities to which CSFP may become subject, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any provision or omission in, or action or failure to
act pursuant to, the Intercreditor Agreement, and will reimburse CSFP for any
legal or other expenses reasonably incurred by CSFP in connection with
investigating or defending any such action or claim.
Promptly following CSFP's receipt of notice of the commencement of any
action, CSFP shall, if a claim in respect thereof is to be made against UA
under this Paragraph 10, notify UA in writing of the commencement thereof; but
the failure so to notify UA shall not relieve UA from any liability which it
may have to CSFP otherwise than under this Paragraph 10 (except to the extent
the indemnification obligation of UA hereunder is increased because of such
failure). In case any such action shall be brought against CSFP and it shall
notify UA of the commencement thereof, UA shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof
with counsel reasonably satisfactory to CSFP, and, after notice from UA to CSFP
of its election so to assume the defense thereof, UA shall not be liable to
CSFP under this Paragraph 10 for any legal expenses of other counsel or any
other expenses subsequently incurred by CSFP, in connection with the defense of
such action other than reasonable costs of investigation.
9
<PAGE> 30
[LETTERHEAD]
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By: /s/ Signature
-------------------------
Name:
--------------------
Title:
-------------------
Confirmed as of the date first written above:
UNITED AIR LINES, INC.
By:
-----------------------
Name:
-------------------
Title:
------------------
10
<PAGE> 31
[LETTERHEAD]
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By:
-------------------------
Name:
--------------------
Title:
-------------------
Confirmed as of the date first written above:
UNITED AIR LINES, INC.
By:/s/Thomas A. Mutryn
----------------------
Name: Thomas A. Mutryn
-----------------
Title: Vice President and Treasurer
-----------------------------
10
<PAGE> 32
[CREDIT SUISSE LETTERHEAD]
EXHIBIT A
Date: 23 December 1997
To: First Security Bank, National Association
Corporate Trust Department
79 South Main Street
Salt Lake City, Utah 84111
Attn: Mr. Greg Hawley
From: Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
Subject: ABOVE CAP LIQUIDITY FACILITY CONFIRMATION
Transaction Reference Number:5284907
- --------------------------------------------------------------------------------
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into on the Trade Date referred to in
Paragraph 2 below (the "Transaction") between Credit Suisse Financial Products
("CSFP") and First Security Bank, National Association ("FSB"), in its capacity
as Subordination Agent on behalf of the Pass-Through Trustee under the
Pass-Through Trust Agreement dated as of 23 December 1997 between FSB and
United Air Lines, Inc. This letter agreement constitutes a "Confirmation" as
referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "Definitions") are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. References herein to a
"Transaction" shall be deemed to be references to a "Swap Transaction" for
the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to the
1992 ISDA Master Agreement (including the Schedule and Credit Support
Annex thereto), dated as of 23 December 1997 as amended and supplemented
from time to time (collectively, the "Agreement"), between us. All
provisions contained in the Agreement govern this Confirmation except as
modified below. In the event of any inconsistency between the Agreement
and this Confirmation, this Confirmation will govern. Capitalized terms
not defined in the Agreement or this Confirmation shall have the meanings
ascribed to them in the Offering
11
<PAGE> 33
[LETTERHEAD]
Memorandum dated December 18, 1997, relating to the United Airlines
Enhanced Pass-Through Certificates, Series 1997-1 (the "Offering
Memorandum").
The Agreement and each Confirmation will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
Each of CSFP and FSB represents to the other that it has entered into
this Transaction in reliance upon such independent accounting,
regulatory, legal, tax and financial advice as it deems necessary and not
upon any view expressed by the other.
2. CSFP and FSB have entered into a Transaction (the "Above Cap Liquidity
Facility") that provides an irrevocable interest rate cap. The terms of
the Above Cap Liquidity Facility are as follows:
General Terms:
Transaction Type: Rate Cap Transaction
Notional Amount: The Pool Balance for the Class B Certificates
Trade Date: 23 December 1997
Effective Date: 23 December 1997
Termination Date: The earlier of 2 March 2004 and the date upon
which the Pool Balance of the Class B
Certificates equals zero
Currency Unit: USD
Business Day: "Business Day" shall have the meaning set forth
in the Offering Memorandum
Business Day Convention: Following; provided, however, that any Floating
Amount the payment of which is deferred in
accordance with the Following Business Day
Convention shall bear interest during the
period of such deferral at the interest rate on
the Class B Certificates applicable during the
immediately preceding Calculation Period
Fixed Amounts:
Fixed Amount Payer: FSB
12
<PAGE> 34
[LETTERHEAD]
FSB Payment Date: 23 December 1997
Fixed Amount: USD 250,000
Floating Amounts:
Floating Rate Payer: CSFP
Floating Amount: On each Payment Date, the Floating Amount shall
be calculated as follows:
(i) in the event that the Interest Shortfall
(as defined in Paragraph 5 below) is equal to
zero, the Floating Amount shall equal zero;
(ii) in the event that there is a nonzero
Interest Shortfall and there are fewer than six
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating Amount
shall equal the lesser of
(a) such current nonzero Interest Shortfall,
and
(b) the Full Cap Payment Amount (as defined in
Paragraph 5 below);
(iii) in the event that there is a nonzero
Interest Shortfall and there are six or more
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating Amount
shall equal zero.
Period End Dates: Each 2 March, 2 June, 2 September, and 2
December, commencing on the Effective Date and
ending on the Termination Date, inclusive,
subject to adjustment in accordance with the
Following Business Day Convention.
Floating Amount Payment Each day that is two Business Days after a
Dates: Period End Date
Floating Rate Option: Three-Month LIBOR (as defined in the Offering
Memorandum)
Cap Rate: 10.04% per annum; provided, however, that the
13
<PAGE> 35
[LETTERHEAD]
Cap Rate shall be 9.57% per annum (i) in the
event no Registration Event (as defined in the
Registration Rights Agreement) occurs on or
prior to the 180th day after the Closing Date,
from July 1, 1998 through but excluding the date
on which such Registration Event occurs or (ii)
in the event the Shelf Registration Statement
(as defined in the Registration Rights
Agreement) ceases to be effective for more than
60 days, whether or not consecutive during any
12-month period, during the period from the 61st
day of such applicable 12-month period until
such time as the Shelf Registration Statement
again becomes effective
Designated Maturity: 3 months
Spread: None
Floating Rate Day Count Actual/360
Fraction:
Reset Dates: The first day of the relevant Calculation Period
Compounding: Inapplicable
Notice: FSB shall, on each Period End Date, provide
CSFP with notice of the then-current Pool
Balance and the then-current Interest
Shortfall; FSB shall also promptly provide CSFP
with notice of any Registration Event
3. Role of CSFP; Role of Calculation Agent
(i) FSB acknowledges that: (a) in connection with this
Transaction and this Agreement, CSFP has acted in the capacity of an
arm's-length contractual counterparty and not as its financial
advisor or fiduciary; and (b) in exercising its rights or performing
any of its duties under this Agreement, CSFP will act as principal
and not as a fiduciary of FSB.
(ii) The Calculation Agent shall have no responsibility for good
faith errors or omissions in making any determination or calculation
as provided herein. The calculations and determinations of the
Calculation Agent shall be made in accordance with terms of this
Confirmation having regard in each case to the criteria stipulated
herein and (where relevant) on the basis of information provided to
or obtained by it and such further inquiries as it
14
<PAGE> 36
[LETTERHEAD]
deems necessary and will, in the absence of manifest error, be
final, conclusive and binding on FSB and CSFP.
(iii) In performing the duties referred to herein, the Calculation
Agent shall act as principal and not as agent or fiduciary of FSB or
any other person. Each calculation and determination performed by
the Calculation Agent hereunder is performed in reliance upon the
preceding statement and subject thereto. If by performing any such
calculation or determination the Calculation Agent is rendered an
agent or fiduciary for one or more Certificateholders under
applicable law, then in relation to such parties the Calculation
Agent's right and obligation to perform such calculation or duty may
be suspended at the option of the Calculation Agent (or, if already
performed, its application may be suspended) until such calculation
or determination may be performed by the Calculation Agent as
principal and not as agent or fiduciary (or until it may be
performed by an appropriate third party that is willing and able to
perform it).
4. Credit Downgrade of CSFP
Notwithstanding any other provisions of this Agreement, within thirty days
of the commencement of any CSFP Credit Downgrade Period (as defined in
Paragraph 5 below), CSFP shall at its own expense assign and delegate, in whole
but not in part, its rights and obligations under this Agreement to another
financial institution with ratings equaling or exceeding the thresholds set
forth in the definition of CSFP Credit Downgrade Period below, or, failing such
assignment,
(i) transfer its rights and obligations under the Above-Cap
Liquidity Facility to an Affiliate that is eligible to become a
debtor under the United States Bankruptcy Code and reasonably
acceptable to the Rating Agencies, which Affiliate will provide to
FSB the Downgrade Collateral (as defined in Paragraph 5 below); or
(ii) provide to FSB such other assurances of creditworthiness as
will maintain the then-current ratings of the Class B Certificates
by the Rating Agencies.
5. Additional Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set forth below:
"Business Day" and "Local Business Day" mean, with respect to the
Transaction set forth in this Confirmation, "Business Day" as defined in the
Offering Memorandum for all purposes under the Agreement.
"Credit Support Amount" means
15
<PAGE> 37
[LETTERHEAD]
(i) in the case in which FSB is the Secured Party and CSFP has
transferred its rights and obligations to an Affiliate pursuant to
Paragraph 4 above, the Downgrade Collateral;
(ii) in all other cases, zero.
"CSFP Credit Downgrade Period" means any continuous period in which either
(i) the short term, unsecured and unsubordinated debt rating assigned
to CSFP by Moody's is below "P1," or the long term unsecured debt
rating assigned to CSFP by Moody's is below "Aa3" if there is no
such short term rating;
(ii) the short term, unsecured and unsubordinated debt rating assigned
to CSFP by S&P is below "A1+," or the long term unsecured debt
rating assigned to CSFP by S&P is below "AA-" if there is no such
short term rating;
(iii) CSFP has no rating from Moody's; or
(iv) CSFP has no rating from S&P.
"Downgrade Collateral" means
(i) during the first thirty days, inclusive, of any CSFP Credit
Downgrade Period, zero;
(ii) during the period between the thirty-first day of any CSFP Credit
Downgrade Period to the end of such CSFP Credit Downgrade Period,
inclusive, the greater of zero and
(a) the greater of 12.29% and Three-Month LIBOR (as defined in
the Offering Memorandum), minus
(b) the Cap Rate, and such difference multiplied by
(c) the Notional Amount, and the resulting product multiplied by
(d) a fraction, the numerator of which is an amount equal to
the difference between (X) 18 and (Y) three times the
number of unreimbursed Interest Drawings under the Primary
Liquidity Facility, and the denominator of which is 12;
(iii) at all other times, zero.
16
<PAGE> 38
[LETTERHEAD]
"Full Cap Payment Amount" as of any date means the amount calculated
pursuant to Section 6.1 of the Definitions, provided, however, that for
purposes of calculating the Full Cap Payment Amount, the Notional Amount shall
be deemed to be the Notional Amount as of the Contingent Cap Payment Date, as
such term is defined in the Confirmation of even date herewith relating to a
Swap Transaction between CSFP and United Air Lines, Inc. (the "Above-Cap
Liquidity Facility Supplemental Confirmation"). CSFP shall, promptly after
learning of the occurrence of a Contingent Cap Payment Date, provide FSB with
notice thereof.
"Interest Shortfall" means, on any Floating Amount Payment Date, the
additional amount required in order for FSB to have sufficient funds to pay
interest due on any Class B certificates, after giving effect to the Interest
Drawing to be made under the Class B Primary Liquidity Facility. For purposes
of this definition, the amount of the Interest Drawing will be deemed to have
been paid to FSB whether or not such payment has in fact been made.
"Registration Rights Agreement" means the registration rights agreement
between UA, Kreditanstalt fur Wiederaufbau, FSB, and the Initial Purchasers,
dated as of 23 December 1997.
6. Payments
CSFP hereby irrevocably instructs FSB to make any payment due to CSFP
directly to the account specified below in the name of CSFP. FSB hereby
irrevocably instructs CSFP to make any payments of Floating Amounts due to FSB
directly to the account(s) specified below in the name of FSB. All payments by
CSFP of Floating Amounts due to FSB shall be made without set-off, deduction,
withholding, netting, or any other reduction.
7. Account Details
Payments to CSFP: Credit Suisse First Boston
ABA No. 026-009-179
a/c Credit Suisse Financial Products - London
a/c no. 32491401
Payments to FSB: First Security Bank, National Association
ABA No. 124-0000-12
a/c 051-0922115
Attn: Corporate Trust Department
Reference: Class B Pass-Through Trust Agreement
17
<PAGE> 39
[LETTERHEAD]
8. Offices
The Office of CSFP for the Transaction is its office at the address
specified for notices to it in the Schedule to the Agreement. The Office of
FSB for the Transaction is its office at the address specified for notices to
it in the Schedule to the Agreement.
Credit Suisse Financial Products is regulated by The Securities and
Futures Authority and has entered into this transaction as principal. The time
at which the above transaction was executed will be notified to FSB on request.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
Confirmed as of the date first written above:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Subordination Agent on behalf of the
Pass-Through Trustee under the Pass-Through Trust
Agreement dated as of 23 December 1997 between
FSB and United Air Lines, Inc.
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
18
<PAGE> 1
Exhibit 4.10
(MULTICURRENCY-CROSS BORDER)
ISDA
International Swaps & Derivatives Association, Inc.
MASTER AGREEMENT
dated as of 23rd December 1997
CREDIT SUISSE FINANCIAL PRODUCTS and FIRST SECURITY BANK, NATIONAL ASSOCIATION
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming
those Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant
Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement" ), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
Copyright(c) 1992 by International Swaps & Derivatives Association, Inc.
<PAGE> 2
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to
which such change applies unless such other party gives timely notice of a
reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to
make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been
payable by one party exceeds the aggregate amount that would otherwise have
been payable by the other party, replaced by an obligation upon the party by
whom the larger aggregate amount would have been payable to pay to the other
party the excess of the larger aggregate amount over the smaller aggregate
amount.
The parties may elect in respect of two or more Transactions that a net
amount will be determined in respect of all amounts payable on the same date
in the same currency in respect of such Transactions, regardless of whether
such amounts are payable in respect of the same Transaction. The election
may be made in the Schedule or a Confirmation by specifying that
subparagraph (ii) above will not apply to the Transactions identified as
being subject to the election, together with the starting date (in which
case subparagraph (ii) above will not, or will cease to, apply to such
Transactions from such date). This election may be made separately for
different groups of Transactions and will apply separately to each pairing of
Offices through which the parties make and receive payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted
or withheld from any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (1) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date
on which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this
Agreement) or (11) a Change in Tax Law.
2
<PAGE> 3
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make any
deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount of
such liability (including any related liability for interest, but including
any related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation
will, to the extent permitted by law and subject to Section 6(c), be required
to pay interest (before as well as after judgment) on the overdue amount to the
other party on demand in the same currency as such overdue amount, for the
period from (and including) the original due date for payment to (but
excluding) the date of actual payment, at the Default Rate. Such interest will
be calculated on the basis of daily compounding and the actual number of days
elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in
the performance of any obligation required to be settled by delivery, it will
compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be
deemed to be repeated by each party on each date on which a Transaction is
entered into and, in the case of the representations in Section 3(f), at all
times until the termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it, any
provision of its constitutional documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets
or any contractual restriction binding on or affecting it or any of its
assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
3
<PAGE> 4
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a
result of its entering into or performing its obligations under this Agreement
or any Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency
or official or any arbitrator that is likely to affect the legality, validity
or enforceability against it of this Agreement or any Credit Support Document
to which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of the
date of the information, true, accurate and complete in every material
respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of such
demand), with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be executed and
to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section ll, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated,
4
<PAGE> 5
organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this
Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other
party against any Stamp Tax levied or imposed upon the other party or in
respect of the other party's execution or performance of this Agreement by any
such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with
respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each Transaction
to which such Credit Support Document relates without the written
consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
5
<PAGE> 6
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on the
due date thereof in an aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments (after giving effect
to any applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant
to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets;
(7) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration
or other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within 30 days thereafter; (8) causes or
is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to any
of the events specified in clauses (1) to (7) (inclusive); or (9)
takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
6
<PAGE> 7
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the is specified pursuant to (v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into, or
due to the promulgation of, or any change in, the interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or
such Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either ( 1 ) be required to pay
an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party such party ("X"), any
Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers all
or substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will not
constitute an Event of Default.
7
<PAGE> 8
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions. If,
however, "Automatic Early Termination" is specified in the Schedule as applying
to a party, then an Early Termination Date in respect of all outstanding
Transactions will occur immediately upon the occurrence with respect to such
party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6)
or, to the extent analogous thereto, (8), and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence with respect to such party of an Event of
Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,
(8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party
is the Affected Party, the Affected Party will, as a condition to its right
to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will
give notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)( 1 ) or
a Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax
Event Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a Credit
Event Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then
8
<PAGE> 9
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section 2(a)(i)
or 2(e) in respect of the Terminated Transactions will be required to be
made, but without prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and a
payment method, either the "First Method" or the "Second Method". If the parties
fail to designate a payment measure or payment method in the Schedule, it will
be deemed that "Market Quotation" or the "Second Method", as the case may be,
shall apply. The amount, if any, payable in respect of an Early Termination
Date and determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event
of Default:--
(1) First Method and Marker Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over
(B) the Termination Currency Equivalent of the Unpaid Amounts owing
to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the sum
of the Settlement Amount (determined by the
9
<PAGE> 10
Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Termination Currency Equivalent
of the Unpaid Amounts owing to the Defaulting Party. If that amount
is a positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the Defaulting
Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the Transactions
are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parries. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with the
higher Settlement Amount ("X") and the Settlement Amount of the
party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (11) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions
are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the loss
of bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
10
<PAGE> 11
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of
the other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be
void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered
into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts payable in respect of this Agreement. If for any reason the
amount in the Contractual Currency so received falls short of the amount in
the Contractual Currency payable in respect of this Agreement, the party
required to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual
Currency payable in respect of this Agreement, the party receiving the payment
will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party
is entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid
in such other currency if such shortfall or such excess arises or results from
any variation between the rate of exchange at which the Contractual Currency
is converted into the currency of the judgment or order for the purposes of
such judgment or order and the rate of exchange at which such party is able,
acting in a reasonable manner and in good faith in converting the currency
received into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation, any
premiums and costs of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
11
<PAGE> 12
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced
by a facsimile transmission) and executed by each of the parties or confirmed
by an exchange of telexes or electronic messages on an electronic messaging
system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive
the termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of
booking office or jurisdiction of incorporation or organisation of such
party, the obligations of such party are the same as if it had entered into
the Transaction through its head or home office. This representation will be
deemed to be repeated by such party on each date on which a Transaction is
entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including legal
fees and Stamp Tax, incurred by such other party by reason of the enforcement
and protection of its rights under this Agreement or any Credit Support
Document
12
<PAGE> 13
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(c) GOVERNING LAB. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the
Civil Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to
service of process given in the manner provided for notices in Section 12.
Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues
and assets (irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of
any judgment to which it or its revenues or assets might otherwise be
entitled in any Proceedings in the courts of any jurisdiction and irrevocably
agrees, to the extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b)
with respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of
the entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after
the date on which the relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified
as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
<PAGE> 15
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed
in respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"LAW " includes any treaty, law, rule or regulation (as modified, in the case
of tax matters, by the practice of any relevant governmental revenue authority)
and "lawful" and "unlawful" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and
foreign currency deposits) (a) in relation to any obligation under Section
2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so
specified, as otherwise agreed by the parties in writing or determined pursuant
to provisions contained, or incorporated by reference, in this Agreement, (b)
in relation to any other payment, in the place where the relevant account is
located and, if different, in the principal financial centre, if any, of the
currency of such payment, (c) in relation to any notice or other communication,
including notice contemplated under Section 5(a)(i), in the city specified in
the address for notice provided by the recipient and, in the case of a notice
contemplated by Section 2(b), in the place where the relevant new account is to
be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations
for performance with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating, liquidating,
obtaining or reestablishing any hedge or related trading position (or any gain
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 11. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition
precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for the
occurrence of the relevant Early Termination Date, have
15
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is
to be included. The Replacement Transaction would be subject to such
documentation as such party and the Reference Market-maker may, in good faith,
agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time
zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if
more than one quotation has the same highest value or lowest value, then one
of such quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of such
Terminated Transaction or group of Terminated Transactions cannot be
determined.
"NON-DEFAULT RATE" MEANS a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head
or home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention
or withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or
imposed on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not
(in the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16
<PAGE> 17
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of
such party or any applicable Specified Entity of such party) and the other
party to this Agreement (or any Credit Support Provider of such other party or
any applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction, cross-currency
rate swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions), (b) any
combination of these transactions and (c) any other transaction identified as a
Specified transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Agreement other than a stamp, registration,
documentation or similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination
Date (a) if resulting from a Termination Event, all Affected transactions and
(b) if resulting from an Event of Default, all transactions (in either case) in
effect immediately before the effectiveness of the notice designating that
Early Termination Date (or, if "Automatic Early Termination" applies,
immediately before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount
denominated in the Termination Currency, such Termination Currency amount and,
in respect of any amount denominated in a currency other than the Termination
Currency (the "Other Currency"), the amount in the Termination Currency
determined by the party making the relevant determination as being required to
purchase such amount of such Other Currency as at the relevant Early
Termination Date, or, if the relevant Market Quotation or Loss (as the case may
be), is determined as of a later date, that later date, with the Termination
Currency at the rate equal to the spot exchange rate of the foreign exchange
agent (selected as provided below) for the purchase of such Other Currency with
the Termination Currency at or about 11:00 a.m. (in the city in which such
foreign exchange agent is located) on such date as would be customary for the
determination of such a rate for the purchase of such Other Currency for value
on the relevant Early Termination Date or that later date. The foreign exchange
agent will, if only one party is obliged to make a determination under Section
6(e), be selected in good faith by that party and otherwise will be agreed by
the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon
Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of
the cost (without proof or evidence of any actual cost) to each party (as
certified by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated transaction, for each obligation under
Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to such party on or prior to such Early
Termination Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market
17
<PAGE> 18
value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding)
such Early Termination Date, at the Applicable Rate. Such amounts of interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CREDIT SUISSE FINANCIAL PRODUCTS FIRST SECURITY BANK, NATIONAL ASSOCIATION
- -------------------------------- -----------------------------------------
(Name of Party) (Name of Party)
By: /s/ Jeanette Whomersley By:
---------------------------- --------------------------------------
Name: Jeanette Whomersley Name:
Title: Vice President Title:
Date: Date:
By: /s/ Antony C. Blunden
----------------------------
Name: Antony C. Blunden
Title: Director of Compliance Department
Date:
18
<PAGE> 19
value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding)
such Early Termination Date, at the Applicable Rate. Such amounts of interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CREDIT SUISSE FINANCIAL PRODUCTS FIRST SECURITY BANK, NATIONAL ASSOCIATION(1)
- -------------------------------- -----------------------------------------
(Name of Party) (Name of Party)
By: By: /s/ C. Scott Nielsen
---------------------------- --------------------------------------
Name: Name: C. Scott Nielsen
Title: Title: Vice President
Date: Date:
(1)Signing in its capacity as Subordination Agent under the Pass-Through Trust
Agreement dated as of 23 December 1997 between First Security Bank, National
Association and United Air Lines, Inc.
18
<PAGE> 20
SCHEDULE
to the
MASTER AGREEMENT
dated as of 23 December 1997
between
CREDIT SUISSE FINANCIAL PRODUCTS, an AND FIRST SECURITY BANK, NATIONAL
unlimited company incorporated under ASSOCIATION, a national banking
the laws of England and Wales association, in its capacity as
("CSFP") Subordination Agent on behalf
of the Pass-Through Trustee
under the Pass-Through Trust
Agreement dated as of 23
December 1997 between FSB and
United Air Lines Inc.
("FSB")
PART 1
TERMINATION PROVISIONS
In this Agreement:
(A) SPECIFIED ENTITY. None.
(B) SPECIFIED TRANSACTION. Specified Transaction will have the meaning
specified in Section 14.
(C) CROSS DEFAULT. The "Cross Default" provision (Section 5(a)(vi)) will not
apply to FSB and will apply to CSFP.
(D) CREDIT EVENT UPON MERGER. The "Credit Event Upon Merger" provision
(Section 5(b)(iv)) will not apply to FSB and will apply to CSFP.
(E) AUTOMATIC EARLY TERMINATION. The "Automatic Early Termination" provision
of Section 6(a) will not apply.
(F) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e), the Second
Method and Market Quotation will apply.
(G) TERMINATION CURRENCY. "Termination Currency" means United States Dollars.
(H) ADDITIONAL TERMINATION EVENT. Additional Termination Event will not apply
except as set forth in any Confirmation.
<PAGE> 21
PART 2
TAX REPRESENTATIONS
(A) PAYER TAX REPRESENTATIONS. For the purpose of Section 3(e), CSFP and FSB
each make the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e)) to be
made by it to the other party under this Agreement. In making this
representation, it may rely on:
(i) the accuracy of any representation made by the other party pursuant
to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained in
Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of
any document provided by the other party pursuant to Section 4(a)(i)
or 4(a)(iii); and
provided that it shall not be a breach of this representation where
reliance is placed on clause (ii), and the other party does not deliver a
form or document under Section 4(a)(iii) by reason of material prejudice to
its legal or commercial position.
(B) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f),
(i) CSFP represents that (A) it is entering into each Transaction
in the ordinary course of its trade as, and is, a recognized U.K.
bank and (B) it will bring into account payments made and received
in respect of each Transaction in computing its income for United
Kingdom tax purposes.
(ii) FSB represents that it is a national banking association organized
under the laws of the United States.
2
<PAGE> 22
PART 3
AGREEMENT TO DELIVER DOCUMENTS
Each party agrees to deliver the following documents as applicable:
(a) For the purpose of Section 4(a)(i), tax forms, documents or certificates
to be delivered are:
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE
DELIVER DOCUMENTS CERTIFICATE DELIVERED
<S> <C> <C>
CSFP A duly executed IRS Upon execution of this
form W-8 Agreement
</TABLE>
(b) For the purpose of Section 4(a)(ii), other documents to be delivered are:
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION 3(D)
DELIVER DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
<S> <C> <C> <C>
CSFP and FSB Evidence reasonably Upon execution of this Yes
satisfactory to the Agreement and, if
other party as to the requested, upon
names, true signatures execution of any
and authority of the Confirmation.
officer or officials
signing this Agreement
or any Confirmation on
its behalf
CSFP A copy of the annual Upon request, as soon Yes
report for CSFP as publicly available
containing audited or
certified financial
statements for the most
recently ended
financial year
CSFP Opinion of counsel to Upon execution of this No
CSFP reasonably Agreement
satisfactory in form
and substance to FSB
</TABLE>
3
<PAGE> 23
PART 4
MISCELLANEOUS
(A) ADDRESSES FOR NOTICES. For the purpose of Section 12(a):
(i) (1) Address for notices or communications to CSFP (other than by
facsimile):
Office: London Attention: (1) Global Risk Manager;
Address: One Cabot Square (2) Director - Operations
London E14 4QJ Department;
England (3) Director - Legal Department
Telex No.: 264521 Answerback: CSFINP G
with a copy to:
CSFP Capital Inc.
Eleven Madison Avenue
New York, NY 10010
Attention: Head Structured Options Trader
(For all purposes.)
(2) For the purposes of facsimile notices or communications under this
Agreement (other than a notice or communication under Section 5 or 6):
Facsimile No.: 44 171 516 2686
Attention: Director - Legal Department
Telephone number for oral confirmation of receipt of facsimile in legible
form: 44 171 888 2028 Designated responsible employee for the purposes of
Section 12(a)(iii): Senior Legal Secretary
(ii) Address for notices or communications to FSB:
Address: First Security Bank, National Association
Corporate Trust Department
79 South Main Street
Salt Lake City, Utah 84111
Telephone No.: 801 350 3630
Facsimile No.: 801 246 5826
(For all purposes.)
(B) PROCESS AGENT. For the purpose of Section 13(c):
CSFP appoints CSFP Capital, Inc., Eleven Madison Avenue, New York, New York
10010 as its Process Agent.
(C) OFFICES. The provisions of Section 10(a) will apply to this
Agreement.
(D) MULTIBRANCH PARTY. For the purpose of Section 10(c):
4
<PAGE> 24
CSFP is not a Multibranch Party.
FSB is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is CSFP, unless otherwise
agreed in a Confirmation in relation to the relevant Transaction, and unless an
Event of Default with respect to CSFP has occurred and is continuing, in which
case FSB may appoint at its own expense one of the following five entities as
Calculation Agent: The Chase Manhattan Bank, Morgan Guaranty Trust Company,
Merrill Lynch Capital Services, Bankers Trust Company, or Citibank, N.A.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document: To
be promptly negotiated in good faith upon the occurrence of an event under any
Transaction giving rise to an obligation to post collateral.
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to CSFP: None.
Credit Support Provider means in relation to FSB: None.
(h) GOVERNING LAW. This Agreement and each Confirmation will be
governed by and construed in accordance with the laws of the State of New York
without reference to choice of law doctrine.
(i) NETTING OF PAYMENTS. Section 2(c)(ii) of this Agreement will apply.
(j) AFFILIATE. Affiliate will have the meaning specified in Section 14.
5
<PAGE> 25
PART 5
OTHER PROVISIONS
(a) DEFINITIONS. Unless otherwise specified in a Confirmation, this Agreement
and each Transaction between the parties are subject to the 1991 ISDA
Definitions as published by the International Swap Dealers Association, Inc.
(the "Definitions"), and will be governed in all relevant respects by the
provisions set forth in the Definitions, without regard to any amendment to the
Definitions subsequent to the date hereof. The provisions of the Definitions
are incorporated by reference in and shall be deemed a part of this Agreement,
except that references in the Definitions to a "Swap Transaction" shall be
deemed references to a "Transaction" for purposes of this Agreement. In the
event of any inconsistency between the provisions of this Agreement and the
Definitions, this Agreement will prevail.
(b) INDEPENDENT RELIANCE. Except as provided in Section 3 of this Agreement,
CSFP and FSB each represents to the other that it is entering into this
Agreement and will enter into each Transaction in reliance upon such tax,
accounting, regulatory, legal, and financial advice as it deems necessary and
not upon any view expressed by the other.
(c) EVENTS OF DEFAULT. The events described in Section 5 shall not constitute
Events of Default with respect to FSB.
6
<PAGE> 1
Exhibit 4.11
Date: 23 December 1997
To: First Security Bank, National Association
Corporate Trust Department
79 South Main Street
Salt Lake City, Utah 84111
Attn: Mr. Greg Hawley
From: Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
Subject: ABOVE CAP LIQUIDITY FACILITY CONFIRMATION
Transaction Reference Number: 5284905
- --------------------------------------------------------------------------------
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into on the Trade Date referred to in
Paragraph 2 below (the "Transaction") between Credit Suisse Financial Products
("CSFP") and First Security Bank, National Association ("FSB"), in its capacity
as Subordination Agent on behalf of the Pass-Through Trustee under the
Pass-Through Trust Agreement dated as of 23 December 1997 between FSB and
United Air Lines, Inc. This letter agreement constitutes a "Confirmation" as
referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "Definitions") are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. References herein to a
"Transaction" shall be deemed to be references to a "Swap Transaction" for
the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to the
1992 ISDA Master Agreement (including the Schedule and Credit Support
Annex thereto), dated as of 23 December 1997 as amended and supplemented
from time to time (collectively, the "Agreement"), between us. All
provisions contained in the Agreement govern this Confirmation except as
modified below. In the event of any inconsistency between the Agreement
and this Confirmation, this Confirmation will govern. Capitalized terms
not defined in the Agreement or this Confirmation shall have the meanings
ascribed to them in the Offering Memorandum dated December 18, 1997,
relating to the United Airlines
<PAGE> 2
[LETTERHEAD]
Enhanced Pass-Through Certificates, Series 1997-1 (the "Offering
Memorandum").
The Agreement and each Confirmation will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
Each of CSFP and FSB represents to the other that it has entered into
this Transaction in reliance upon such independent accounting,
regulatory, legal, tax and financial advice as it deems necessary and not
upon any view expressed by the other.
2. CSFP and FSB have entered into a Transaction (the "Above Cap Liquidity
Facility") that provides an irrevocable interest rate cap. The terms of
the Above Cap Liquidity Facility are as follows:
General Terms:
Transaction Type: Rate Cap Transaction
Notional Amount: The Pool Balance for the Class A Certificates
Trade Date: 23 December 1997
Effective Date: 23 December 1997
Termination Date: The earlier of 2 March 2004 and the date upon
which the Pool Balance of the Class A
Certificates equals zero
Currency Unit: USD
Business Day: "Business Day" shall have the meaning set forth
in the Offering Memorandum
Business Day Convention: Following; provided, however, that any Floating
Amount the payment of which is deferred in
accordance with the Following Business Day
Convention shall bear interest during the
period of such deferral at the interest rate on
the Class A Certificates applicable during the
immediately preceding Calculation Period
Fixed Amounts:
Fixed Amount Payer: FSB
2
<PAGE> 3
[LETTERHEAD]
FSB Payment Date: 23 December 1997
Fixed Amount: USD 250,000
Floating Amounts:
Floating Rate Payer: CSFP
Floating Amount: On each Payment Date, the Floating Amount shall
be calculated as follows:
(i) in the event that the Interest Shortfall
(as defined in Paragraph 5 below) is equal to
zero, the Floating Amount shall equal zero;
(ii) in the event that there is a nonzero
Interest Shortfall and there are fewer than six
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating Amount
shall equal the lesser of
(a) such current nonzero Interest Shortfall,
and
(b) the Full Cap Payment Amount (as defined in
Paragraph 5 below);
(iii) in the event that there is a nonzero
Interest Shortfall and there are six or more
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating Amount
shall equal zero.
Period End Dates: Each 2 March, 2 June, 2 September, and 2
December, commencing on the Effective Date and
ending on the Termination Date, inclusive,
subject to adjustment in accordance with the
Following Business Day Convention.
Floating Amount Payment Each day that is two Business Days after a
Dates: Period End Date
Floating Rate Option: Three-Month LIBOR (as defined in the Offering
Memorandum)
3
<PAGE> 4
[LETTERHEAD]
Cap Rate: 10.04% per annum; provided, however, that the
Cap Rate shall be 9.57% per annum (i) in the
event no Registration Event (as defined in the
Registration Rights Agreement) occurs on or
prior to the 180th day after the Closing Date,
from July 1, 1998 through but excluding the date
on which such Registration Event occurs or (ii)
in the event the Shelf Registration Statement
(as defined in the Registration Rights
Agreement) ceases to be effective for more than
60 days, whether or not consecutive during any
12-month period, during the period from the 61st
day of such applicable 12-month period until
such time as the Shelf Registration Statement
again becomes effective
Designated Maturity: 3 months
Spread: None
Floating Rate Day Count Actual/360
Fraction:
Reset Dates: The first day of the relevant Calculation Period
Compounding: Inapplicable
Notice: FSB shall, on each Period End Date, provide
CSFP with notice of the then-current Pool
Balance and the then-current Interest
Shortfall; FSB shall also promptly provide CSFP
with notice of any Registration Event
3. Role of CSFP; Role of Calculation Agent
(i) FSB acknowledges that: (a) in connection with this Transaction and
this Agreement, CSFP has acted in the capacity of an arm's-length
contractual counterparty and not as its financial advisor or
fiduciary; and (b) in exercising its rights or performing any of
its duties under this Agreement, CSFP will act as principal and not
as a fiduciary of FSB.
(ii) The Calculation Agent shall have no responsibility for good
faith errors or omissions in making any determination or calculation
as provided herein. The calculations and determinations of the
Calculation Agent shall be made in accordance with terms of this
Confirmation having regard in each case to the criteria stipulated
herein and (where relevant) on the basis of
4
<PAGE> 5
[LETTERHEAD]
information provided to or obtained by it and such further
inquiries as it deems necessary and will, in the absence of
manifest error, be final, conclusive and binding on FSB and CSFP.
(iii) In performing the duties referred to herein, the Calculation
Agent shall act as principal and not as agent or fiduciary of FSB or
any other person. Each calculation and determination performed by
the Calculation Agent hereunder is performed in reliance upon the
preceding statement and subject thereto. If by performing any such
calculation or determination the Calculation Agent is rendered an
agent or fiduciary for one or more Certificateholders under
applicable law, then in relation to such parties the Calculation
Agent's right and obligation to perform such calculation or duty may
be suspended at the option of the Calculation Agent (or, if already
performed, its application may be suspended) until such calculation
or determination may be performed by the Calculation Agent as
principal and not as agent or fiduciary (or until it may be
performed by an appropriate third party that is willing and able to
perform it).
4. Credit Downgrade of CSFP
Notwithstanding any other provisions of this Agreement, within thirty days
of the commencement of any CSFP Credit Downgrade Period (as defined in
Paragraph 5 below), CSFP shall at its own expense assign and delegate, in whole
but not in part, its rights and obligations under this Agreement to another
financial institution with ratings equaling or exceeding the thresholds set
forth in the definition of CSFP Credit Downgrade Period below, or, failing such
assignment,
(i) transfer its rights and obligations under the Above-Cap Liquidity
Facility to an Affiliate that is eligible to become a debtor under
the United States Bankruptcy Code and reasonably acceptable to the
Rating Agencies, which Affiliate will provide to FSB the Downgrade
Collateral (as defined in Paragraph 5 below); or
(ii) provide to FSB such other assurances of creditworthiness as will
maintain the then-current ratings of the Class A Certificates by
the Rating Agencies.
5. Additional Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set forth below:
"Business Day" and "Local Business Day" mean, with respect to the
Transaction set forth in this Confirmation, "Business Day" as defined in the
Offering Memorandum for all purposes under the Agreement.
"Credit Support Amount" means
5
<PAGE> 6
[LETTERHEAD]
(i) in the case in which FSB is the Secured Party and CSFP has
transferred its rights and obligations to an Affiliate pursuant to
Paragraph 4 above, the Downgrade Collateral;
(ii) in all other cases, zero.
"CSFP Credit Downgrade Period" means any continuous period in which either
(i) the short term, unsecured and unsubordinated debt rating
assigned to CSFP by Moody's is below "P1," or the long term
unsecured debt rating assigned to CSFP by Moody's is below "Aa3" if
there is no such short term rating;
(ii) the short term, unsecured and unsubordinated debt rating
assigned to CSFP by S&P is below "A1+," or the long term unsecured
debt rating assigned to CSFP by S&P is below "AA-" if there is no
such short term rating;
(iii) CSFP has no rating from Moody's; or
(iv) CSFP has no rating from S&P.
"Downgrade Collateral" means
(i) during the first thirty days, inclusive, of any CSFP Credit
Downgrade Period, zero;
(ii) during the period between the thirty-first day of any CSFP
Credit Downgrade Period to the end of such CSFP Credit Downgrade
Period, inclusive, the greater of zero and
(a) the greater of 12.29% and Three-Month LIBOR (as defined in
the Offering Memorandum), minus
(b) the Cap Rate, and such difference multiplied by
(c) the Notional Amount, and the resulting product multiplied by
(d) a fraction, the numerator of which is an amount equal to the
difference between (X) 18 and (Y) three times the number
of unreimbursed Interest Drawings under the Primary Liquidity
Facility, and the denominator of which is 12;
(iii) at all other times, zero.
6
<PAGE> 7
[LETTERHEAD]
"Full Cap Payment Amount" as of any date means the amount calculated
pursuant to Section 6.1 of the Definitions, provided, however, that for
purposes of calculating the Full Cap Payment Amount, the Notional Amount shall
be deemed to be the Notional Amount as of the date on which the Contingent Cap
Purchase Event occurs , as such term is defined in the Confirmation of even
date herewith relating to a Swap Transaction between CSFP and United Air Lines,
Inc. (the "Above-Cap Liquidity Facility Supplemental Confirmation"). CSFP
shall, promptly after learning of the occurrence of a Contingent Cap Payment
Date, provide FSB with notice thereof.
"Interest Shortfall" means, on any Floating Amount Payment Date, the
additional amount required in order for FSB to have sufficient funds to pay
interest due on any Class A certificates, after giving effect to the Interest
Drawing to be made under the Class A Primary Liquidity Facility. For purposes
of this definition, the amount of the Interest Drawing will be deemed to have
been paid to FSB whether or not such payment has in fact been made.
"Registration Rights Agreement" means the registration rights agreement
between UA, Kreditanstalt fur Wiederaufbau, FSB, and the Initial Purchasers,
dated as of 23 December 1997.
6. Payments
CSFP hereby irrevocably instructs FSB to make any payment due to CSFP
directly to the account specified below in the name of CSFP. FSB hereby
irrevocably instructs CSFP to make any payments of Floating Amounts due to FSB
directly to the account(s) specified below in the name of FSB. All payments by
CSFP of Floating Amounts due to FSB shall be made without set-off, deduction,
withholding, netting, or any other reduction.
7. Account Details
Payments to CSFP: Credit Suisse First Boston
ABA No. 026-009-179
a/c Credit Suisse Financial Products - London
a/c no. 32491401
Payments to FSB: First Security Bank, National Association
ABA No. 124-0000-12
a/c 051-0922115
Attn: Corporate Trust Department
Reference: Class A Pass-Through Trust
Agreement
7
<PAGE> 8
[LETTERHEAD]
8. Offices
The Office of CSFP for the Transaction is its office at the address
specified for notices to it in the Schedule to the Agreement. The Office of
FSB for the Transaction is its office at the address specified for notices to
it in the Schedule to the Agreement.
Credit Suisse Financial Products is regulated by The Securities and
Futures Authority and has entered into this transaction as principal. The time
at which the above transaction was executed will be notified to FSB on request.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By: /s/ Jeanette Whomersley
---------------------------
Name: Jeanette Whomersley
----------------------
Title: Vice President
---------------------
Confirmed as of the date first written above:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Subordination Agent on behalf of the
Pass-Through Trustee under the Pass-Through Trust
Agreement dated as of 23 December 1997 between
FSB and United Air Lines, Inc.
By:
---------------------------
Name:
----------------------
Title:
---------------------
<PAGE> 9
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By:
---------------------------
Name:
----------------------
Title:
---------------------
Confirmed as of the date first written above:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Subordination Agent on behalf of the
Pass-Through Trustee under the Pass-Through Trust
Agreement dated as of 23 December 1997 between
FSB and United Air Lines, Inc.
By: /s/ C. Scott Nielsen
---------------------------
Name: C. Scott Nielsen
----------------------
Title: Vice President
---------------------
<PAGE> 10
[Letterhead]
Date: 23 December 1997
To: First Security Bank, National Association
Corporate Trust Department
79 South Main Street
Salt Lake City, Utah 84111
Attn: Mr. Greg Hawley
From: Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
Subject: ABOVE CAP LIQUIDITY FACILITY CONFIRMATION
Transaction Reference Number: 5284907
- --------------------------------------------------------------------------------
Dear Sirs:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into on the Trade Date referred to in
Paragraph 2 below (the "Transaction") between Credit Suisse Financial Products
("CSFP") and First Security Bank, National Association ("FSB"), in its capacity
as Subordination Agent on behalf of the Pass-Through Trustee under the
Pass-Through Trust Agreement dated as of 23 December 1997 between FSB and
United Air Lines, Inc. This letter agreement constitutes a "Confirmation" as
referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "Definitions") are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. References herein to a
"Transaction" shall be deemed to be references to a "Swap Transaction" for
the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to the
1992 ISDA Master Agreement (including the Schedule and Credit Support
Annex thereto), dated as of 23 December 1997 as amended and supplemented
from time to time (collectively, the "Agreement"), between us. All
provisions contained in the Agreement govern this Confirmation except as
modified below. In the event of any inconsistency between the Agreement
and this Confirmation, this Confirmation will govern. Capitalized terms
not defined in the Agreement or this Confirmation shall have the meanings
ascribed to them in the Offering Memorandum dated December 18, 1997,
relating to the United Airlines
<PAGE> 11
[LETTERHEAD]
Enhanced Pass-Through Certificates, Series 1997-1 (the "Offering
Memorandum").
The Agreement and each Confirmation will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
Each of CSFP and FSB represents to the other that it has entered into
this Transaction in reliance upon such independent accounting,
regulatory, legal, tax and financial advice as it deems necessary and not
upon any view expressed by the other.
2. CSFP and FSB have entered into a Transaction (the "Above Cap Liquidity
Facility") that provides an irrevocable interest rate cap. The terms of
the Above Cap Liquidity Facility are as follows:
General Terms:
Transaction Type: Rate Cap Transaction
Notional Amount: The Pool Balance for the Class B Certificates
Trade Date: 23 December 1997
Effective Date: 23 December 1997
Termination Date: The earlier of 2 March 2004 and the date
upon which the Pool Balance of the Class B
Certificates equals zero
Currency Unit: USD
Business Day: "Business Day" shall have the meaning set
forth in the Offering Memorandum
Business Day Convention: Following; provided, however, that any
Floating Amount the payment of which is
deferred in accordance with the Following
Business Day Convention shall bear interest
during the period of such deferral at the
interest rate on the Class B Certificates
applicable during the immediately preceding
Calculation Period
Fixed Amounts:
Fixed Amount Payer: FSB
2
<PAGE> 12
[LETTERHEAD]
FSB Payment Date: 23 December 1997
Fixed Amount: USD 250,000
Floating Amounts:
Floating Rate Payer: CSFP
Floating Amount: On each Payment Date, the Floating Amount
shall be calculated as follows:
(i) in the event that the Interest Shortfall
(as defined in Paragraph 5 below) is equal to
zero, the Floating Amount shall equal zero;
(ii) in the event that there is a nonzero
Interest Shortfall and there are fewer than
six unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating
Amount shall equal the lesser of
(a) such current nonzero Interest Shortfall,
and
(b) the Full Cap Payment Amount (as defined in
Paragraph 5 below);
(iii) in the event that there is a nonzero
Interest Shortfall and there are six or more
unreimbursed Interest Drawings under the
Primary Liquidity Facility, the Floating
Amount shall equal zero.
Period End Dates: Each 2 March, 2 June, 2 September, and 2
December, commencing on the Effective Date and
ending on the Termination Date, inclusive,
subject to adjustment in accordance with the
Following Business Day Convention.
Floating Amount Payment Each day that is two Business Days after a
Dates: Period End Date
Floating Rate Option: Three-Month LIBOR (as defined in the Offering
Memorandum)
Cap Rate: 10.04% per annum; provided, however, that the
Cap Rate shall be 9.57% per annum (i) in the
3
<PAGE> 13
[LETTERHEAD]
event no Registration Event (as defined in the
Registration Rights Agreement) occurs on or
prior to the 180th day after the Closing Date,
from July 1, 1998 through but excluding the date
on which such Registration Event occurs or (ii)
in the event the Shelf Registration Statement
(as defined in the Registration Rights
Agreement) ceases to be effective for more than
60 days, whether or not consecutive during any
12-month period, during the period from the 61st
day of such applicable 12-month period until
such time as the Shelf Registration Statement
again becomes effective
Designated Maturity: 3 months
Spread: None
Floating Rate Day
Count Fraction: Actual/360
Reset Dates: The first day of the relevant Calculation Period
Compounding: Inapplicable
Notice: FSB shall, on each Period End Date, provide CSFP
with notice of the then-current Pool Balance
and the then-current Interest Shortfall; FSB
shall also promptly provide CSFP with notice
of any Registration Event
3. Role of CSFP; Role of Calculation Agent
(i) FSB acknowledges that: (a) in connection with this Transaction and
this Agreement, CSFP has acted in the capacity of an arm's-length
contractual counterparty and not as its financial advisor or
fiduciary; and (b) in exercising its rights or performing any of its
duties under this Agreement, CSFP will act as principal and not as
a fiduciary of FSB.
(ii) The Calculation Agent shall have no responsibility for good faith
errors or omissions in making any determination or calculation as
provided herein. The calculations and determinations of the
Calculation Agent shall be made in accordance with terms of this
Confirmation having regard in each case to the criteria stipulated
herein and (where relevant) on the basis of information provided to
or obtained by it and such further inquiries as it
4
<PAGE> 14
[LETTERHEAD]
deems necessary and will, in the absence of manifest error, be
final, conclusive and binding on FSB and CSFP.
(iii) In performing the duties referred to herein, the Calculation
Agent shall act as principal and not as agent or fiduciary of FSB or
any other person. Each calculation and determination performed by
the Calculation Agent hereunder is performed in reliance upon the
preceding statement and subject thereto. If by performing any such
calculation or determination the Calculation Agent is rendered an
agent or fiduciary for one or more Certificateholders under
applicable law, then in relation to such parties the Calculation
Agent's right and obligation to perform such calculation or duty may
be suspended at the option of the Calculation Agent (or, if already
performed, its application may be suspended) until such calculation
or determination may be performed by the Calculation Agent as
principal and not as agent or fiduciary (or until it may be
performed by an appropriate third party that is willing and able to
perform it).
4. Credit Downgrade of CSFP
Notwithstanding any other provisions of this Agreement, within thirty days
of the commencement of any CSFP Credit Downgrade Period (as defined in
Paragraph 5 below), CSFP shall at its own expense assign and delegate, in whole
but not in part, its rights and obligations under this Agreement to another
financial institution with ratings equaling or exceeding the thresholds set
forth in the definition of CSFP Credit Downgrade Period below, or, failing such
assignment,
(i) transfer its rights and obligations under the Above-Cap
Liquidity Facility to an Affiliate that is eligible to become a
debtor under the United States Bankruptcy Code and reasonably
acceptable to the Rating Agencies, which Affiliate will provide to
FSB the Downgrade Collateral (as defined in Paragraph 5 below); or
(ii) provide to FSB such other assurances of creditworthiness as will
maintain the then-current ratings of the Class B Certificates by the
Rating Agencies.
5. Additional Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set forth below:
"Business Day" and "Local Business Day" mean, with respect to the
Transaction set forth in this Confirmation, "Business Day" as defined in the
Offering Memorandum for all purposes under the Agreement.
"Credit Support Amount" means
5
<PAGE> 15
[LETTERHEAD]
(i) in the case in which FSB is the Secured Party and CSFP has
transferred its rights and obligations to an Affiliate pursuant to
Paragraph 4 above, the Downgrade Collateral;
(ii) in all other cases, zero.
"CSFP Credit Downgrade Period" means any continuous period in which either
(i) the short term, unsecured and unsubordinated debt rating assigned
to CSFP by Moody's is below "P1," or the long term unsecured
debt rating assigned to CSFP by Moody's is below "Aa3" if there is
no such short term rating;
(ii) the short term, unsecured and unsubordinated debt rating assigned
to CSFP by S&P is below "A1+," or the long term unsecured debt
rating assigned to CSFP by S&P is below "AA-" if there is no such
short term rating;
(iii) CSFP has no rating from Moody's; or
(iv) CSFP has no rating from S&P.
"Downgrade Collateral" means
(i) during the first thirty days, inclusive, of any CSFP Credit
Downgrade Period, zero;
(ii) during the period between the thirty-first day of any CSFP
Credit Downgrade Period to the end of such CSFP Credit Downgrade
Period, inclusive, the greater of zero and
(a) the greater of 12.29% and Three-Month LIBOR (as defined in
the Offering Memorandum), minus
(b) the Cap Rate, and such difference multiplied by
(c) the Notional Amount, and the resulting product multiplied by
(d) a fraction, the numerator of which is an amount equal to the
difference between (X) 18 and (Y) three times the number of
unreimbursed Interest Drawings under the Primary Liquidity
Facility, and the denominator of which is 12;
(iii) at all other times, zero.
6
<PAGE> 16
[LETTERHEAD]
"Full Cap Payment Amount" as of any date means the amount calculated
pursuant to Section 6.1 of the Definitions, provided, however, that for
purposes of calculating the Full Cap Payment Amount, the Notional Amount shall
be deemed to be the Notional Amount as of the date on which the Contingent Cap
Purchase Event occurs, as such term is defined in the Confirmation of even date
herewith relating to a Swap Transaction between CSFP and United Air Lines, Inc.
(the "Above-Cap Liquidity Facility Supplemental Confirmation"). CSFP shall,
promptly after learning of the occurrence of a Contingent Cap Payment Date,
provide FSB with notice thereof.
"Interest Shortfall" means, on any Floating Amount Payment Date, the
additional amount required in order for FSB to have sufficient funds to pay
interest due on any Class B certificates, after giving effect to the Interest
Drawing to be made under the Class B Primary Liquidity Facility. For purposes
of this definition, the amount of the Interest Drawing will be deemed to have
been paid to FSB whether or not such payment has in fact been made.
"Registration Rights Agreement" means the registration rights agreement
between UA, Kreditanstalt fur Wiederaufbau, FSB, and the Initial Purchasers,
dated as of 23 December 1997.
6. Payments
CSFP hereby irrevocably instructs FSB to make any payment due to CSFP
directly to the account specified below in the name of CSFP. FSB hereby
irrevocably instructs CSFP to make any payments of Floating Amounts due to FSB
directly to the account(s) specified below in the name of FSB. All payments by
CSFP of Floating Amounts due to FSB shall be made without set-off, deduction,
withholding, netting, or any other reduction.
7. Account Details
Payments to CSFP: Credit Suisse First Boston
ABA No. 026-009-179
a/c Credit Suisse Financial Products - London
a/c no. 32491401
Payments to FSB: First Security Bank, National Association
ABA No. 124-0000-12
a/c 051-0922115
Attn: Corporate Trust Department
Reference: Class B Pass-Through Trust Agreement
7
<PAGE> 17
[LETTERHEAD]
8. Offices
The Office of CSFP for the Transaction is its office at the address
specified for notices to it in the Schedule to the Agreement. The Office of
FSB for the Transaction is its office at the address specified for notices to
it in the Schedule to the Agreement.
Credit Suisse Financial Products is regulated by The Securities and
Futures Authority and has entered into this transaction as principal. The time
at which the above transaction was executed will be notified to FSB on request.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By: /s/ Jeanette Whomersley
-----------------------------
Name: Jeanette Whomersley
------------------------
Title: Vice President
-----------------------
Confirmed as of the date first written above:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Subordination Agent on behalf of the
Pass-Through Trustee under the Pass-Through Trust
Agreement dated as of 23 December 1997 between
FSB and United Air Lines, Inc.
By:
------------------------
Name:
-------------------
Title:
------------------
8
<PAGE> 18
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
CREDIT SUISSE FINANCIAL PRODUCTS
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
Confirmed as of the date first written above:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Subordination Agent on behalf of the
Pass-Through Trustee under the Pass-Through Trust
Agreement dated as of 23 December 1997 between
FSB and United Air Lines, Inc.
By: /s/ C. Scott Nielsen
------------------------
Name: C. Scott Nielsen
-------------------
Title: Vice President
------------------
<PAGE> 1
EXHIBIT 4.12
- --------------------------------------------------------------------------------
INTERCREDITOR AGREEMENT
Dated as of
December 23, 1997
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION
not in its individual capacity
but solely as Trustee under the
United Airlines 1997-1A Pass Through Trust,
United Airlines 1997-1B Pass Through Trust,
United Airlines 1997-1C Pass Through Trust
and
United Airlines 1997-1D Pass Through Trust
KREDITANSTALT FUR WIEDERAUFBAU,
as Class A Primary Liquidity Provider
and
Class B Primary Liquidity Provider,
CREDIT SUISSE FINANCIAL PRODUCTS,
as Class A Above-Cap Liquidity Provider
and
Class B Above-Cap Liquidity Provider
AND
FIRST SECURITY BANK, NATIONAL ASSOCIATION
not in its individual capacity except
as expressly set forth herein but
solely as Subordination Agent and Trustee
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST ACCOUNTS; CONTROLLING PARTY
Section 2.1 Agreement to Terms of Subordination; Payments
from Monies Received Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.2 Trust Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.3 Deposits to the Collection Account
and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.4 Distributions of Special Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.5 Designated Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.6 Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF
AMOUNTS RECEIVED
Section 3.1 Written Notice of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.2 Distribution of Amounts on Deposit in the Collection Account . . . . . . . . . . . . . . . . . . . . 33
Section 3.3 Distribution of Amounts on Deposit Following a Triggering Event . . . . . . . . . . . . . . . . . . 35
Section 3.4 Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.5 Payments to the Trustee and the Primary Liquidity Providers . . . . . . . . . . . . . . . . . . . . 37
Section 3.6 Liquidity Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV
EXERCISE OF REMEDIES
Section 4.1 Directions from the Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.2 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.3 Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.4 Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . . 47
Section 4.5 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
DUTIES OF THE SUBORDINATION AGENT;
AGREEMENTS OF TRUSTEES, ETC.
Section 5.1 Notice of Indenture Default or Triggering Event . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.3 No Duties Except as Specified in Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.4 Notice from the Liquidity Providers and Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
THE SUBORDINATION AGENT
Section 6.1 Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.2 Absence of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.3 No Representations or Warranties as to Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.4 No Segregation of Monies; No Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.5 Reliance; Agents; Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.6 Capacity in Which Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.7 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.8 May Become Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.9 Subordination Agent Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.10 Money to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII
[Reserved]
ARTICLE VIII
SUCCESSOR SUBORDINATION AGENT
Section 8.1 Replacement of Subordination Agent; Appointment of Successor . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
Section 9.1 Amendments, Waivers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 9.2 Subordination Agent Protected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.3 Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.4 Copy to Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE X
MISCELLANEOUS
Section 10.1 Termination of Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.2 Intercreditor Agreement for Benefit of Trustee, Liquidity Providers
and Subordination Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.5 No Oral Modifications or Continuing Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.8 Counterpart Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.9 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Indemnity . . . . . . . . . . . . . . . 57
Section 10.12 Obligations of CSFP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
Schedule 1 Indentures
Schedule 2 Note Purchase Agreement
iii
<PAGE> 5
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated as of December 23, 1997, among
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association
("FSB"), not in its individual capacity but solely as Trustee of each Trust
(each as defined below), KREDITANSTALT FUR WIEDERAUFBAU, a corporation
organized under the public law of the Federal Republic of Germany ("KfW"), as
the primary liquidity provider, Credit Suisse Financial Products ("CSFP"), an
unlimited company incorporated in England and an authorized institution under
the Banking Act of 1987 of the United Kingdom, as the above-cap liquidity
provider, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity except as expressly set forth herein, but solely as Subordination
Agent hereunder (in such capacity, together with any successor appointed
pursuant to Article VIII, the "Subordination Agent").
WHEREAS, all capitalized terms used and not otherwise defined
herein shall have the respective meanings referred to in Article I;
WHEREAS, pursuant to each Indenture (i) with respect to the
two Boeing 747-422 aircraft, four Airbus A320-232 aircraft, three Boeing
777-222 aircraft and one Boeing 777-222IGW aircraft owned by United (the "Owned
Aircraft"), United proposes to issue on a recourse basis three series of
Equipment Notes (and, pursuant to the related Indenture, may in the future
issue on a recourse basis a fourth series of Equipment Notes) either to finance
the Owned Aircraft or refinance its current indebtedness originally incurred to
finance the Owned Aircraft and (ii) with respect to the four Boeing 737-322
aircraft that have been leased to United pursuant to the related Lease
(collectively, the "Leased Aircraft"), the related Owner Trustees propose to
issue on a nonrecourse basis four series of Equipment Notes to refinance the
current indebtedness of such Owner Trustees originally incurred to finance the
purchase of the Leased Aircraft;
WHEREAS, pursuant to the Note Purchase Agreement, each Trust
will acquire those Equipment Notes having an interest rate equal to the
interest rate applicable to the Certificates to be issued by such Trust;
WHEREAS, pursuant to each Trust Agreement executed and
delivered from time to time, the Trust created thereby proposes to issue a
single class of Certificates (a "Class"), designated as either Class A
Certificates, Class B Certificates, Class C Certificates or Class D
Certificates, bearing the interest rate and having the final distribution date
described in such Trust Agreement on the terms and subject to the conditions
set forth therein;
WHEREAS, pursuant to the Purchase Agreement, on the Closing
Date the Initial Purchasers propose to purchase the Class A Certificates issued
by the Class A Trust in the aggregate face amount set forth opposite the name
of such Trust on Schedule I thereto;
<PAGE> 6
WHEREAS, on the Closing Date (i) pursuant to the Class B
Certificate Purchase Agreement and the Class C Certificate Purchase Agreement,
KfW proposes to purchase the Class B Certificates and the Class C Certificates,
respectively, issued by the related Trust and (ii) pursuant to the Class D
Certificate Purchase Agreement, United proposes to purchase the Class D
Certificates issued by the Class D Trust, in each case in the aggregate amount
set forth therein;
WHEREAS, the Class A Primary Liquidity Provider proposes to
enter into a revolving credit agreement relating to the Class A Certificates,
the Class B Primary Liquidity Provider proposes to enter into a revolving
credit agreement relating to the Class B Certificates, the Class A Above-Cap
Liquidity Provider proposes to enter into irrevocable interest rate cap
agreements relating to the Class A Certificates and the Class B Above-Cap
Liquidity Provider proposes to enter into irrevocable interest rate cap
agreements relating to the Class B Certificates (each, a "Liquidity Facility"),
in each case with the Subordination Agent, as agent for the Trustee of the
Class A Trust or the Class B Trust, as applicable, for the benefit of the
Certificateholders of each such Trust; and
WHEREAS, it is a condition precedent to the obligations of the
Initial Purchasers under the Purchase Agreement that the Subordination Agent,
the Trustee and the Liquidity Providers agree to the terms of subordination set
forth in this Agreement in respect of each Class of Certificates, and the
Subordination Agent, the Trustee and the Liquidity Providers, by entering into
this Agreement, hereby acknowledge and agree to such terms of subordination and
the other provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, and of other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms used herein that are defined in this Article I
have the meanings assigned to them in this Article I, and include the
plural as well as the singular;
(b) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Agreement;
2
<PAGE> 7
(c) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision; and
(d) the term "including" means "including without
limitation".
"Above-Cap Liquidity Facility" the Class A Above-Cap Liquidity
Facility or the Class B Above-Cap Liquidity Facility, as applicable.
"Above-Cap Liquidity Provider" means the Class A Above-Cap
Liquidity Provider and/or the Class B Above- Cap Liquidity Provider,
as applicable.
"Acceleration" means, with respect to the amounts payable in
respect of the Equipment Notes issued under any Indenture, the
declaration of such amounts to be immediately due and payable.
"Accelerate," "Accelerated" and "Accelerating" have meanings
correlative to the foregoing.
"Additional Payment" means a payment of Make-Whole Amount
and/or Break Amount, if any.
"Adjusted Expected Distributions" means, with respect to the
Certificates of any Trust or Trusts of the same Class on any Current
Distribution Date, the sum of (x) accrued and unpaid interest on such
Certificates and (y) the greater of:
(A) the difference between (x) the Pool Balance
of such Certificates as of the preceding
Distribution Date and (y) the Pool Balance of
such Certificates as of the Current
Distribution Date calculated on the basis
that (i) the principal of the Non-Performing
Equipment Notes held in such Trust or Trusts
has been paid in full and such payments have
been distributed to the holders of such
Certificates and (ii) the principal of the
Performing Equipment Notes has been paid when
due (but without giving effect to any
Acceleration of Performing Equipment Notes)
and such payments have been distributed to
the holders of such Certificates; and
(B) the amount of the excess, if any, of (i) the
Pool Balance of such Class of Certificates as
of the preceding Distribution Date, over (ii)
the Aggregate LTV Collateral Amount for such
Class of Certificates for the Current
Distribution Date;
provided, however, that, until the date of the initial LTV
Appraisals, clause (B) shall not apply.
3
<PAGE> 8
"Advance" means, with respect to any Primary Liquidity
Facility, any Advance as defined in such Primary Liquidity Facility.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under
common control with such Person. For the purposes of this definition,
"control" means the power, directly or indirectly, to direct or cause
the direction of the management and policies of such Person whether
through the ownership of voting securities or by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Aggregate LTV Collateral Amount" for any Class of
Certificates for any Distribution Date means the sum of the applicable
LTV Collateral Amounts for all Aircraft, minus the Pool Balance for
each Class of Certificates, if any, senior to such Class, after giving
effect to any distribution of principal on such Distribution Date on
such senior Class or Classes.
"Aircraft" means, with respect to each Indenture, the
"Aircraft" referred to therein.
"Appraisal" means a fair market value appraisal (which may be
a "desktop" appraisal) performed by any Appraiser or any other
nationally recognized appraiser on the basis of an arm's-length
transaction between an informed and willing purchaser under no
compulsion to buy and an informed and willing seller under no
compulsion to sell and both having knowledge of all relevant facts.
"Appraised Current Market Value" of any Aircraft means the
lower of the average and the median of the most recent three
Appraisals of such Aircraft.
"Appraisers" means Aircraft Information Services, Inc., BK
Associates, Inc. and AvSolutions Inc.
"Available Amount" means, with respect to any Primary
Liquidity Facility on any drawing date, an amount equal to (a) the
Maximum Commitment Amount of such Primary Liquidity Facility, less (b)
the amount of each LP Interest Drawing honored by the Primary
Liquidity Provider under such Primary Liquidity Facility on or prior
to such date that has not been reimbursed or reinstated as of such
date; provided, however, that, following a Downgrade Drawing or a
Final Drawing under such Primary Liquidity Facility, the Available
Amount of such Primary Liquidity Facility shall be zero.
"Bankruptcy Code" has the meaning assigned to such term in the
definition of "Performing Equipment Note" in this Section 1.1.
"Basic Pass Through Trust Agreement" with respect to any
Trust, means the Pass Through Trust Agreement, dated as of December
23, 1997, between United and FSB,
4
<PAGE> 9
as the same may from time to time be supplemented, amended or modified,
but does not include any Trust Supplement.
"Break Amount" shall have the meaning set forth in the
Indentures.
"Business Day" means any day (i) other than a Saturday or
Sunday or a day on which commercial banks are required or authorized
to close in Chicago, Illinois, New York, New York, Frankfurt, Germany
or the city and state in which the Trustee, the Subordination Agent or
any Indenture Trustee maintains its Corporate Trust Office or receives
and disburses funds, and (ii) on which dealings are carried on in the
London interbank market.
"Cash Collateral Account" means the Class A Cash Collateral
Account, the Class A Above-Cap Account, the Class B Cash Collateral
Account or the Class B Above-Cap Account, as applicable.
"Certificate" means a Class A Certificate, a Class B
Certificate, a Class C Certificate or a Class D Certificate, as
applicable.
"Certificateholder" means any holder of one or more
Certificates.
"Class" has the meaning assigned to such term in the
preliminary statements to this Agreement.
"Class A Above-Cap Account" means an Eligible Deposit Account
in the name of the Subordination Agent maintained at an Eligible
Institution, which shall be the Subordination Agent if it shall so
qualify, into which all amounts posted as collateral under the Class A
Above-Cap Liquidity Facility pursuant to Section 3.6(d) shall be
deposited.
"Class A Above-Cap Liquidity Facility" means, initially, the
ISDA Master Agreement, dated as of December 23, 1997, between the
Subordination Agent, as agent of the Trustee, and the Class A
Above-Cap Liquidity Provider, together with the Schedule, Collateral
Support Annex and Confirmation attached thereto, relating to the Class
A Certificates, and, from and after the replacement of such ISDA
Master Agreement pursuant hereto, the Replacement Above-Cap Liquidity
Facility therefor, if any, in each case as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"Class A Above-Cap Liquidity Provider" means CSFP, together
with any Replacement Above-Cap Liquidity Provider or Replacement
Above-Cap Liquidity Providers that have issued a Replacement Above-Cap
Liquidity Facility to replace the Class A Above-Cap Liquidity Facility
pursuant to Section 3.6(d) or 3.6(e).
5
<PAGE> 10
"Class A Cash Collateral Account" means an Eligible Deposit
Account in the name of the Subordination Agent maintained at an
Eligible Institution, which shall be the Subordination Agent if it
shall so qualify, into which all amounts drawn under the Class A
Primary Liquidity Facility pursuant to Section 3.6(c) or 3.6(i) shall
be deposited.
"Class A Certificateholder" means, at any time, any holder of
one or more Class A Certificates.
"Class A Certificates" means the certificates issued by each
Class A Trust, substantially in the form of Exhibit A to the related
Class A Trust Agreement, and authenticated by the Trustee,
representing fractional undivided interests in such Class A Trust, and
any certificates issued in exchange therefor or replacement thereof
pursuant to the terms of such Class A Trust Agreement.
"Class A Primary Liquidity Facility" means, initially, the
Revolving Credit Agreement, dated as of December 23, 1997, between the
Subordination Agent, as agent of the Trustee, and the Class A Primary
Liquidity Provider relating to the Class A Certificates, and, from and
after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Primary Liquidity Facility therefor, if any,
in each case as amended, supplemented or otherwise modified from time
to time in accordance with its terms.
"Class A Primary Liquidity Provider" means KfW, together with
any Replacement Primary Liquidity Provider or Replacement Primary
Liquidity Providers that have issued a Replacement Primary Liquidity
Facility to replace the Class A Primary Liquidity Facility pursuant to
Section 3.6(c) or 3.6(e).
"Class A Trust" means United Airlines 1997-1A Pass Through
Trust created and administered pursuant to the initial Class A Trust
Agreement or any subsequent or additional United Airlines 1997-1A Pass
Through Trust created and administered pursuant to any other Class A
Trust Agreement from time to time in effect.
"Class A Trust Agreement" means (i) the Class A Trust
Supplement, dated as of December 23, 1997, between United and FSB,
together with the Basic Pass Through Trust Agreement, as each may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms and (ii) any subsequent or additional Trust
Supplement which is designated and is to be treated as a Class A Trust
Supplement and which, together with the Basic Pass Through Trust
Agreement, creates a Class A Trust.
"Class A Trust Supplement" shall mean a Trust Supplement
designated under the Basic Pass Through Trust Agreement as a Class A
Trust Agreement.
"Class B Above-Cap Account" means an Eligible Deposit Account
in the name of the Subordination Agent maintained at an Eligible
Institution, which shall be the
6
<PAGE> 11
Subordination Agent if it shall so qualify, into which all amounts
posted as collateral under the Class B Above-Cap Liquidity Facility
pursuant to Section 3.6(d) shall be deposited.
"Class B Above-Cap Liquidity Facility" means, initially, the
ISDA Master Agreement, dated as of December 23, 1997, between the
Subordination Agent, as agent of the Trustee, and the Class B
Above-Cap Liquidity Provider, together with the Schedule, Collateral
Support Annex and Confirmation attached thereto, relating to the Class
B Certificates, and, from and after the replacement of such ISDA
Master Agreement pursuant hereto, the Replacement Above-Cap Liquidity
Facility therefor, if any, in each case as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"Class B Above-Cap Liquidity Provider" means CSFP, together
with any Replacement Above-Cap Liquidity Provider or Replacement
Above-Cap Liquidity Providers that have issued a Replacement Above-Cap
Liquidity Facility to replace the Class B Above-Cap Liquidity Facility
pursuant to Section 3.6(d) or 3.6(e).
"Class B Cash Collateral Account" means an Eligible Deposit
Account in the name of the Subordination Agent maintained at an
Eligible Institution, which shall be the Subordination Agent if it
shall so qualify, into which all amounts drawn under the Class B
Primary Liquidity Facility pursuant to Section 3.6(c) or 3.6(i) shall
be deposited.
"Class B Certificateholder" means, at any time, any holder of
one or more Class B Certificates.
"Class B Certificate Purchase Agreement" means the Class B
Certificate Purchase Agreement, dated as of December 23, 1997, among
the Trustee, United and KfW, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Class B Certificates" means the certificates issued by each
Class B Trust, substantially in the form of Exhibit A to the related
Class B Trust Agreement, and authenticated by the Trustee,
representing fractional undivided interests in such Class B Trust, and
any certificates issued in exchange therefor or replacement thereof
pursuant to the terms of such Class B Trust Agreement.
"Class B Primary Liquidity Facility" means, initially, the
Revolving Credit Agreement, dated as of December 23, 1997, between the
Subordination Agent, as agent of the Trustee, and the Class B Primary
Liquidity Provider relating to the Class B Certificates, and, from and
after the replacement of such Agreement pursuant hereto, the
Replacement Primary Liquidity Facility therefor, if any, in each case
as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
7
<PAGE> 12
"Class B Primary Liquidity Provider" means KfW, together with
any Replacement Primary Liquidity Provider or Replacement Primary
Liquidity Providers that have issued a Replacement Primary Liquidity
Facility to replace the Class B Primary Liquidity Facility pursuant to
Section 3.6(c) or 3.6(e).
"Class B Trust" means United Airlines 1997-1B Pass Through
Trust created and administered pursuant to the initial Class B Trust
Agreement or any subsequent or additional United Airlines 1997-1B Pass
Through Trust created and administered pursuant to any other Class B
Trust Agreement from time to time in effect.
"Class B Trust Agreement" means (i) the Class B Trust
Supplement, dated as of December 23, 1997, between United and FSB,
together with the Basic Pass Through Trust Agreement, as each may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms and (ii) any subsequent or additional Trust
Supplement which is designated and is to be treated as a Class B Trust
Supplement and which, together with the Basic Pass Through Trust
Agreement, creates a Class B Trust.
"Class B Trust Supplement" shall mean a Trust Supplement
designated under the Basic Pass Through Trust Agreement as a Class B
Trust Agreement.
"Class C Certificateholder" means, at any time, any holder of
one or more Class C Certificates.
"Class C Certificate Purchase Agreement" means the Class C
Certificate Purchase Agreement, dated as of December 23, 1997, among
the Trustee, United and KfW, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Class C Certificates" means the certificates issued by each
Class C Trust, substantially in the form of Exhibit A to the related
Class C Trust Agreement, and authenticated by the Trustee,
representing fractional undivided interests in such Class C Trust, and
any certificates issued in exchange therefor or in replacement thereof
pursuant to the terms of such Class C Trust Agreement.
"Class C Trust" means United Airlines 1997-1C Pass Through
Trust created and administered pursuant to the initial Class C Trust
Agreement or any subsequent or additional United Airlines 1997-1C Pass
Through Trust created and administered pursuant to any other Class C
Trust Agreement from time to time in effect.
"Class C Trust Agreement" means (i) the Class C Trust
Supplement, dated as of December 23, 1997, between United and FSB,
together with the Basic Pass Through Trust Agreement, as each may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms and (ii) any subsequent or additional Trust
8
<PAGE> 13
Supplement which is designated and is to be treated as a Class C Trust
Supplement and which, together with the Basic Pass Through Trust
Agreement, creates a Class C Trust.
"Class C Trust Supplement" shall mean a Trust Supplement
designated under the Basic Pass Through Trust Agreement as a Class C
Trust Agreement.
"Class D Certificateholder" means, at any time, any holder of
one or more Class D Certificates.
"Class D Certificate Purchase Agreement" means the Class D
Certificate Purchase Agreement, dated as of December 23, 1997, between
the Trustee and United, as amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"Class D Certificates" means the certificates issued by each
Class D Trust, substantially in the form of Exhibit A to the related
Class D Trust Agreement, and authenticated by the Trustee,
representing fractional undivided interests in such Class D Trust, and
any certificates issued in exchange therefor or in replacement thereof
pursuant to the terms of such Class D Trust Agreement.
"Class D Trust" means United Airlines 1997-1D Pass Through
Trust created and administered pursuant to the initial Class D Trust
Agreement or any subsequent or additional United Airlines 1997-1D Pass
Through Trust created and administered pursuant to any other Class D
Trust Agreement from time to time in effect.
"Class D Trust Agreement" means (i) the Class D Trust
Supplement, dated as of December 23, 1997, between United and FSB,
together with the Basic Pass Through Trust Agreement, as each may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms and (ii) any subsequent or additional Trust
Supplement which is designated and is to be treated as a Class D Trust
Supplement and which, together with the Basic Pass Through Trust
Agreement, creates a Class D Trust.
"Class D Trust Supplement" shall mean a Trust Supplement
designated under the Basic Pass Through Trust Agreement as a Class D
Trust Agreement.
"Closing Date" means December 23, 1997.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.
"Collection Account" means the Eligible Deposit Account
established by the Subordination Agent pursuant to Section 2.2(a) into
and from which the Subordination Agent shall make deposits and
withdrawals in accordance with this Agreement.
9
<PAGE> 14
"Commitment Percentage" means, at the date of determination,
(i) the commitment of each Primary Liquidity Provider, if more than
one, as compared to the aggregate commitments of all Primary Liquidity
Providers, stated as a percentage or (ii) the commitment of each
Above-Cap Liquidity Provider, if more than one, as compared to the
aggregate commitments of all Above-Cap Liquidity Providers, stated as
a percentage.
"Controlling Party" means the Person entitled to act as such
pursuant to the terms of Section 2.6.
"Corporate Trust Office" means, with respect to the Trustee,
the Subordination Agent or any Indenture Trustee, the office of such
Person in the city at which, at any particular time, its corporate
trust business shall be principally administered.
"CSFP" has the meaning assigned to such term in the recital of
parties to this Agreement.
"Current Distribution Date" means a Distribution Date
specified as a reference date for calculating the Expected
Distributions or the Adjusted Expected Distributions with respect to
the Certificates of any Trust as of such Distribution Date.
"Deferral Period" means the period (a) commencing on the date
of the first amendment, waiver, modification, exercise of remedies or
other action of the type described in clauses (i) through (v) of the
second sentence of Section 4.1(c), and (b) ending on the second
anniversary of such date.
"Deficiency Amount" has the meaning assigned to such term in
Section 3.6(a).
"Designated Representatives" means the Trustee Representatives
and the LP Representatives identified under Section 2.5.
"Distribution Date" means a Regular Distribution Date or a
Special Distribution Date.
"Dollars" means United States dollars.
"Downgrade Collateral" has the meaning assigned thereto in the
Above-Cap Liquidity Facilities.
"Downgrade Drawing" has the meaning assigned to such term in
Section 3.6(c).
"Downgraded Facility" has the meaning assigned to such term in
Section 3.6(c).
10
<PAGE> 15
"Drawing" means an Interest Drawing, a Final Drawing or a
Downgrade Drawing, as the case may be.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account
with the corporate trust department of a depository institution
organized under the laws of the United States of America or any one of
the states thereof or the District of Columbia (or any U.S. branch of
a foreign bank), having corporate trust powers and acting as trustee
for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating
from each Rating Agency of at least "A-3" or its equivalent. An
Eligible Deposit Account may be maintained with a Liquidity Provider
so long as such Liquidity Provider is an Eligible Institution;
provided, however, that such Liquidity Provider shall have waived all
rights of set-off and counterclaim with respect to such account; and
provided, further, that each institution at which any Eligible Deposit
Account is maintained shall agree, for all purposes of the applicable
Uniform Commercial Code ("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 credited to such account shall be
treated as a "financial asset" (as defined in Section 8-102(9) of the
UCC), (c) the Subordination Agent shall be the "entitlement holder"
(as defined in Section 8-102(7) of the UCC) in respect of such
account, (d) such institution shall comply with all entitlement orders
issued by the Subordination Agent to the exclusion of any other Person
and (e) the "securities intermediary jurisdiction" (under Section
8-110(e) of the UCC) shall be the State of Illinois.
"Eligible Institution" means (a) the corporate trust
department of the Subordination Agent or the Trustee, as applicable,
or (b) a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of
Columbia (or any U.S. branch of a foreign bank), which has a long-term
unsecured debt rating from each Rating Agency of at least "A-3" or its
equivalent.
"Eligible Investments" means each of (i) obligations of, or
guaranteed by, the United States Government, (ii) open market
commercial paper of any corporation incorporated under the laws of the
United States of America or any State thereof rated at least "P-1" or
its equivalent by Moody's or at least "A-1" or its equivalent by
Standard & Poor's, (iii) certificates of deposit, time deposits or
other direct obligations of, or obligations guaranteed by, commercial
banks organized under the laws of the United States or of any
political subdivision thereof having a combined capital and surplus in
excess of $500,000,000 which banks or their holding companies have a
rating of "A" or its equivalent by Moody's or Standard & Poor's;
provided, however, that the aggregate amount at any one time so
invested in certificates of deposit issued by any one bank shall not
exceed 5% of such bank's capital and surplus, (iv) U.S. dollar
denominated offshore certificates of deposit issued by, or offshore
time deposits with, any commercial bank described in clause (iii) or
any subsidiary thereof and (v) repurchase agreements with any
financial institution having combined capital and surplus of at least
$500,000,000 with
11
<PAGE> 16
any of the obligations described in clauses (i) through (iv) as
collateral; provided that all Eligible Investments held pursuant to
this Agreement must be held in an Eligible Deposit Account.
"Equipment Notes" means, at any time, the Series A Equipment
Notes, the Series B Equipment Notes, the Series C Equipment Notes and
the Series D Equipment Notes, collectively, and in each case, any
Equipment Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Indentures.
"Expected Distributions" means, with respect to the
Certificates of any Trust or Trusts of the same Class on any Current
Distribution Date, the sum of (x) accrued and unpaid interest on such
Certificates and (y) the difference between (A) the Pool Balance of
such Certificates as of the preceding Distribution Date and (B) the
Pool Balance of such Certificates as of the Current Distribution Date,
calculated on the basis that the principal of the Equipment Notes held
in such Trust or Trusts has been paid when due (whether at stated
maturity or upon redemption, prepayment or acceleration or otherwise)
and such payments have been distributed to the holders of such
Certificates. For purposes of calculating Expected Distributions, any
Additional Payment paid on the Equipment Notes held in any Trust which
has not been distributed to the Certificateholders of such Trust
(other than such Additional Payment or a portion thereof applied to
the payment of interest on the Certificates of such Trust or the
reduction of the Pool Balance of such Trust) shall be added to the
amount of such Expected Distributions.
"Fee Letter" means the Fee Letter, dated December 23, 1997,
among United, KfW and the Subordination Agent with respect to the
Primary Liquidity Facilities.
"Final Distributions" means, with respect to the Certificates
of any Trust or Trusts of the same Class on any Distribution Date, the
sum of (x) accrued and unpaid interest on such Certificates and (y)
the Pool Balance of such Certificates as of the preceding Distribution
Date. For purposes of calculating Final Distributions, any Additional
Payment paid on the Equipment Notes held in any Trust which has not
been distributed to the Certificateholders of such Trust (other than
such Additional Payment or a portion thereof applied to the payment of
interest on the Certificates of such Trust or the reduction of the
Pool Balance of such Trust) shall be added to the amount of such Final
Distributions.
"Final Drawing" has the meaning assigned to such term in
Section 3.6(i).
"Final Maturity Date" for the Class A Certificates and the
Class B Certificates means March 2, 2004 and for the Class C
Certificates and Class D Certificates means December 2, 2002.
"FSB" has the meaning assigned to such term in the recital of
parties to this Agreement.
12
<PAGE> 17
"Indenture" means each of the Amended and Restated Trust
Indentures and Security Agreements and the Trust Indentures and
Security Agreements listed on Schedule 1 hereto, as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"Indenture Default" means, with respect to any Indenture, any
Indenture Event of Default (as such term is defined in such Indenture)
thereunder.
"Indenture Estate" means, with respect to any Indenture, the
"Indenture Estate" referred to therein.
"Indenture Trustee" means, with respect to any Indenture, the
Indenture Trustee thereunder.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated,
BT Alex. Brown Incorporated, Citicorp Securities, Inc., Credit Suisse
First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Interest Drawing" has the meaning assigned to such term in
Section 3.6(a).
"Interest Period" shall have the meaning set forth in the
Indentures.
"Interest Period Available Amount" means, with respect to any
Primary Liquidity Facility, at any time, the lesser of (i) the
Interest Period Commitment at such time and (ii) the Available Amount
at such time.
"Interest Period Commitment" means, with respect to any
Primary Liquidity Facility, at any time, an amount equal to the
Maximum Commitment Amount at such time multiplied by 1/6.
"Investment Earnings" means investment earnings on funds on
deposit in the Trust Accounts net of losses and investment expenses of
the Subordination Agent in making such investments.
"KfW" has the meaning assigned to such term in the recital of
parties to this Agreement.
"Lease" means, with respect to the Indenture pertaining to
each Leased Aircraft, the "Lease" referred to therein.
"Leased Aircraft" has the meaning assigned to such term in the
preliminary statements to this Agreement.
13
<PAGE> 18
"Leased Aircraft Participation Agreement" means, with respect
to the Indenture pertaining to each Leased Aircraft, the
"Participation Agreement" referred to therein.
"Lien" means any mortgage, pledge, lien, charge, claim,
disposition of title, encumbrance, lease, sublease, or security
interest of any kind, including any arising under any conditional
sales or other title retention agreement.
"Liquidity Event of Default," with respect to any Primary
Liquidity Facility, has the meaning assigned to such term in such
Primary Liquidity Facility.
"Liquidity Expenses" means, with respect to the Primary
Liquidity Facilities, all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Primary Liquidity
Facilities and (ii) any interest accrued on such Liquidity
Obligations.
"Liquidity Facility" means, at any time, the Class A Primary
Liquidity Facility, the Class A Above-Cap Liquidity Facility, the
Class B Primary Liquidity Facility or the Class B Above-Cap Liquidity
Facility, as applicable.
"Liquidity Obligations" means, with respect to the Primary
Liquidity Facilities, all principal, interest, fees and other amounts
owing to the Primary Liquidity Providers under the Primary Liquidity
Facilities, the Note Purchase Agreement, the Participation Agreements
and the Fee Letter.
"Liquidity Provider" means, at any time, the Primary Liquidity
Provider or the Above-Cap Liquidity Provider, as applicable.
"LP Incumbency Certificate" has the meaning assigned to such
term in Section 2.5(b).
"LP Interest Drawing" means an Interest Drawing under any
Primary Liquidity Facility.
"LP Representatives" has the meaning assigned to such term in
Section 2.5(b).
"LTV Appraisals" has the meaning assigned to such term in
Section 4.1(a).
"LTV Collateral Amount" of any Aircraft for any Class of
Certificates means, as of any Distribution Date, the lesser of (i) the
LTV Ratio for such Class of Certificates multiplied by the Appraised
Current Market Value of such Aircraft and (ii) the outstanding
principal amount of the Equipment Notes secured by such Aircraft after
giving effect to any principal payments of such Equipment Notes on or
before such Distribution Date.
14
<PAGE> 19
"LTV Ratio" means for the Class A Certificates 46%, for the
Class B Certificates 57%, for the Class C Certificates 68.3% and for
the Class D Certificates 82.3%.
"Make-Whole Amount" shall have the meaning set forth in the
Indentures.
"Maximum Commitment Amount" means, with respect to any Primary
Liquidity Facility, the Commitment (as defined in such Primary
Liquidity Facility).
"Moody's" means Moody's Investors Service, Inc.
"Non-Controlling Party" means, at any time, any Trustee or
Liquidity Provider that is not the Controlling Party at such time.
"Non-Performing Equipment Note" means an Equipment Note issued
pursuant to an Indenture that is not a Performing Equipment Note.
"Note Purchase Agreement" means the Note Purchase Agreement,
dated as of the date hereof, among United, each Owner Trustee, the
Trustee, the Subordination Agent and each Indenture Trustee, as
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"Officer's Certificate" of any Person means a certification
signed by a Responsible Officer of such Person.
"Operative Agreements" means this Agreement, the Liquidity
Facilities, the Indentures, the Trust Agreements, the Purchase
Agreement, the Note Purchase Agreement, the Registration Rights
Agreement, the Class B Certificate Purchase Agreement, the Class C
Certificate Purchase Agreement, the Class D Certificate Purchase
Agreement, the Leases, the Participation Agreements, the Fee Letter,
the Equipment Notes and the Certificates, together with all exhibits
and schedules included with any of the foregoing.
"Outstanding" means, when used with respect to each Class of
Certificates, as of the date of determination, all Certificates of
such Class theretofore authenticated and delivered under the related
Trust Agreements, except:
(i) Certificates of such Class theretofore
canceled by the Registrar (as defined in such Trust Agreement)
or delivered to the Trustee thereunder or such Registrar for
cancellation;
(ii) Certificates of such Class for which money in
the full amount required to make the final distribution with
respect to such Certificates pursuant to Section 11.01 of such
Trust Agreement has been theretofore deposited with the
related Trustee in trust for the holders of such Certificates
as provided in
15
<PAGE> 20
Section 4.01 of such Trust Agreement pending distribution of
such money to such Certificateholders pursuant to such final
distribution payment; and
(iii) Certificates of such Class in exchange for or
in lieu of which other Certificates of like Class have been
authenticated and delivered pursuant to such Trust Agreement;
provided, however, that in determining whether the holders of the
requisite Outstanding amount of such Certificates have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, any Class A, Class B, Class C or Class D Certificates owned
by United or any of its Affiliates shall be disregarded and deemed not
to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates
that the Trustee knows to be so owned shall be so disregarded.
Notwithstanding the foregoing, (x) if United or any of its Affiliates
shall own 100% of the Certificates, such Certificates shall not be so
disregarded and (y) Certificates so owned by United or any of its
Affiliates that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not United or any of its
Affiliates.
"Overdue Scheduled Payment" means any Scheduled Payment that
is not in fact received by the Subordination Agent within five days
after the Scheduled Payment Date relating thereto.
"Owned Aircraft" has the meaning assigned to such term in the
preliminary statements of this Agreement.
"Owned Aircraft Participation Agreement" means, with respect
to the Indenture pertaining to each Owned Aircraft, the "Participation
Agreement" referred to therein.
"Owner Trustee" means, with respect to any Indenture
pertaining to a Leased Aircraft, the "Owner Trustee" (as defined
therein) not in its individual capacity but solely as trustee under
the related owner trust agreement, together with any successor trustee
appointed pursuant to such owner trust agreement.
"Participation Agreement" means any Owned Aircraft
Participation Agreement or Leased Aircraft Participation Agreement, as
applicable.
"Performing Equipment Note" means an Equipment Note issued
pursuant to an Indenture with respect to which no payment default has
occurred and is continuing; provided, however, that in the event of a
bankruptcy proceeding involving United under Title 11 of the United
States Code (the "Bankruptcy Code"), (i) any payment default existing
during the 60-day period under Section 1110(a)(1)(A) of the Bankruptcy
Code
16
<PAGE> 21
(or such longer period as may apply under Section 1110(b) of the
Bankruptcy Code) (the "Section 1110 Period") shall not be taken into
consideration, unless during the Section 1110 Period the trustee in
such proceeding or United does not agree to perform its obligations
under the Lease related to such Equipment Note (in the case of the
Leased Aircraft) or under the Indenture (in the case of the Owned
Aircraft) and (ii) any payment default occurring after the date of the
order of relief in such proceeding shall not be taken into
consideration if such payment default is cured under Section
1110(a)(1)(B) of the Bankruptcy Code before the later of 30 days after
the date of such default or the expiration of the Section 1110 Period.
"Performing Note Deficiency" means any time that less than 65%
of the then aggregate outstanding principal amount of all Equipment
Notes are Performing Equipment Notes.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, trustee,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pool Balance" means, with respect to the Certificates of a
Class, as of any date, (i) the original aggregate face amount of the
Certificates of such Class less (ii) the aggregate amount of all
payments made in respect of the Certificates of such Class other than
payments made in respect of interest or Additional Payment thereon or
reimbursement of any costs and expenses in connection therewith. The
Pool Balance for each Class of Certificates as of any Distribution
Date shall be computed after giving effect to the payment of
principal, if any, on the Equipment Notes held in the related Trust or
Trusts, if more than one Trust of such Class shall exist, and the
distribution thereof to be made on such date.
"Primary Liquidity Facility" means the Class A Primary
Liquidity Facility or the Class B Primary Liquidity Facility, as
applicable.
"Primary Liquidity Provider" means the Class A Primary
Liquidity Provider and/or the Class B Primary Liquidity Provider, as
applicable.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"PTC Event of Default" means, with respect to the Trust
Agreements of any Class, the failure to pay within 10 Business Days of
the due date thereof: (i) the outstanding Pool Balance of the
applicable Class of Certificates on the Final Maturity Date for such
Class or (ii) interest due on such Certificates on any Distribution
Date (unless, in the case of the Class A or Class B Certificates, the
Subordination Agent shall have made an Interest Drawing or a
withdrawal from a Cash Collateral Account with
17
<PAGE> 22
respect thereto in an amount sufficient to pay such interest and shall
have distributed such amount to the Certificateholders entitled
thereto).
"Purchase Agreement" means the Purchase Agreement, dated as of
December 18, 1997, between the Initial Purchasers and United, relating
to the purchase of the Class A Certificates by the Initial Purchasers,
as the same may be amended, supplemented or otherwise modified from
time to time in accordance with its terms.
"Rating Agencies" means, collectively, at any time, each
nationally recognized rating agency that shall have been requested to
rate the Class A Certificates and the Class B Certificates and that
shall then be rating such Certificates. The initial Rating Agencies
shall be Moody's and Standard & Poor's.
"Ratings Confirmation" means, with respect to any action
proposed to be taken, a written confirmation from each of the Rating
Agencies that such action would not result in (i) a reduction of the
rating for the Class A Certificates or Class B Certificates below the
then current rating for such Class of Certificates or (ii) a
withdrawal or suspension of the rating of the Class A Certificates or
the Class B Certificates.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 23, 1997, between the Initial
Purchasers, the Trustee and United, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"Regular Distribution Dates" means each March 2, June 2,
September 2 and December 2, commencing on March 2, 1998; provided,
however, that, if any such day shall not be a Business Day, the
related distribution for each Class of Certificates shall be made on
the next Business Day with additional interest accruing at the rate
applicable to such Class of Certificates.
"Remaining Commitment Amount," with respect to any Primary
Liquidity Facility, has the meaning assigned to such term in such
Primary Liquidity Facility.
"Replacement Above-Cap Liquidity Facility" means, for any
Above-Cap Liquidity Facility, an irrevocable interest rate cap
agreement issued by a one or more Replacement Above-Cap Liquidity
Providers for the same term as the Above-Cap Liquidity Facility being
replaced, in substantially the form of the replaced Above-Cap
Liquidity Facility or in such other form (which may include a letter
of credit) as shall permit the Rating Agencies to confirm in writing
their respective ratings then in effect for the Class A Certificates
and Class B Certificates (before the downgrading of such ratings, if
any, as a result of the downgrading of the Above-Cap Liquidity
Provider), issued by a Replacement Above-Cap Liquidity Provider;
provided that (i) upon the replacement of the Above-Cap Liquidity
Facility for either the Class A Certificates or the Class B
Certificates, the Above-Cap Liquidity Facility for the other Class of
Certificates shall
18
<PAGE> 23
also be replaced by the same Replacement Above-Cap Liquidity Providers
as provided above and (ii) the Commitment Percentage of each
Replacement Above-Cap Liquidity Provider shall be the same for each
Above-Cap Liquidity Facility.
"Replacement Above-Cap Liquidity Provider" means a Person
having (i) short-term unsecured debt ratings issued by each Rating
Agency that are equal to or higher than the Threshold Rating specified
in clause (i) of the definition of Threshold Rating or (ii) if such
Person does not have a short-term unsecured debt rating from each
Rating Agency, long-term unsecured debt ratings issued by each Rating
Agency that are equal to or higher than the Threshold Rating specified
in clause (ii) of the definition of Threshold Rating.
"Replacement Liquidity Facility" means a Replacement Primary
Liquidity Facility or a Replacement Above- Cap Liquidity Facility, as
applicable.
"Replacement Liquidity Provider" means a Replacement Primary
Liquidity Provider or a Replacement Above- Cap Liquidity Provider, as
applicable.
"Replacement Primary Liquidity Facility" means, for any
Primary Liquidity Facility, an irrevocable revolving credit agreement
issued by a one or more Replacement Primary Liquidity Providers for
the same term as the Primary Liquidity Facility being replaced in
substantially the form of the replaced Primary Liquidity Facility,
including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to
confirm in writing their respective ratings then in effect for the
Class A Certificates and the Class B Certificates (before the
downgrading of such ratings, if any, as a result of the downgrading of
the Primary Liquidity Provider), in a face amount equal to the Maximum
Commitment Amount for such Primary Liquidity Facility and issued by a
Replacement Primary Liquidity Provider; provided that (i) upon the
replacement of the Primary Liquidity Facility for either the Class A
Certificates or the Class B Certificates, the Primary Liquidity
Facility for the other Class of Certificates shall also be replaced by
the same Replacement Primary Liquidity Providers as provided above and
(ii) the Commitment Percentage of each Replacement Primary Liquidity
Provider shall be the same for each Primary Liquidity Facility.
"Replacement Primary Liquidity Provider" means a Person having
(i) short-term unsecured debt ratings issued by each Rating Agency
that are equal to or higher than the Threshold Rating specified in
clause (i) of the definition of Threshold Rating or (ii) if such
Person does not have a short-term unsecured debt rating from each
Rating Agency, long-term unsecured debt ratings issued by each Rating
Agency that are equal to or higher than the Threshold Rating specified
in clause (ii) of the definition of Threshold Rating.
19
<PAGE> 24
"Responsible Officer" means, (i) in the case of any Liquidity
Provider that is a corporation, the Chairman of the Board of
Directors, the President, the Treasurer, the Secretary, or any Vice
President thereof, (ii) in the case of the Trustee and the
Subordination Agent, any officer in the Corporate Trust Department
thereof or any other officer customarily performing functions similar
to those performed by the persons who at the time shall be such
officers or to whom any corporate trust matter is referred because of
his knowledge of and familiarity with a particular subject and (iii)
in any other case, an individual generally authorized to execute and
deliver contracts on behalf of such entity.
"Scheduled Payment" means, with respect to any Equipment Note,
(i) any payment of principal and interest on such Equipment Note
(other than an Overdue Scheduled Payment) due from the obligor thereon
or (ii) in the case of the Class A Certificates or the Class B
Certificates, any payment of interest on the corresponding Class of
Certificates with funds drawn under any Liquidity Facility or
withdrawn from a Cash Collateral Account, which payment represents the
installment of principal at the stated maturity of such installment of
principal on such Equipment Note, the payment of regularly scheduled
interest accrued on the unpaid principal amount of such Equipment
Note, or both; provided, however, that any payment of principal of,
Additional Payment, if any, or interest resulting from the redemption
or purchase of any Equipment Note shall not constitute a Scheduled
Payment.
"Scheduled Payment Date" means, with respect to any Scheduled
Payment, the date on which such Scheduled Payment is scheduled to be
made.
"Series A Equipment Notes" means the Series A Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee in the
case of the Leased Aircraft, or United, in the case of the Owned
Aircraft, as the case may be, and authenticated by the respective
Indenture Trustee thereunder, and any such Equipment Notes issued in
exchange therefor or replacement thereof pursuant to the terms of such
Indenture.
"Series B Equipment Notes" means the Series B Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee in the
case of the Leased Aircraft, or United, in the case of the Owned
Aircraft, as the case may be, and authenticated by the respective
Indenture Trustee thereunder, and any such Equipment Notes issued in
exchange therefor or replacement thereof pursuant to the terms of such
Indenture.
"Series C Equipment Notes" means the Series C Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee in the
case of the Leased Aircraft, or United, in the case of the Owned
Aircraft, as the case may be, and authenticated by the respective
Indenture Trustee thereunder, and any such Equipment Notes issued in
exchange therefor or replacement thereof pursuant to the terms of such
Indenture.
20
<PAGE> 25
"Series D Equipment Notes" means the Series D Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee in the
case of the Leased Aircraft, or United, in the case of the Owned
Aircraft, as the case may be, and authenticated by the respective
Indenture Trustee thereunder, and any such Equipment Notes issued in
exchange therefor or replacement thereof pursuant to the terms of such
Indenture.
"Special Distribution Date" means, with respect to any Special
Payment, the date chosen by the Subordination Agent pursuant to
Section 2.4(a) for the distribution of such Special Payment in
accordance with this Agreement; provided, however, that, if any such
day shall not be a Business Day, the related distribution for each
Class of Certificates shall be made on the next Business Day with
additional interest accruing at the rate applicable to such Class of
Certificates.
"Special Payment" means any payment (other than a Scheduled
Payment) in respect of, or any proceeds of, (i) any Equipment Note or
the Indenture or (ii) the proceeds from a refinancing, redemption or
purchase pursuant to Section 2 of the Note Purchase Agreement.
"Special Payments Account" means the Eligible Deposit Account
created pursuant to Section 2.2 as a sub- account to the Collection
Account.
"Standard & Poor's" means Standard & Poor's Ratings Services,
a division of McGraw-Hill Inc.
"Stated Interest Rate" means (i) with respect to the Class A
Certificates, for any Interest Period, LIBOR plus 0.22% per annum and
(ii) with respect to the Class B Certificates, for any Interest
Period, LIBOR plus 0.325% per annum, and in each case, plus an
additional margin equal to 0.50% per annum, from and including July 1,
1998, in the event no Registration Event (as defined in the
Registration Rights Agreement) occurs on or prior to the 180th day
after the Closing Date (provided that any such additional margin shall
cease to be in effect from and including the date on which such
Registration Event occurs); provided, however, that if the Shelf
Registration Statement (as defined in the Registration Rights
Agreement), if any, ceases to be effective at any time during the
period specified by Section 3(b) of the Registration Rights Agreement
for more than 60 days, whether or not consecutive, during any 12-month
period, the Stated Interest Rate for each Class of Certificates shall
be increased by 0.50% per annum from the 61st day of the period during
which such Shelf Registration Statement ceases to be effective until
such time as the Shelf Registration Statement again becomes effective.
"Subordination Agent" has the meaning assigned to such term in
the recital of parties to this Agreement.
"Tax" and "Taxes" mean any and all taxes, fees, levies,
duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, loss, damage,
21
<PAGE> 26
liability, expense, additions to tax and additional amounts or costs
incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing
authority, including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation or
net worth and similar charges; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, taxes
on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs and similar charges.
"Termination Notice" with respect to any Primary Liquidity
Facility has the meaning assigned to such term in such Primary
Liquidity Facility.
"Three-Month LIBOR" shall have the meaning set forth in the
Indentures.
"Threshold Rating" means, with respect to any Liquidity
Provider, (i) the short-term unsecured debt rating of "P-1" by Moody's
and "A-1+" by Standard & Poor's and (ii) for any Person which does not
have a published short-term unsecured debt rating from each Rating
Agency, the long-term unsecured debt rating of "Aa3" by Moody's and
"AA-" by Standard & Poor's.
"Treasury Regulations" means regulations, including proposed
or temporary regulations, promulgated under the Code. References
herein to specific provisions of proposed or temporary regulations
shall include analogous provisions of final Treasury Regulations or
other successor Treasury Regulations.
"Triggering Event" means (x) the occurrence of an Indenture
Default under all of the Indentures resulting in a PTC Event of
Default with respect to the most senior Class of Certificates then
Outstanding, (y) the Acceleration of all of the outstanding Equipment
Notes or (z) the occurrence of a United Bankruptcy Event.
"Trust" means any of the Class A Trust, the Class B Trust, the
Class C Trust or the Class D Trust.
"Trust Accounts" has the meaning assigned to such term in
Section 2.2(a).
"Trust Agreement" means any of the Class A Trust Agreement,
the Class B Trust Agreement, the Class C Trust Agreement or the Class
D Trust Agreement.
"Trustee" means First Security Bank, National Association, or
its successor in interest, and any successor or other trustee
appointed as provided in the Trust Agreements; provided, however, that
if the same institution is not acting as Trustee in respect of all
Classes of Certificates, the phrase "the Trustee" shall, unless the
context
22
<PAGE> 27
otherwise requires, mean, as to any Class of Certificates, the
institution acting as the Trustee in respect of such Class.
"Trustee Incumbency Certificate" has the meaning assigned to
such term in Section 2.5(a).
"Trustee Representatives" has the meaning assigned to such
term in Section 2.5(a).
"Trust Supplement" means an agreement supplemental to the
Basic Pass Through Agreement pursuant to which (i) a separate Trust is
created for the benefit of the Holders of the Certificates of a class,
(ii) the issuance of the Certificates of such class representing
fractional undivided interests in such Trust is authorized and (iii)
the terms of the Certificates of such class are established.
"U.C.C." means the Uniform Commercial Code in effect in the
applicable jurisdiction.
"United" means United Air Lines, Inc., a Delaware corporation,
and its successors and assigns.
"United Bankruptcy Event" means the occurrence and
continuation of any of the following:
(i) United shall consent to the appointment of or
the taking of possession by a receiver, trustee or liquidator
of itself or of a substantial part of its property, or United
shall admit in writing its inability to pay it debts generally
as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit
of creditors, or United shall file a voluntary petition in
bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation or other relief in a case under
any bankruptcy laws or other insolvency laws (as in effect at
such time) or an answer admitting the material allegations of
a petition filed against United in any such case, or United
shall seek relief by voluntary petition, answer or consent,
under the provisions of any other bankruptcy or other similar
law providing for the reorganization or winding-up of
corporations (as in effect at such time) or United shall seek
an agreement, composition, extension or adjustment with its
creditors under such laws, or United's board of directors
shall adopt a resolution authorizing corporate action in
furtherance of any of the foregoing; or
(ii) an order, judgment or decree shall be entered
by any court of competent jurisdiction appointing, without the
consent of United, a receiver, trustee or liquidator of United
or of any substantial part of its property, or any substantial
part of the property of United shall be sequestered, or
granting any
23
<PAGE> 28
other relief in respect of United as a debtor under any
bankruptcy laws or other insolvency laws (as in effect at such
time), and any such order, judgment or decree of appointment
or sequestration shall remain in force undismissed, unstayed
and unvacated for a period of 90 days after the date of entry
thereof; and
(iii) a petition against United in a case under any
bankruptcy laws or other insolvency laws (as in effect at such
time) is filed and not withdrawn or dismissed within 90 days
thereafter, or if, under the provisions of any law providing
for reorganization or winding-up of corporations which may
apply to United, any court of competent jurisdiction assumes
jurisdiction, custody or control of United or of any
substantial part of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed
and unterminated for a period of 90 days.
"United Provisions" has the meaning assigned to such term in
Section 9.1(a).
"Written Notice" means, from (i) the Trustee or any Liquidity
Provider, a written instrument executed by the Designated
Representative of such Person, and (ii) the Subordination Agent, a
written instrument executed by a Person designated in the Officer's
Certificate of the Subordination Agent delivered on the Closing Date.
An invoice delivered by a Primary Liquidity Provider pursuant to
Section 3.1 in accordance with its normal invoicing procedures shall
constitute Written Notice under such Section.
ARTICLE II
TRUST ACCOUNTS; CONTROLLING PARTY
2.1 Agreement to Terms of Subordination; Payments from Monies
Received Only.
(a) The Trustee hereby acknowledges and agrees to the terms
of subordination set forth in this Agreement in respect of each Class of
Certificates and agrees to enforce such provisions and cause all payments in
respect of the Equipment Notes and the Liquidity Facilities to be applied in
accordance with the terms of this Agreement. In addition, the Trustee hereby
agrees to cause the Equipment Notes purchased by the related Trust to be
registered in the name of the Subordination Agent, as nominee of the Trustee,
to be held in trust by the Subordination Agent solely for the purpose of
facilitating the enforcement of the subordination and other provisions of this
Agreement.
(b) Except as otherwise expressly provided in the next
sentence of this Section 2.1, all payments to be made by the Subordination
Agent hereunder shall be made only from amounts received by it that constitute
Scheduled Payments, Special Payments, payments under Section 7 of the Leased
Aircraft Participation Agreements, payments under Section 5 of the Owned
Aircraft Participation Agreements, payments under Section 6(j) or 9 of the Note
24
<PAGE> 29
Purchase Agreement or payments under any Liquidity Facility, and only to the
extent that the Subordination Agent shall have received sufficient income or
proceeds therefrom to enable it to make such payments in accordance with the
terms hereof. Each of the Trustee and the Subordination Agent hereby agrees
and, as provided in each Trust Agreement, each Certificateholder, by its
acceptance of a Certificate, and each Liquidity Provider, by entering into the
Liquidity Facility to which it is a party, has agreed to look solely to such
amounts to the extent available for distribution to it as provided in this
Agreement and that none of the Trustee, the Owner Trustees, the Indenture
Trustees, the Owner Participants nor the Subordination Agent is personally
liable to any of them for any amounts payable or any liability under this
Agreement, any Trust Agreement, any Liquidity Facility or such Certificate,
except (in the case of the Subordination Agent) as expressly provided herein or
(in the case of the Trustee) as expressly provided in each Trust Agreement or
(in the case of the Owner Trustees and the Indenture Trustees) as expressly
provided in any Operative Agreement.
2.2 Trust Accounts. (a) Upon the execution of this Agreement,
the Subordination Agent shall establish and maintain in its name (i) the
Collection Account as an Eligible Deposit Account, bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Trustee, the Certificateholders and the Primary Liquidity
Providers and (ii) as a sub-account in the Collection Account, the Special
Payments Account as an Eligible Deposit Account, bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit
of the Trustee, the Certificateholders and the Primary Liquidity Providers.
The Subordination Agent shall establish and maintain the Cash Collateral
Accounts pursuant to and under the circumstances set forth in Section 3.6(f).
Upon such establishment and maintenance under Section 3.6(f), the Cash
Collateral Accounts shall, together with the Collection Account, constitute the
"Trust Accounts" hereunder. Each such Trust Account shall meet the
requirements of an"Eligible Deposit Account."
(b) Funds on deposit in the Trust Accounts shall be invested
and reinvested by the Subordination Agent in Eligible Investments selected by
United if such investments are reasonably available and have maturities no
later than the earlier of (i) 90 days following the date of such investment and
(ii) the Business Day preceding the Regular Distribution Date or the date of
the related distribution pursuant to Section 2.4, as the case may be, next
following the date of such investment; provided, however, that upon the
occurrence and during the continuation of a Triggering Event, the Subordination
Agent shall invest and reinvest such amounts in accordance with the written
instructions of the Controlling Party; and provided, further, that following
the making of a Downgrade Drawing under any Primary Liquidity Facility, the
Subordination Agent shall invest and reinvest the amounts in the Cash
Collateral Account with respect to such Primary Liquidity Facility at the
direction of the Primary Liquidity Provider funding such Drawing. Unless
otherwise expressly provided in this Agreement (including Section 3.6(f)), any
Investment Earnings shall be deposited in the Collection Account when received
by the Subordination Agent and shall be applied by the Subordination Agent in
the same manner as the principal amount of such investment is to be applied and
any losses shall be charged against the principal amount invested, in each case
net of the Subordination Agent's reasonable fees and expenses in making such
investments. The Subordination Agent shall not
25
<PAGE> 30
be liable for any loss resulting from any investment, reinvestment or
liquidation required to be made under this Agreement other than by reason of
its willful misconduct or gross negligence. Eligible Investments and any other
investment required to be made hereunder shall be held to their maturities
except that any such investment may be sold (without regard to its maturity) by
the Subordination Agent without instructions whenever such sale is necessary to
make a distribution required under this Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
(c) The Subordination Agent shall possess all right, title
and interest in all funds on deposit from time to time in the Trust Accounts
and in all proceeds thereof (including all income thereon, except as otherwise
expressly provided herein with respect to Investment Earnings). The Trust
Accounts shall be held in trust by the Subordination Agent under the sole
dominion and control of the Subordination Agent for the benefit of the Trustee,
the Certificateholders and the Primary Liquidity Providers, as the case may be.
The Subordination Agent shall maintain "control" of the Trust Accounts within
the meaning of Section 8-106 of the U.C.C. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the Subordination Agent
shall within 10 Business Days (or such longer period, not to exceed 30 calendar
days, to which each Rating Agency may consent) establish a new Collection
Account, Special Payments Account or Cash Collateral Account, as the case may
be, as an Eligible Deposit Account and shall transfer any cash and/or any
investments to such new Collection Account, Special Payments Account or Cash
Collateral Account, as the case may be. So long as FSB is an Eligible
Institution, the Trust Accounts shall be maintained with it as Eligible Deposit
Accounts.
2.3 Deposits to the Collection Account and Special Payments
Account. (a) The Subordination Agent shall, upon receipt thereof, deposit in
the Collection Account all Scheduled Payments received by it.
(b) The Subordination Agent shall, on each date when one or
more Special Payments are made to the Subordination Agent as holder of the
Equipment Notes, deposit in the Special Payments Account the aggregate amount
of such Special Payments.
2.4 Distributions of Special Payments. (a) Notice of
Special Payment. Upon receipt by the Subordination Agent, as registered holder
of the Equipment Notes, of any notice of a Special Payment (or, in the absence
of any such notice, upon receipt by the Subordination Agent of a Special
Payment), the Subordination Agent shall promptly give notice thereof to the
Trustee and the Primary Liquidity Providers. The Subordination Agent shall
promptly calculate the amount of the redemption or purchase of Equipment Notes
or the amount of any Overdue Scheduled Payment, as the case may be, comprising
such Special Payment under the applicable Indenture or Indentures or the Note
Purchase Agreement and shall promptly send to the Trustee a Written Notice of
such amount. Such Written Notice shall also set the distribution date for such
Special Payment (a "Special Distribution Date"), which shall be a Business Day
which follows the later to occur of (x) the 20th day after the date of such
Written Notice or (y) the date the Subordination Agent has received or expects
to receive such Special Payment.
26
<PAGE> 31
(b) Redemptions and Purchases of All Equipment Notes Issued
Under an Indenture. So long as no Triggering Event shall have occurred
(whether or not continuing), the Subordination Agent shall make distributions
pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments
Account on account of the redemption, purchase or refinancing (including a
purchase resulting from a sale of the Equipment Notes permitted by Article IV
and a purchase, redemption or refinancing permitted by Section 2(a) or 2(c) of
the Note Purchase Agreement) of all of the Equipment Notes issued pursuant to
an Indenture on the Special Distribution Date for such Special Payment in the
following order of priority:
first, such amount as shall be required to pay (A) all accrued
and unpaid Liquidity Expenses then in arrears plus (B) the product of
(x) the aggregate amount of all accrued and unpaid Liquidity Expenses
not in arrears to such Special Payment Date multiplied by (y) a
fraction, the numerator of which is the aggregate outstanding
principal amount of Equipment Notes being redeemed, purchased or
refinanced on such Special Payment Date and the denominator of which
is the aggregate outstanding principal amount of all Equipment Notes,
shall be distributed to the Primary Liquidity Providers pari passu on
the basis of the amount of Liquidity Expenses owed to each Primary
Liquidity Provider;
second, such amount as shall be required to pay (A) all
accrued and unpaid interest then in arrears on all Liquidity
Obligations (including interest accrued on any Interest Drawing or any
Applied Downgrade Drawing (as defined in any Primary Liquidity
Facility)) plus (B) the product of (x) the aggregate amount of all
accrued and unpaid interest on all Liquidity Obligations not in
arrears to such Special Payment Date (at the rate provided in the
applicable Primary Liquidity Facility) multiplied by (y) a fraction,
the numerator of which is the aggregate outstanding principal amount
of Equipment Notes being redeemed, purchased or refinanced on such
Special Payment Date and the denominator of which is the aggregate
outstanding principal amount of all Equipment Notes, shall be
distributed to the Primary Liquidity Providers pari passu on the basis
of the amount of Liquidity Obligations owed to each Primary Liquidity
Provider;
third, such amount as shall be required (A) if any Cash
Collateral Account relating to a Primary Liquidity Facility had been
previously funded as provided in Section 3.6(f), to fund such Cash
Collateral Account up to the Maximum Commitment Amount applicable to
the related Primary Liquidity Facility shall be deposited in such Cash
Collateral Account, (B) if any Primary Liquidity Facility shall become
a Downgraded Facility at a time when unreimbursed LP Interest Drawings
under such Primary Liquidity Facility have reduced the Remaining
Commitment Amount thereunder to zero, to fund the relevant Cash
Collateral Account up to the Maximum Commitment Amount applicable to
such Primary Liquidity Facility shall be deposited in such Cash
Collateral Account and (C) if, with respect to any particular Primary
Liquidity Facility, neither subclause (A) nor subclause (B) of this
clause third are applicable, to pay or reimburse the Primary Liquidity
Provider in respect of such Primary Liquidity Facility, in each case
in an amount equal to the amount of any unreimbursed Interest Drawings
27
<PAGE> 32
under the Primary Liquidity Facilities shall be distributed to the
Primary Liquidity Providers, pari passu on the basis of the amounts of
all such deficiencies and/or unreimbursed Interest Drawings;
fourth, if, with respect to any particular Primary Liquidity
Facility, either subclause (A) or (B) of clause third above is
applicable, then the Primary Liquidity Provider with respect to such
Primary Liquidity Facility shall be paid the excess of (x) the
aggregate outstanding amount of unreimbursed Advances (whether or not
then due) under such Primary Liquidity Facility over (y) the Maximum
Commitment Amount applicable to such Primary Liquidity Facility, pari
passu on the basis of such amounts in respect of each Primary
Liquidity Provider;
fifth, if any Class A Certificates are Outstanding on such
Special Distribution Date, such amount as shall be required to pay in
full Expected Distributions to the holders of Class A Certificates on
such Special Distribution Date shall be distributed to the Trustee;
sixth, if any Class B Certificates are Outstanding on such
Special Distribution Date, such amount as shall be required to pay in
full Expected Distributions to the holders of Class B Certificates on
such Special Distribution Date shall be distributed to the Trustee;
seventh, if any Class C Certificates are Outstanding on such
Special Distribution Date, such amount as shall be required to pay in
full Expected Distributions to the holders of Class C Certificates on
such Special Distribution Date shall be distributed to the Trustee;
eighth, if any Class D Certificates are Outstanding on such
Special Distribution Date, such amount as shall be required to pay in
full Expected Distributions to the holders of Class D Certificates on
such Special Distribution Date shall be distributed to the Trustee;
and
ninth, the balance, if any, of such Special Payment shall be
distributed to United.
(c) Other Special Payments. Any amounts on deposit in the
Special Payments Account other than in respect of amounts to be distributed
pursuant to Section 2.4(b) or (e) shall be distributed on the Special
Distribution Date therefor in accordance with Article III.
(d) Investment of Amounts in Special Payments Account. Any
amounts on deposit in the Special Payments Account prior to the distribution
thereof pursuant to Section 2.4(b), (c) or (e) shall be invested in accordance
with Section 2.2(b). Investment Earnings on such investments shall be
distributed in accordance with Section 2.4(b), (c) or (e), as the case may be.
28
<PAGE> 33
(e) Certain Payments. The Subordination Agent shall
distribute promptly upon receipt thereof (i) any indemnity payment received by
it from United in respect of any Trustee or any Primary Liquidity Provider
(collectively, the "Payees") and (ii) any compensation (including any fees
payable to any Primary Liquidity Provider under Section 2.03 of any Primary
Liquidity Facility) received by it from United under any Operative Agreement in
respect of any Payee, directly to the Payee entitled thereto.
2.5 Designated Representatives. (a) With the delivery of this
Agreement, the Trustee shall furnish to the Subordination Agent, and from time
to time thereafter may furnish to the Subordination Agent, at the Trustee's
discretion, or upon the Subordination Agent's request (which request shall not
be made more than one time in any 12-month period), a certificate (a "Trustee
Incumbency Certificate") of a Responsible Officer of the Trustee certifying as
to the incumbency and specimen signatures of the officers of the Trustee and
the attorney-in-fact and agents of the Trustee (the "Trustee Representatives")
authorized to give Written Notices on behalf of the Trustee hereunder. Until
the Subordination Agent receives a subsequent Trustee Incumbency Certificate,
it shall be entitled to rely on the last Trustee Incumbency Certificate
delivered to it hereunder.
(b) With the delivery of this Agreement, each Liquidity
Provider shall furnish to the Subordination Agent, and from time to time
thereafter may furnish to the Subordination Agent, at such Liquidity Provider's
discretion, or upon the Subordination Agent's request (which request shall not
be made more than one time in any 12-month period), a certificate (an "LP
Incumbency Certificate") of any authorized signatory of such Liquidity Provider
certifying as to the incumbency and specimen signatures of any officer,
attorney-in-fact, agent or other designated representative of such Liquidity
Provider (the "LP Representatives" and, together with the Trustee
Representatives, the "Designated Representatives") authorized to give Written
Notices on behalf of such Liquidity Provider hereunder. Until the
Subordination Agent receives a subsequent LP Incumbency Certificate, it shall
be entitled to rely on the last LP Incumbency Certificate delivered to it
hereunder.
2.6 Controlling Party. (a) The Trustee and the Primary
Liquidity Providers hereby agree that, with respect to any Indenture at any
given time, the Indenture Trustee thereunder shall be directed (i) in taking,
or refraining from taking, any action under such Indenture or the Equipment
Notes issued thereunder, so long as no Indenture Default has occurred and is
continuing thereunder, by the holders of at least a majority of the outstanding
principal amount of such Equipment Notes (provided that, for so long as the
Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent shall act with respect to this clause (i) in accordance
with the direction of the Trustee), and (ii) after the occurrence and during
the continuation of an Indenture Default thereunder (which, in the case of an
Indenture pertaining to a Leased Aircraft, has not been cured by the Owner
Trustee or the Owner Participant thereunder, if applicable, pursuant to Section
8.03 of such Indenture), in taking, or refraining from taking, any action under
such Indenture or with respect to such Equipment Notes, including exercising
remedies thereunder (including Accelerating the Equipment Notes issued
thereunder
29
<PAGE> 34
or foreclosing the Lien on the Aircraft securing such Equipment Notes), by the
Controlling Party.
(b) The Person who shall be the "Controlling Party" with
respect to any Indenture shall be: (w) the Trustee acting on behalf of holders
of Class A Certificates; (x) upon payment of Final Distributions to the holders
of Class A Certificates, the Trustee acting on behalf of the holders of Class B
Certificates; (y) upon payment of Final Distributions to the holders of Class A
Certificates and Class B Certificates, the Trustee acting on behalf of holders
of Class C Certificates; and (z) upon payment of Final Distributions to the
holders of Class A Certificates, Class B Certificates and Class C Certificates,
the Trustee acting on behalf of holders of Class D Certificates. For purposes
of giving effect to the foregoing, the Trustee (other than as the Controlling
Party) irrevocably agrees (and the Certificateholders (other than the
Certificateholders represented by the Controlling Party) shall be deemed to
agree by virtue of their purchase of Certificates) that the Subordination
Agent, as record holder of the Equipment Notes, shall exercise its voting
rights in respect of the Equipment Notes as directed by the Controlling Party.
The Subordination Agent shall give written notice to all of
the other parties to this Agreement promptly upon a change in the identity of
the Controlling Party (including, for this purpose, a change in the Class of
Certificates that the Trustee then represents as the Controlling Party). Each
of the parties hereto agrees that it shall not exercise any of the rights of
the Controlling Party at such time as it is not the Controlling Party
hereunder; provided, however, that nothing herein contained shall prevent or
prohibit any Non-Controlling Party from exercising such rights as shall be
specifically granted to such Non-Controlling Party hereunder and under the
other Operative Agreements.
(c) Notwithstanding the foregoing, at any time after 18
months following the earlier to occur of (i) the date on which the Remaining
Commitment Amount under any Primary Liquidity Facility shall be and remain zero
(for any reason other than a Downgrade Drawing), (ii) a Final Drawing shall
have been made under any Primary Liquidity Facility and remains unreimbursed
and (iii) the date on which all Equipment Notes shall have been Accelerated,
the Primary Liquidity Providers holding more than 50% of all unreimbursed
Liquidity Obligations under the Liquidity Facilities shall have the right to
elect, by Written Notice to the Subordination Agent and the Trustee, that such
Liquidity Providers will become the Controlling Party hereunder with respect to
any Indenture at any time from and including the last day of such 18-month
period.
(d) The exercise of remedies by the Controlling Party under
this Agreement shall be expressly limited by Section 4.1(a)(ii) and 4.1(c).
(e) The Controlling Party shall not be entitled to require
or obligate any Non-Controlling Party to provide funds necessary to exercise
any right or remedy hereunder.
30
<PAGE> 35
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF
AMOUNTS RECEIVED
3.1 Written Notice of Distribution. (a) No later than 3:00 P.M.
(New York City time) on the Business Day preceding each Distribution Date, each
of the following Persons shall deliver to the Subordination Agent a Written
Notice setting forth the following information as at the close of business on
such Business Day:
(i) With respect to the Class A Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clause fifth of Section 2.4(b) or 3.2;
(ii) With respect to the Class B Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clause sixth of Sections 2.4(b) or 3.2;
(iii) With respect to the Class C Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clause seventh of Section 2.4(b) or 3.2;
(iv) With respect to the Class D Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clause eighth of Section 2.4(b) or 3.2;
(v) With respect to each Primary Liquidity Facility, the
Primary Liquidity Providers thereunder shall separately set forth the
amounts to be paid in accordance with clauses first, second, third and
fourth of Section2.4(b) or 3.2; and
(vi) The Trustee shall set forth the amounts to be paid in
accordance with clause ninth of Section 3.2.
The notices required under this Section 3.1(a) may be in the form of a schedule
or similar document provided to the Subordination Agent by the parties
referenced therein or by any one of them, which schedule or similar document
may state that, unless there has been a prepayment, purchase or redemption of
the Certificates, such schedule or similar document is to remain in effect
until any substitute notice or amendment shall be given to the Subordination
Agent by the party providing such notice.
(b) Following the occurrence of a Triggering Event, the
Subordination Agent shall request the following information from the following
Persons, and each of the following Persons shall, upon the request of the
Subordination Agent, deliver a Written Notice to the Subordination Agent
setting forth for such Person the following information:
31
<PAGE> 36
(i) With respect to the Class A Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clauses first (to reimburse payments made by
the Class A Certificateholders pursuant to subclause (iii) of clause
first of Section 3.3) and seventh of Section 3.3;
(ii) With respect to the Class B Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clauses first (to reimburse payments made by
the Class B Certificateholders pursuant to subclause (iii) of clause
first of Section 3.3) and eighth of Section 3.3;
(iii) With respect to the Class C Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clauses first (to reimburse payments made by
the Class C Certificateholders pursuant to subclause (iii) of clause
first of Section 3.3) and ninth of Section 3.3;
(iv) With respect to the Class D Certificates, if any are
Outstanding, the Trustee shall separately set forth the amounts to be
paid in accordance with clauses first (to reimburse payments made by
the Class D Certificateholders pursuant to subclause (iii) of clause
first of Section 3.3) and tenth of Section 3.3;
(v) With respect to each Primary Liquidity Facility, each
Primary Liquidity Provider thereunder shall separately set forth the
amounts to be paid to it in accordance with subclause (iii) of clause
first of Section 3.3 and clauses second, third, fourth and fifth of
Section 3.3; and
(vi) The Trustee shall set forth the amounts to be paid in
accordance with clause sixth of Section 3.3.
(c) At such time as the Trustee or a Primary Liquidity
Provider shall have received all amounts owing to it (and, in the case of the
Trustee, the Certificateholders for which it is acting) pursuant to Section
2.4, 3.2 or 3.3, as applicable, and, in the case of a Primary Liquidity
Provider, its commitment under the related Primary Liquidity Facility shall
have terminated or expired, such Person shall, by a Written Notice, so inform
the Subordination Agent and each other party to this Agreement.
(d) As provided in Section 6.5, the Subordination Agent
shall be fully protected in relying on any of the information set forth in a
Written Notice provided by the Trustee or any Primary Liquidity Provider
pursuant to Sections 3.1(a) through (c) above and shall have no independent
obligation to verify, calculate or recalculate any amount set forth in any
Written Notice delivered in accordance with such paragraphs.
(e) Any Written Notice delivered by the Trustee or a Primary
Liquidity Provider, as applicable, pursuant to Section 3.1(a), 3.1(b) or
3.1(c), if made prior to 10:00 A.M. (New York City time) shall be effective on
the date delivered (or if delivered later shall
32
<PAGE> 37
be effective as of the next Business Day). Subject to the terms of this
Agreement, the Subordination Agent shall as promptly as practicable comply with
any such instructions; provided, however, that any transfer of funds pursuant
to any instruction received after 10:00 A.M. (New York City time) on any
Business Day may be made on the next succeeding Business Day.
(f) If the Subordination Agent shall not receive from any
Person any information set forth in Section 3.1(a) or (b) above which is
required to enable the Subordination Agent to make a distribution to such
Person pursuant to Sections 2.4(b), 3.2 or 3.3, the Subordination Agent shall
request such information and, failing to receive any such information, the
Subordination Agent shall not make such distribution(s) to such Person. In
such event, the Subordination Agent shall make distributions pursuant to
clauses first through ninth of Section 2.4(b), clauses first through tenth of
Section 3.2 and clauses first through eleventh of Section 3.3 to the extent it
shall have sufficient information to enable it to make such distributions, and
shall continue to hold any funds remaining, after making such distributions,
until the Subordination Agent shall receive all necessary information to enable
it to distribute any funds so withheld.
(g) On such dates (but not more frequently than monthly) as
any Primary Liquidity Provider or the Trustee shall request, the Subordination
Agent shall send to such party a written statement reflecting all amounts on
deposit with the Subordination Agent pursuant to Section 3.1(f).
3.2 Distribution of Amounts on Deposit in the Collection Account.
Except as otherwise provided in Sections 2.4, 3.1(f), 3.3, 3.4 and 3.6(b),
amounts on deposit in the Collection Account (or, in the case of any amount
described in Section 2.4(c), on deposit in the Special Payments Account) shall
be promptly distributed on each Distribution Date in the following order of
priority and in accordance with the information provided to the Subordination
Agent pursuant to Section 3.1(a):
first, such amount as shall be required to pay all accrued and
unpaid Liquidity Expenses owed to each Primary Liquidity Provider
shall be distributed to the Primary Liquidity Providers pari passu on
the basis of the amount of Liquidity Expenses owed to each Primary
Liquidity Provider;
second, such amount as shall be required to pay in full the
aggregate amount of interest accrued on all Liquidity Obligations
payable as of such Distribution Date (at the rate provided in the
applicable Primary Liquidity Facility) shall be distributed to the
Primary Liquidity Providers pari passu on the basis of the amount of
Liquidity Obligations owed to each Primary Liquidity Provider;
third, such amount as shall be required (A) if any Cash
Collateral Account relating to a Primary Liquidity Facility had been
previously funded as provided in Section 3.6(f), to fund such Cash
Collateral Account up to the Maximum Commitment
33
<PAGE> 38
Amount applicable to the related Primary Liquidity Facility shall be
deposited in such Cash Collateral Account, (B) if any Primary
Liquidity Facility shall become a Downgraded Facility at a time when
unreimbursed LP Interest Drawings under such Primary Liquidity
Facility have reduced the Remaining Commitment Amount thereunder to
zero, to fund the relevant Cash Collateral Account up to the Maximum
Commitment Amount applicable to the such Primary Liquidity Facility
shall be deposited in such Cash Collateral Account and (C) if, with
respect to any particular Primary Liquidity Facility, neither
subclause (A) nor subclause (B) of this clause third are applicable,
to pay or reimburse the Primary Liquidity Provider in respect of such
Primary Liquidity Facility, in each case in an amount equal to the
amount of all Liquidity Obligations then due under such Primary
Liquidity Facility (other than amounts payable pursuant to clause
first second of this Section 3.2) shall be distributed to such Primary
Liquidity Provider, pari passu on the basis of the amounts of all such
unreimbursed Liquidity Obligations and/or deficiencies;
fourth, if, with respect to any particular Primary Liquidity
Facility, either subclause (A) or (B) of clause third above is
applicable, then the Primary Liquidity Provider with respect to such
Primary Liquidity Facility shall be paid the excess of (x) the
aggregate outstanding amount of unreimbursed Advances (whether or not
then due) under such Primary Liquidity Facility over (y) the Maximum
Commitment Amount applicable to such Primary Liquidity Facility, pari
passu on the basis of such amounts in respect of each Primary
Liquidity Provider;
fifth, if any Class A Certificates are Outstanding on such
Distribution Date, such amount as shall be required to pay in full
Expected Distributions to the holders of the Class A Certificates on
such Distribution Date shall be distributed to the Trustee;
sixth, if any Class B Certificates are Outstanding on such
Distribution Date, such amount as shall be required to pay in full
Expected Distributions to the holders of the Class B Certificates on
such Distribution Date shall be distributed to the Trustee;
seventh, if any Class C Certificates are Outstanding on such
Distribution Date, such amount as shall be required to pay in full
Expected Distributions to the holders of the Class C Certificates on
such Distribution Date shall be distributed to the Trustee;
eighth, if any Class D Certificates are Outstanding on such
Distribution Date, such amount as shall be required to pay in full
Expected Distributions to the holders of the Class D Certificates on
such Distribution Date shall be distributed to the Trustee;
ninth, such amount as shall be required to pay in full the
aggregate unpaid amount of fees and expenses payable as of such
Distribution Date to the Subordination Agent and the Trustee pursuant
to the terms of this Agreement and the Trust Agreements, as the case
may be, shall be distributed to the Subordination Agent and the
Trustee; and
34
<PAGE> 39
tenth, the balance, if any, of any such payment remaining
thereafter shall be distributed to United.
3.3 Distribution of Amounts on Deposit Following a Triggering
Event. Except as otherwise provided in Sections 3.1(f) and 3.6(b), upon the
occurrence of a Triggering Event and at all times thereafter, all funds in the
Collection Account (including the Special Payments Account) shall be promptly
distributed by the Subordination Agent in the following order of priority:
first, such amount as shall be required to reimburse (i) the
Subordination Agent for any out-of-pocket costs and expenses actually
incurred by it (to the extent not previously reimbursed) in the
protection of, or the realization of the value of, the Equipment Notes
or any Indenture Estate, shall be applied by the Subordination Agent
in reimbursement of such costs and expenses, (ii) the Trustee for any
amounts of the nature described in clause (i) above actually incurred
by it under the applicable Trust Agreement (to the extent not
previously reimbursed), shall be distributed to the Trustee and (iii)
any Primary Liquidity Provider or Certificateholder for payments, if
any, made by it to the Subordination Agent or the Trustee in respect
of amounts described in clause (i) above, shall be distributed to such
Primary Liquidity Provider or to the Trustee for the account of such
Certificateholder, in each such case, pari passu on the basis of all
amounts described in clauses (i) through (iii) above;
second, such amount remaining as shall be required to pay all
accrued and unpaid Liquidity Expenses shall be distributed to each
Primary Liquidity Provider pari passu on the basis of the amount of
Liquidity Expenses owed to each Liquidity Provider;
third, such amount remaining as shall be required to pay
accrued and unpaid interest on the Liquidity Obligations as provided
in the Primary Liquidity Facilities shall be distributed to each
Primary Liquidity Provider pari passu on the basis of the amount of
such accrued and unpaid interest owed to each Primary Liquidity
Provider;
fourth, such amount as shall be required (A) if any Cash
Collateral Account relating to a Primary Liquidity Facility had been
previously funded as provided in Section 3.6(f) unless (i) a
Performing Note Deficiency exists and a Triggering Event shall have
occurred and be continuing with respect to the relevant Primary
Liquidity Facility or (ii) a Final Drawing shall have occurred with
respect to the relevant Primary Liquidity Facility, to fund such Cash
Collateral Account up to the Maximum Commitment Amount applicable to
the related Primary Liquidity Facility shall be deposited in such Cash
Collateral Account, (B) if any Primary Liquidity Facility shall become
a Downgraded Facility at a time when unreimbursed LP Interest Drawings
under such Primary Liquidity Facility have reduced the Remaining
Commitment Amount thereunder to zero unless (i) a Performing Note
Deficiency exists and a Triggering Event shall have occurred and be
continuing with respect to the relevant Primary Liquidity Facility or
(ii) a Final Drawing shall have occurred with respect to the relevant
Primary
35
<PAGE> 40
Liquidity Facility, to fund the relevant Cash Collateral Account up to
the Maximum Commitment Amount applicable to such Primary Liquidity
Facility shall be deposited in such Cash Collateral Account and (C)
if, with respect to any particular Primary Liquidity Facility, neither
subclause (A) nor subclause (B) of this clause fourth is applicable,
to pay or reimburse the Primary Liquidity Provider in respect of such
Primary Liquidity Facility, in each case in an amount equal to the
amount of all Liquidity Obligations, whether or not then due under
such Primary Liquidity Facility (other than amounts payable pursuant
to clause first, second or third of this Section 3.3), shall be
distributed to such Primary Liquidity Provider, pari passu on the
basis of the amounts of such deficiencies and/or unreimbursed
Liquidity Obligations;
fifth, if, with respect to any particular Primary Liquidity
Facility, either subclause (A) or (B) of clause fourth above is
applicable, then the Primary Liquidity Provider with respect to such
Primary Liquidity Facility shall be paid the excess of (x) the
aggregate outstanding amount of unreimbursed Advances (whether or not
then due) under such Primary Liquidity Facility over (y) the Maximum
Commitment Amount applicable to such Primary Liquidity Facility, pari
passu on the basis of such amounts in respect of each Primary
Liquidity Provider;
sixth, such amount as shall be required to reimburse or pay
(i) the Subordination Agent for any Tax (other than Taxes imposed on
compensation paid hereunder), expense, fee, charge or other loss
incurred by or any other amount payable to the Subordination Agent in
connection with the transactions contemplated hereby (to the extent
not previously reimbursed), shall be applied by the Subordination
Agent in reimbursement of such amount, (ii) the Trustee for any Tax
(other than Taxes imposed on compensation paid under any Trust
Agreement), expense, fee, charge, loss or any other amount payable to
the Trustee under the Trust Agreements (to the extent not previously
reimbursed), shall be distributed to the Trustee and (iii) each
Certificateholder for payments, if any, made by it pursuant to Section
5.2 in respect of amounts described in clause (i) above, shall be
distributed to the Trustee for the account of such Certificateholder,
in each such case, pari passu on the basis of all amounts described in
clauses (i) through (iii) above;
seventh, if any Class A Certificates are then Outstanding,
such amount remaining as shall be required to pay in full Adjusted
Expected Distributions on the Class A Certificates shall be
distributed to the Trustee;
eighth, if any Class B Certificates are then Outstanding, such
amount remaining as shall be required to pay in full Adjusted Expected
Distributions on the Class B Certificates shall be distributed to the
Trustee;
ninth, if any Class C Certificates are then Outstanding, such
amount remaining as shall be required to pay in full Adjusted Expected
Distributions on the Class C Certificates shall be distributed to the
Trustee;
36
<PAGE> 41
tenth, if any Class D Certificates are then Outstanding, such
amount remaining as shall be required to pay in full Adjusted Expected
Distributions on the Class D Certificates shall be distributed to the
Trustee; and
eleventh, the balance, if any, of such funds remaining
thereafter shall be distributed to United.
3.4 Other Payments. (a) Any payments received by the
Subordination Agent for which no provision as to the application thereof is
made in this Agreement shall be distributed by the Subordination Agent (i) in
the order of priority specified in Section 3.3 and (ii) to the extent received
or realized at any time after the Final Distributions for each Class of
Certificates have been made, in the following order of priority: first, in the
manner provided in clause first of Section 3.3 and second, in the manner
provided in clause eleventh of Section 3.3.
(b) On any interest payment date under each Primary
Liquidity Facility which is not a Distribution Date, the Subordination Agent
shall pay to the Primary Liquidity Provider under such Primary Liquidity
Facility from, and to the extent of, amounts on deposit in the Collection
Account, an amount equal to the amount of interest then due and payable to such
Primary Liquidity Provider under such Primary Liquidity Facility.
(c) Except as otherwise provided in Section 3.3, if the
Subordination Agent receives any Scheduled Payment after the Scheduled Payment
Date relating thereto, but prior to such payment becoming an Overdue Scheduled
Payment, then the Subordination Agent shall deposit such Scheduled Payment in
the Collection Account and promptly distribute such Scheduled Payment in
accordance with the priority of distributions set forth in Section 3.2;
provided, however, that for the purposes of this Section 3.4(c) only, each
reference in clause second or ninth of Section 3.2 to "Distribution Date" shall
be deemed to mean the actual date of payment of such Scheduled Payment and each
reference in clause fifth, sixth, seventh or eighth of Section 3.2 to
"Distribution Date" shall be deemed to refer to such Scheduled Payment Date.
3.5 Payments to the Trustee and the Primary Liquidity Providers.
Any amounts distributed hereunder to any Primary Liquidity Provider shall be
paid to such Primary Liquidity Provider by wire transfer of funds to the
address such Primary Liquidity Provider shall provide to the Subordination
Agent. The Subordination Agent shall provide a Written Notice of any such
transfer to the applicable Primary Liquidity Provider, as the case may be, at
the time of such transfer. Any amounts distributed hereunder by the
Subordination Agent to the Trustee which shall not be the same institution as
the Subordination Agent shall be paid to the Trustee by wire transfer funds at
the address the Trustee shall provide to the Subordination Agent.
3.6 Liquidity Facilities. (a) Interest Drawings. If on any
Distribution Date, after giving effect to the subordination provisions of this
Agreement, the Subordination Agent shall not have sufficient funds for the
payment of any amounts due and owing in respect of accrued interest on the
Class A Certificates or the Class B Certificates, then, prior to 12:00 noon
(New
37
<PAGE> 42
York City time) on the Business Day following such Distribution Date, the
Subordination Agent shall request a drawing, in the case of the Primary
Liquidity Facilities, or an interest rate cap payment, in the case of the
Above-Cap Liquidity Facilities (each such drawing or payment, an "Interest
Drawing"), first under the Primary Liquidity Facility with respect to such
Class of Certificates in an amount equal to the lesser of (i) an amount
sufficient to pay the amount of such accrued interest and (ii) the Interest
Period Available Amount at such time under such Primary Liquidity Facility and,
second, to the extent that the Interest Drawing under such Primary Liquidity
Facility is insufficient (assuming the Advance thereunder was paid to the
Subordination Agent) to pay the amount of such accrued interest (the
"Deficiency Amount"), under the Above-Cap Liquidity Facility with respect to
such Class of Certificates in an amount equal to such Deficiency Amount, and,
upon receipt by the Subordination Agent thereof, shall pay such amounts to the
Trustee with respect to such Class of Certificates in payment of such accrued
interest.
(b) Application of Interest Drawings. Notwithstanding
anything to the contrary contained in this Agreement, (i) all payments received
by the Subordination Agent in respect of an Interest Drawing under the Class A
Primary Liquidity Facility and, if necessary, under the Class A Above-Cap
Liquidity Facility, and all amounts withdrawn by the Subordination Agent from
the Class A Cash Collateral Account and, if necessary, the Class A Above-Cap
Account, and payable in each case to the Class A Certificateholders, shall be
promptly distributed to the Trustee acting on behalf of the Class A
Certificateholders and (ii) all payments received by the Subordination Agent in
respect of an Interest Drawing under the Class B Primary Liquidity Facility
and, if necessary, under the Class B Above-Cap Liquidity Facility, and all
amounts withdrawn by the Subordination Agent from the Class B Cash Collateral
Account and, if necessary, the Class B Above-Cap Account, and payable in each
case to the Class B Certificateholders, shall be promptly distributed to the
Trustee acting on behalf of the Class B Certificateholders.
(c) Downgrade of Primary Liquidity Providers; Downgrade
Drawings. If at any time the short-term unsecured debt rating of any Primary
Liquidity Provider or, if such Primary Liquidity Provider does not have a
short- term unsecured debt rating, the long-term unsecured debt rating of such
Primary Liquidity Provider issued by either Rating Agency is lower than the
applicable Threshold Rating, such Primary Liquidity Provider shall provide
notice of such downgrading in writing to United, the Subordination Agent, the
Trustee for the Class A Trust and the Trustee for the Class B Trust. Within 30
days after such Primary Liquidity Provider receives notice of such downgrading
(but no later than the expiration date of the Primary Liquidity Facilities (the
"Downgraded Facility")), such Primary Liquidity Provider or United may arrange
for one or more Replacement Liquidity Providers to issue and deliver a
Replacement Primary Liquidity Facility for both the Class A Primary Liquidity
Facility and the Class B Primary Liquidity Facility to the Subordination Agent.
If the Primary Liquidity Facilities have not been replaced in accordance with
the terms of this paragraph, the Subordination Agent shall, on such 30th day
(or if such 30th day is not a Business Day, on the next succeeding Business
Day) (or, if earlier, the expiration date of the Primary Liquidity Facilities)
request a drawing in accordance with and to the extent permitted by the Primary
38
<PAGE> 43
Liquidity Facilities (such drawing, a "Downgrade Drawing") of the Remaining
Commitment Amount thereunder (but not to exceed the Available Amount at such
time thereunder). Amounts drawn pursuant to a Downgrade Drawing shall be
maintained and invested as provided in Section 3.6(f). Any Primary Liquidity
Provider may also arrange for one or more Replacement Primary Liquidity
Providers to issue and deliver a Replacement Primary Liquidity Facility for
both the Class A Primary Liquidity Facility and the Class B Primary Liquidity
Facility at any time after such Downgrade Drawing so long as such Downgrade
Drawing has not been reimbursed in full to the Primary Liquidity Providers.
(d) Downgrade of Above-Cap Liquidity Providers; Posting of
Collateral Accounts. If at any time the short-term unsecured debt rating of
any Above-Cap Liquidity Provider or, if such Above-Cap Liquidity Provider does
not have a short-term unsecured debt rating, the long-term unsecured debt
rating of such Above-Cap Liquidity Provider issued by either Rating Agency is
lower than the applicable Threshold Rating, such Above-Cap Liquidity Provider
shall provide notice of such downgrading in writing to United, the
Subordination Agent, the Trustee for the Class A Trust and the Trustee for the
Class B Trust. Within 30 days after the Above-Cap Liquidity Provider receives
notice of such downgrading (but no later than the expiration date of the
Above-Cap Liquidity Facilities), such Above-Cap Liquidity Provider or United
may arrange for one or more Replacement Above-Cap Liquidity Providers to issue
and deliver a Replacement Above-Cap Liquidity Facility for both the Class A
Above-Cap Liquidity Facility and the Class B Above-Cap Liquidity Facility to
the Subordination Agent. If the Above-Cap Liquidity Facilities have not been
replaced in accordance with the terms of this paragraph, the Above-Cap
Liquidity Providers shall, on such 30th day (or if such 30th day is not a
Business Day, on the next succeeding Business Day) (or, if earlier, the
expiration date of the Above-Cap Liquidity Facilities) either (x) transfer its
rights and obligations under the Above-Cap Liquidity Facilities to an Affiliate
that is eligible to become a debtor under the United States Bankruptcy Code and
reasonably acceptable to the Rating Agencies, which Affiliate will pay to the
Subordination Agent, for the benefit of the Trustee on behalf of the holders of
the Class A Certificates and the Class B Certificates, the Downgrade Collateral
(as defined in the Above-Cap Liquidity Facilities) to secure the obligation of
the Above-Cap Liquidity Providers to pay the Deficiency Amount, if any, upon an
Interest Drawing or (y) provide to the Subordination Agent, for the benefit of
the Trustee on behalf of the holders of the Class A Certificates and the Class
B Certificates, such other assurances of creditworthiness as will maintain the
then current ratings of the Class A Certificates and the Class B Certificates
by the Rating Agencies as confirmed by a Ratings Confirmation. United may
arrange for one or more Replacement Above-Cap Liquidity Providers to issue and
deliver a Replacement Above-Cap Liquidity Facility for both the Class A
Above-Cap Liquidity Facility and the Class B Above-Cap Liquidity Facility at
any time after the posting of such Downgrade Collateral or provision of other
assurances whereupon the Downgrade Collateral deposited in the Class A
Above-Cap Account and the Class B Above-Cap Account shall be released to the
Above-Cap Liquidity Provider.
(e) Issuance of Replacement Liquidity Facility. At any
time, United may, at its option, arrange for Replacement Liquidity Facilities
to replace the Primary Liquidity Facilities and/or the Above-Cap Liquidity
Facilities for the Class A Certificates and the Class B
39
<PAGE> 44
Certificates; provided, however, that the initial Primary Liquidity Provider
shall not be replaced by United as a Primary Liquidity Provider with respect to
any Class of Certificates unless (A) there shall have become due to the initial
Primary Liquidity Provider, or the initial Primary Liquidity Provider shall
have demanded, amounts pursuant to Section 3.01, 3.02 or 3.03 of any Primary
Liquidity Facility and the replacement of the initial Primary Liquidity
Provider would reduce or eliminate the obligation to pay such amounts, (B) such
replacement of the initial Primary Liquidity Provider would reduce or eliminate
an economic hardship to United or (C) a Downgrade Drawing shall have occurred
under any Primary Liquidity Facility issued by the initial Primary Liquidity
Provider. If a Replacement Primary Liquidity Facility is provided at any time
after a Downgrade Drawing has been made, all funds on deposit in the Class A
Cash Collateral Account and the Class B Cash Collateral Account shall be
returned to the Primary Liquidity Providers being replaced. No such
Replacement Liquidity Facility executed in connection therewith shall become
effective and no such Replacement Liquidity Facility shall be deemed a
"Liquidity Facility" under the Operative Agreements, unless and until (i) the
Liquidity Providers being replaced shall have satisfied each of the conditions
referred to in the immediately following paragraph and (ii) if such Replacement
Liquidity Facility shall materially adversely affect the rights, remedies,
interests or obligations of the Class A Certificateholders or the Class B
Certificateholders under any of the Operative Agreements, the Trustee shall
have consented, in writing, to the execution and issuance of such Replacement
Liquidity Facility.
In connection with the issuance of each Replacement Liquidity
Facility, the Subordination Agent shall (x) prior to the issuance of such
Replacement Liquidity Facility, obtain written confirmation from each Rating
Agency that such Replacement Liquidity Facility will not cause a reduction of
any rating then in effect for the Class A Certificates or the Class B
Certificates by such Rating Agency (without regard to any downgrading of any
rating of any Liquidity Provider being replaced pursuant to Section 3.6(c)),
(y) pay, in the case of the Primary Liquidity Facilities, all Liquidity
Obligations then owing to the replaced Primary Liquidity Providers and, in the
case of the Above-Cap Liquidity Facilities, all obligations then owing to the
replaced Above-Cap Liquidity Providers under the Above-Cap Liquidity Facilities
(which payment, in the case of the Primary Liquidity Facilities, may be made as
provided in clause (v) of Section 3.6(f) pursuant to a drawing under the
Replacement Primary Liquidity Facility, or otherwise) and (z) cause the issuer
or issuers of the Replacement Liquidity Facility to deliver the Replacement
Liquidity Facility to the Subordination Agent, together with a legal opinion
opining that such Replacement Liquidity Facility is an enforceable obligation
of such Replacement Liquidity Providers. Upon satisfaction of the conditions
set forth in this Section 3.6(e), (i) the replaced Liquidity Facilities shall
terminate and (ii) such Replacement Liquidity Providers shall be deemed to be a
Primary Liquidity Providers or Above-Cap Liquidity Providers, as appropriate,
with the rights and obligations of such a Liquidity Provider hereunder and
under the other Operative Agreements and each such Replacement Liquidity
Facility shall be deemed to be a Primary Liquidity Facility or an Above-Cap
Liquidity Facility, as appropriate, hereunder and under the other Operative
Agreements.
In connection with any replacement of a Primary Liquidity
Facility under Section 3.6(c) or this Section 3.6(e) with a Replacement Primary
Liquidity Facility, the other Primary
40
<PAGE> 45
Liquidity Facility will be concurrently replaced with a Replacement Primary
Liquidity Facility and the Commitment Percentage of each Replacement Primary
Liquidity Provider will be the same for each Replacement Primary Liquidity
Facility. In connection with any replacement of an Above-Cap Liquidity
Facility under Section 3.6(d) or this Section 3.6(e) with a Replacement
Above-Cap Liquidity Facility, the other Above-Cap Liquidity Facility will be
concurrently replaced with a Replacement Above-Cap Liquidity Facility and the
Commitment Percentage of each Replacement Above-Cap Liquidity Provider will be
the same for each Replacement Above-Cap Liquidity Facility.
(f) Cash Collateral Accounts; Withdrawals; Investments. If
the Subordination Agent shall draw all available amounts under the Class A
Primary Liquidity Facility or the Class B Primary Liquidity Facility pursuant
to Section 3.6(c) or 3.6(i), or in the event that amounts are to be deposited
in any Cash Collateral Account related to the Primary Liquidity Facilities
pursuant to subclause (B) of clause third of Section 2.4(b) or 3.2 or subclause
(B) of clause fourth of Section 3.3, amounts so drawn or to be deposited, as
the case may be, shall be deposited by the Subordination Agent in the Class A
Cash Collateral Account or the Class B Cash Collateral Account, respectively.
If an Affiliate of the Above-Cap Liquidity Provider shall post Downgrade
Collateral under the Class A Above-Cap Liquidity Facility or the Class B
Above-Cap Liquidity Facility pursuant to Section 3.6(d), such Downgrade
Collateral shall be deposited by the Subordination Agent in the Class A
Above-Cap Account or the Class B Above-Cap Account to secure the obligations of
the Above-Cap Liquidity Providers. Amounts so deposited in the Cash Collateral
Accounts shall be invested in Eligible Investments in accordance with Section
2.2(b). Investment Earnings on amounts on deposit in the Cash Collateral
Accounts with respect to any Primary Liquidity Facility shall be paid after a
Downgrade Drawing by the Subordination Agent to the relevant Primary Liquidity
Provider from time to time on demand of such Primary Liquidity Provider and
otherwise shall be deposited in the Collection Account prior to giving effect
to the distributions below on each Distribution Date commencing on the first
Distribution Date after any such drawing. Investment Earnings on amounts on
deposit in the Cash Collateral Accounts with respect to any Above-Cap Liquidity
Facility shall be paid to the relevant Above-Cap Liquidity Provider from time
to time on demand of such Above-Cap Liquidity Provider. The Subordination
Agent shall deliver a written statement to United and each Liquidity Provider
one day prior to each Distribution Date setting forth the aggregate amount of
Investment Earnings held in the Cash Collateral Accounts as of such date. In
addition, from and after the date funds are so deposited, the Subordination
Agent shall make withdrawals from such account as follows:
(i) on each Distribution Date, the Subordination Agent
shall, to the extent it shall not have received funds to pay accrued
and unpaid interest on the Class A Certificates from any other source,
(A) withdraw from the Class A Cash Collateral Account, and pay to the
Trustee for the benefit of the Class A Certificateholders, an amount
equal to the least of (x) an amount necessary to pay accrued and
unpaid interest on such Class A Certificates, (y) the Interest Period
Available Amount at such time under the related Primary Liquidity
Facility and (z) the amount on deposit in the Class A Cash Collateral
Account and (B) if the Above- Cap Liquidity Provider is required to
pay an
41
<PAGE> 46
Interest Drawing and fails to do so, withdraw from or foreclose upon
the Class A Above-Cap Account, and pay to the Trustee for the benefit
of the Class A Certificateholders, an amount equal to the lesser of
(x) the portion of the Interest Drawing payable by the Above-Cap
Liquidity Providers on such Class A Certificates and (y) the amount on
deposit in the Class A Above-Cap Account;
(ii) on each Distribution Date, the Subordination Agent
shall, to the extent it shall not have received funds to pay accrued
and unpaid interest on the Class B Certificates from any other source,
(A) withdraw from the Class B Cash Collateral Account, and pay to the
Trustee for the benefit of the Class B Certificateholders, an amount
equal to the least of (x) an amount necessary to pay accrued and
unpaid interest on such Class B Certificates, (y) the Interest Period
Available Amount at such time under the related Primary Liquidity
Facility and (z) the amount on deposit in the Class B Cash Collateral
Account and (B) if the Above- Cap Liquidity Provider is required to
pay an Interest Drawing and fails to do so, withdraw from or foreclose
upon the Class B Above-Cap Account, and pay to the Trustee for the
benefit of the Class B Certificateholders, an amount equal to the
lesser of (x) the portion of the Interest Drawing payable by the
Above-Cap Liquidity Providers on such Class B Certificates and (y) the
amount on deposit in the Class B Above-Cap Account;
(iii) on each date on which the Pool Balance of the Class A
Trust shall have been reduced by payments made to the Class A
Certificateholders pursuant to Section 2.4, 3.2 or 3.3, the
Subordination Agent shall withdraw from the Class A Cash Collateral
Account an amount equal to the excess, if any, of the amount on
deposit in the Class A Cash Collateral Account (less Investment
Earnings on deposit in such Cash Collateral Account) over the Maximum
Commitment Amount for the related Primary Liquidity Facility and shall
first, pay such amount to the Class A Primary Liquidity Provider until
the Liquidity Obligations (with respect to the Class A Certificates)
owing to such Primary Liquidity Provider shall have been paid in full,
and second, pay any remaining amount to United;
(iv) on each date on which the Pool Balance of the Class B
Trust shall have been reduced by payments made to the Class B
Certificateholders pursuant to Section 2.4, 3.2 or 3.3, the
Subordination Agent shall withdraw from the Class B Cash Collateral
Account an amount equal to the excess, if any, of the amount on
deposit in the Class B Cash Collateral Account (less Investment
Earnings on deposit in such Cash Collateral Account) over the Maximum
Commitment Amount for the related Primary Liquidity Facility and shall
first, pay such amount to the relevant Class B Primary Liquidity
Provider until the Liquidity Obligations (with respect to the Class B
Certificates) owing to such Primary Liquidity Provider shall have been
paid in full, and second, pay any remaining amount to United;
(v) if a Replacement Primary Liquidity Facility for any
Class of Certificates shall be delivered to the Subordination Agent
following the date on which funds have
42
<PAGE> 47
been deposited into the Cash Collateral Account related to the Primary
Liquidity Facility for such Class of Certificates, the Subordination
Agent shall withdraw all amounts on deposit in such Cash Collateral
Account and shall pay such amounts to the replaced Primary Liquidity
Provider until all Liquidity Obligations owed to such Person shall
have been paid in full pari passu on the basis of the amount of
Liquidity Obligations owed to each Primary Liquidity Provider, and
shall deposit any remaining amount in the Collection Account;
(vi) following the payment of Final Distributions with
respect to the Class A Certificates or the Class B Certificates, on
the date on which the Subordination Agent shall have been notified by
any Primary Liquidity Provider for such Class of Certificates that the
Liquidity Obligations owed to such Primary Liquidity Provider have
been paid in full, the Subordination Agent shall withdraw all amounts
on deposit in the Cash Collateral Account related to the Primary
Liquidity Facility in respect of such Class of Certificates and shall
pay such amount to United; and
(vii) following the occurrence of any event that would,
pursuant to the Above-Cap Liquidity Facilities, require the adjustment
and release of Downgrade Collateral held in the Cash Collateral
Accounts related to the Above-Cap Liquidity Facilities, the
Subordination Agent shall release such Downgrade Collateral at the
times and in accordance with the terms of the Above-Cap Liquidity
Facilities.
(g) Reinstatement. With respect to any LP Interest Drawing
under the Primary Liquidity Facility for any Trust, upon the reimbursement of
each applicable Primary Liquidity Provider for all or any part of the amount of
such Interest Drawing, together with any accrued interest thereon, (x) the
Available Amount of such Primary Liquidity Facility shall be reinstated by an
amount equal to the amount of such LP Interest Drawing so reimbursed to the
relevant Primary Liquidity Providers and (y) the Remaining Commitment Amount
shall be increased by the Interest Period Available Amount related to such LP
Interest Drawing, but not in either case to exceed the Maximum Commitment
Amount for such Primary Liquidity Facility; provided, however, that such
Primary Liquidity Facility shall not be so reinstated in part or in full at any
time if (i) a Triggering Event shall have occurred and be continuing and (ii) a
Performing Note Deficiency exists. In the event that, with respect to any
particular Primary Liquidity Facility, (i) funds are withdrawn from the related
Cash Collateral Account pursuant to clauses (i) or (ii) of Section 3.6(f) or
(ii) such Primary Liquidity Facility shall become a Downgraded Facility at a
time when unreimbursed LP Interest Drawings under such Primary Liquidity
Facility have reduced the Remaining Commitment Amount thereunder to zero, then
funds received by the Subordination Agent at any time other than (x) any time
when a Triggering Event shall have occurred and be continuing with respect to
such Primary Liquidity Facility and a Performing Note Deficiency exists or (y)
any time after a Final Drawing shall have occurred with respect to such Primary
Liquidity Facility, shall be deposited in such applicable Cash Collateral
Account as provided in clause third of Section 2.4(b), clause third of Section
3.2 or clause fourth of Section 3.3, as applicable, and applied in accordance
with Section 3.6(f).
43
<PAGE> 48
(h) Reimbursement. The amount of each drawing under the
Liquidity Facilities shall be due and payable, together with interest thereon,
on the dates and at the rates, respectively, provided in the Liquidity
Facilities.
(i) Final Drawing upon Termination Notice. Upon receipt
from a Primary Liquidity Provider of a Termination Notice with respect to any
Primary Liquidity Facility, the Subordination Agent shall, not later than the
date specified in such Termination Notice, in accordance with and to the extent
permitted by the terms of such Primary Liquidity Facility, request a drawing
under such Primary Liquidity Facility of all available and undrawn amounts
thereunder (a "Final Drawing"). Amounts drawn pursuant to a Final Drawing
shall be maintained and invested in accordance with Section 3.6(f).
(j) [Reserved]
(k) Relation to Subordination Provisions. Interest Drawings
under the Liquidity Facilities and withdrawals from the Cash Collateral
Accounts, in each case, in respect of interest on the Certificates of the Class
A Certificates or the Class B Certificates, shall be distributed to the Trustee
for such Class of Certificates, notwithstanding Sections 3.2, 3.3 and 3.6(h).
ARTICLE IV
EXERCISE OF REMEDIES
4.1 Directions from the Controlling Party. (a) (i) Following
the occurrence and during the continuation of an Indenture Default under any
Indenture, the Controlling Party shall direct the Subordination Agent, which in
turn shall direct the Indenture Trustee under such Indenture in the exercise of
remedies available to the holders of the Equipment Notes issued pursuant to
such Indenture, including, the ability to vote all such Equipment Notes in
favor of declaring all of the unpaid principal amount of such Equipment Notes
and accrued interest thereon to be due and payable under, and in accordance
with, the provisions of such Indenture. Subject to the Owner Trustees' and the
Owner Participants' rights set forth in the Indentures with respect to the
Leased Aircraft to purchase the Equipment Notes and the provisions of the next
paragraph, if the Equipment Notes issued pursuant to any Indenture have been
Accelerated following an Indenture Default with respect thereto, the
Controlling Party may sell, assign, contract to sell or otherwise dispose of
and deliver all (but not less than all) of such Equipment Notes to any Person
at public or private sale, at any location at the option of the Controlling
Party, all upon such terms and conditions as it may reasonably deem advisable
in accordance with applicable law.
(ii) Subject to the Owner Trustees' and the Owner
Participants' rights set forth in the Indentures with respect to Leased
Aircraft to purchase the Equipment Notes and notwithstanding the foregoing, so
long as any Certificates remain Outstanding, during the period ending on the
date which is nine months after the earlier of (x) the Acceleration of the
44
<PAGE> 49
Equipment Notes issued pursuant to any Indenture or (y) the occurrence of a
United Bankruptcy Event, without the consent of the Trustee, (A) no Aircraft
subject to the Lien of such Indenture or Equipment Notes may be sold if the net
proceeds from such sale would be less than the aggregate outstanding principal
amount of Equipment Notes issued with respect to such Aircraft, plus accrued
and unpaid interest thereon and (B) with respect to any Leased Aircraft, the
amount and payment dates of rentals payable by United under the Lease for such
Aircraft may not be adjusted, if, as a result of such adjustment, the
discounted present value (using the weighted average interest rate of the
Equipment Notes issued pursuant to such Indenture as the discount rate) of all
such rentals would be less than 75% of the discounted present value of the
rentals payable by United under such Lease before giving effect to such
adjustment.
(iii) At the request of the Controlling Party, the
Subordination Agent may from time to time during the continuance of an
Indenture Default (and before the occurrence of a Triggering Event) commission
Appraisals with respect to the Aircraft subject to such Indenture.
(iv) After a Triggering Event occurs and any Equipment Note
becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain
Appraisals with respect to all of the Aircraft (the "LTV Appraisals") as soon
as practicable and additional LTV Appraisals on or prior to each anniversary of
the date of such initial LTV Appraisals; provided, however, that if the
Controlling Party reasonably objects to the appraised value of the Aircraft
shown in such LTV Appraisals, the Controlling Party shall have the right to
obtain or cause to be obtained substitute LTV Appraisals (including LTV
Appraisals based upon physical inspection of the Aircraft).
(b) The Controlling Party shall take such actions as it may
reasonably deem most effectual to complete the sale or other disposition of
such Aircraft or Equipment Notes. In addition, in lieu of any sale,
assignment, contract to sell or other disposition, the Controlling Party may
maintain possession of such Equipment Notes and continue to apply monies
received in respect of such Equipment Notes in accordance with Article III. In
addition, in lieu of such sale, assignment, contract to sell or other
disposition, or in lieu of such maintenance of possession, the Controlling
Party may instruct the Indenture Trustee under such Indenture to foreclose on
the Lien on the related Aircraft.
(c) So long as any Liquidity Obligations remain outstanding,
the powers of the Controlling Party shall be restricted as provided in this
Section 4.1(c).
The Controlling Party shall not agree to amend, waive or
otherwise modify any provision of any Operative Agreement, direct the exercise
of any remedy under any Operative Agreement or direct the taking of any other
actions under any Operative Agreement, for the following purposes (without the
consent of each Primary Liquidity Provider, which consent shall not be
unreasonably withheld or delayed):
45
<PAGE> 50
(i) to reduce in any manner the amount of any payment on the
Equipment Notes or the Leases or to require that any such payment on
the Equipment Notes be made other than to the Subordination Agent;
(ii) to delay the timing of any payment on the Equipment
Notes or the Leases if such delay (taken together with all other
delays of payment on the Equipment Notes or the Leases on a cumulative
basis) would extend beyond the Deferral Period;
(iii) to impair the right to institute suit for the
enforcement of any payment obligation under the Equipment Notes or the
Leases, subject to deferrals permitted under clause (ii) above;
(iv) to enter into any lease or similar contract with respect
to any Aircraft unless the lessee (or comparable party) is required to
commence paying rent or comparable payments at market rates for such
Aircraft no later than the end of the Deferral Period; or
(v) to sell or otherwise dispose of any Equipment Note,
Lease or Aircraft (except as contemplated by clause (iv) above) unless
the market value of such Equipment Note, Lease or Aircraft is paid on
or before the end of the Deferral Period.
4.2 Remedies Cumulative. Each and every right, power and remedy
given to the Trustee, the Primary Liquidity Providers, the Controlling Party or
the Subordination Agent specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may, subject always to the terms and conditions
hereof, be exercised from time to time and as often and in such order as may be
deemed expedient by the Trustee, the Primary Liquidity Providers, the
Controlling Party or the Subordination Agent, as appropriate, and the exercise
or the beginning of the exercise of any power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or thereafter any
other right, power or remedy. No delay or omission by the Trustee, the Primary
Liquidity Providers, the Controlling Party or the Subordination Agent in the
exercise of any right, remedy or power or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default or to be an acquiescence therein.
4.3 Discontinuance of Proceedings. If any party to this Agreement
(including the Controlling Party in such capacity) shall have instituted any
Proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, entry or otherwise, and such Proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Person instituting such Proceeding, then and in every such
case each such party shall, subject to any determination in such Proceeding, be
restored to its former position and rights hereunder, and all rights, remedies
and powers of such party shall continue as if no such Proceeding had been
instituted.
46
<PAGE> 51
4.4 Right of Certificateholders to Receive Payments Not to Be
Impaired. Anything in this Agreement to the contrary notwithstanding but
subject to each Trust Agreement, the right of any Certificateholder or any
Primary Liquidity Provider, respectively, to receive payments hereunder
(including pursuant to Section 2.4, 3.2 or 3.3) when due, or to institute suit
for the enforcement of any such payment on or after the applicable Distribution
Date, shall not be impaired or affected without the consent of such
Certificateholder or such Primary Liquidity Provider, respectively.
4.5 Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Agreement or in any suit against any Controlling
Party or the Subordination Agent for any action taken or omitted by it as
Controlling Party or Subordination Agent, as the case may be, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and
good faith of the claims or defenses made by the party litigant. The
provisions of this Section 4.5 do not apply to a suit instituted by the
Subordination Agent, a Liquidity Provider or a Trustee or a suit by
Certificateholders holding more than 10% of the original principal amount of
any Class of Certificates.
ARTICLE V
DUTIES OF THE SUBORDINATION AGENT;
AGREEMENTS OF TRUSTEES, ETC.
5.1 Notice of Indenture Default or Triggering Event. (a) If the
Subordination Agent shall have actual knowledge of the occurrence of an
Indenture Default or a Triggering Event, as promptly as practicable, and in any
event within 10 days after obtaining knowledge thereof, the Subordination Agent
shall transmit by mail to the Rating Agencies, the Liquidity Providers and the
Trustee notice of such Indenture Default or Triggering Event, unless such
Indenture Default or Triggering Event shall have been cured or waived. For all
purposes of this Agreement, in the absence of actual knowledge on the part of a
Responsible Officer, the Subordination Agent shall not be deemed to have
knowledge of any Indenture Default or Triggering Event unless notified in
writing by the Trustee, one or more Liquidity Providers or one or more
Certificateholders.
(b) Other Notices. The Subordination Agent will furnish to
each Liquidity Provider and the Trustee, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and other instruments furnished to the Subordination Agent
as registered holder of the Equipment Notes or otherwise in its capacity as
Subordination Agent to the extent the same shall not have been otherwise
directly distributed to such Liquidity Provider or the Trustee, as applicable,
pursuant to the express provision of any other Operative Agreement.
47
<PAGE> 52
5.2 Indemnification. The Subordination Agent shall not be
required to take any action or refrain from taking any action under Section 5.1
(other than the first sentence thereof) or Article IV unless the Subordination
Agent shall have been indemnified (to the extent and in the manner reasonably
satisfactory to the Subordination Agent) against any liability, cost or expense
(including counsel fees and expenses) which may be incurred in connection
therewith. The Subordination Agent shall not be under any obligation to take
any action under this Agreement and nothing contained in this Agreement shall
require the Subordination Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder
or in the exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. The
Subordination Agent shall not be required to take any action under Section 5.1
(other than the first sentence thereof) or Article IV, nor shall any other
provision of this Agreement be deemed to impose a duty on the Subordination
Agent to take any action, if the Subordination Agent shall have been advised by
counsel that such action is contrary to the terms hereof or is otherwise
contrary to law.
5.3 No Duties Except as Specified in Intercreditor Agreement. The
Subordination Agent shall not have any duty or obligation to take or refrain
from taking any action under, or in connection with, this Agreement, except as
expressly provided by the terms of this Agreement; and no implied duties or
obligations shall be read into this Agreement against the Subordination Agent.
The Subordination Agent agrees that it will, in its individual capacity and at
its own cost and expense (but without any right of indemnity in respect of any
such cost or expense) promptly take such action as may be necessary to duly
discharge all Liens on any of the Trust Accounts or any monies deposited
therein which result from claims against it in its individual capacity not
related to its activities hereunder or any other Operative Agreement.
5.4 Notice from the Liquidity Providers and Trustee. If any
Liquidity Provider or the Trustee has notice of an Indenture Default or a
Triggering Event, such Person shall promptly give notice thereof to all other
Liquidity Providers, to the Trustee and to the Subordination Agent, provided,
however, that no such Person shall have any liability hereunder as a result of
its failure to deliver any such notice.
ARTICLE VI
THE SUBORDINATION AGENT
6.1 Acceptance of Trusts and Duties. Each of the Liquidity
Providers and the Trustee hereby designates and appoints FSB as the
Subordination Agent under this Agreement. FSB hereby accepts the duties hereby
created and applicable to it as the Subordination Agent and agrees to perform
the same but only upon the terms of this Agreement and agrees to receive and
disburse all monies received by it in accordance with the terms hereof. The
Subordination Agent shall not be answerable or accountable under any
circumstances, except (a) for its own willful misconduct or gross negligence or
for its negligence in the receipt and disbursement of funds,
48
<PAGE> 53
(b) as provided in Section 2.2 and (c) for liabilities that may result from the
material inaccuracy of any representation or warranty of the Subordination
Agent made in its individual capacity in any Operative Agreement. The
Subordination Agent shall not be liable for any error of judgment made in good
faith by a Responsible Officer of the Subordination Agent, unless it is proved
that the Subordination Agent was negligent in ascertaining the pertinent facts.
6.2 Absence of Duties. The Subordination Agent shall have no duty
to see to any recording or filing of this Agreement or any other document, or
to see to the maintenance of any such recording or filing.
6.3 No Representations or Warranties as to Documents. The
Subordination Agent in its individual capacity does not make nor shall be
deemed to have made any representation or warranty as to the validity, legality
or enforceability of this Agreement or any other Operative Agreement or as to
the correctness of any statement contained in any thereof, except for the
representations and warranties of the Subordination Agent, made in its
individual capacity, under any Operative Agreement to which it is a party. The
Certificateholders, the Trustee and the Liquidity Providers make no
representation or warranty hereunder whatsoever.
6.4 No Segregation of Monies; No Interest. Any monies paid to or
retained by the Subordination Agent pursuant to any provision hereof and not
then required to be distributed to the Trustee or any Primary Liquidity
Provider as provided in Articles II and III need not be segregated in any
manner except to the extent required by such Articles II and III and by law,
and the Subordination Agent shall not (except as otherwise provided in Section
2.2) be liable for any interest thereon; provided, however, that any payments
received or applied hereunder by the Subordination Agent shall be accounted for
by the Subordination Agent so that any portion thereof paid or applied pursuant
hereto shall be identifiable as to the source thereof.
6.5 Reliance; Agents; Advice of Counsel. The Subordination Agent
shall not incur liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to
be signed by the proper party or parties. As to the Pool Balance of any Trust
or Trusts of the same Class as of any date, the Subordination Agent may for all
purposes hereof rely on a certificate signed by any Responsible Officer of the
Trustee, and such certificate shall constitute full protection to the
Subordination Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon. As to any fact or matter relating to the Liquidity
Providers or the Trustee the manner of ascertainment of which is not
specifically described herein, the Subordination Agent may for all purposes
hereof rely on a certificate, signed by any Responsible Officer of the
applicable Liquidity Provider or the Trustee, as the case may be, as to such
fact or matter, and such certificate shall constitute full protection to the
Subordination Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon. The Subordination Agent shall assume, and shall be
fully protected in assuming, that each of the Liquidity Providers and the
Trustee are authorized to enter into this Agreement and to take all action to
be taken by them pursuant to the provisions hereof, and shall not inquire into
the authorization of each of the Liquidity Providers and the Trustee with
respect thereto. In the
49
<PAGE> 54
administration of the trusts hereunder, the Subordination Agent may execute any
of the trusts or powers hereof and perform its powers and duties hereunder
directly or through agents or attorneys and may consult with counsel,
accountants and other skilled persons to be selected and retained by it, and
the Subordination Agent shall not be liable for the acts or omissions of any
agent appointed with due care or for anything done, suffered or omitted in good
faith by it in accordance with the advice or written opinion of any such
counsel, accountants or other skilled persons.
6.6 Capacity in Which Acting. The Subordination Agent acts
hereunder solely as agent and trustee herein and not in its individual
capacity, except as otherwise expressly provided in the Operative Agreements.
6.7 Compensation. The Subordination Agent shall be entitled to
reasonable compensation, including expenses and disbursements, for all services
rendered hereunder and shall have a priority claim to the extent set forth in
Article III on all monies collected hereunder for the payment of such
compensation, to the extent that such compensation shall not be paid by others.
The Subordination Agent agrees that it shall have no right against the Trustee
or any Liquidity Provider for any fee as compensation for its services as agent
under this Agreement. The provisions of this Section 6.7 shall survive the
termination of this Agreement.
6.8 May Become Certificateholder. The institution acting as
Subordination Agent hereunder may become a Certificateholder and have all
rights and benefits of a Certificateholder to the same extent as if it were not
the institution acting as the Subordination Agent.
6.9 Subordination Agent Required; Eligibility. There shall at all
times be a Subordination Agent hereunder which shall be a corporation organized
and doing business under the laws of the United States of America or of any
State or territory thereof or the District of Columbia having a combined
capital and surplus of at least $75,000,000 (or $5,000,000 and the obligations
of which, whether now in existence or hereafter incurred, are fully and
unconditionally guaranteed by a corporation organized and doing business under
the laws of the United States, any State or territory thereof or of the
District of Columbia and having a combined capital and surplus of at least
$75,000,000), if there is such an institution willing and able to perform the
duties of the Subordination Agent hereunder upon reasonable or customary terms.
Such corporation shall be a citizen of the United States and shall be
authorized under the laws of the United States or any State or territory
thereof or of the District of Columbia to exercise corporate trust powers and
shall be subject to supervision or examination by federal, state, territorial
or District of Columbia authorities. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of any of
the aforesaid supervising or examining authorities, then, for the purposes of
this Section 6.9, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.
50
<PAGE> 55
In case at any time the Subordination Agent shall cease to be
eligible in accordance with the provisions of this Section, the Subordination
Agent shall resign immediately in the manner and with the effect specified in
Section 8.1.
6.10 Money to Be Held in Trust. All Equipment Notes, monies and
other property deposited with or held by the Subordination Agent pursuant to
this Agreement shall be held in trust for the benefit of the parties entitled
to such Equipment Notes, monies and other property. All such Equipment Notes,
monies or other property shall be held in the Trust Department of the
institution acting as Subordination Agent hereunder.
ARTICLE VII
[Reserved]
ARTICLE VIII
SUCCESSOR SUBORDINATION AGENT
8.1 Replacement of Subordination Agent; Appointment of Successor.
The Subordination Agent may resign at any time by so notifying the Trustee and
the Liquidity Providers. The Controlling Party may remove the Subordination
Agent for cause by so notifying the Subordination Agent and may appoint a
successor Subordination Agent. The Controlling Party shall remove the
Subordination Agent if:
(1) the Subordination Agent fails to comply with Section
6.9;
(2) the Subordination Agent is adjudged bankrupt or
insolvent;
(3) a receiver or other public officer takes charge of the
Subordination Agent or its property; or
(4) the Subordination Agent otherwise becomes incapable of
acting.
If the Subordination Agent resigns or is removed or if a
vacancy exists in the office of Subordination Agent for any reason (the
Subordination Agent in such event being referred to herein as the retiring
Subordination Agent), the Controlling Party shall promptly appoint a successor
Subordination Agent.
A successor Subordination Agent shall deliver (x) a written
acceptance of its appointment as Subordination Agent hereunder to the retiring
Subordination Agent and (y) a written assumption of its obligations hereunder
and under each Primary Liquidity Facility to each party hereto, upon which the
resignation or removal of the retiring Subordination Agent shall
51
<PAGE> 56
become effective, and the successor Subordination Agent shall have all the
rights, powers and duties of the Subordination Agent under this Agreement. The
successor Subordination Agent shall mail a notice of its succession to the
Liquidity Providers and the Trustee. The retiring Subordination Agent shall
promptly transfer its rights under each of the Liquidity Facilities and all of
the property held by it as Subordination Agent to the successor Subordination
Agent.
If a successor Subordination Agent does not take office within
60 days after the retiring Subordination Agent resigns or is removed, the
retiring Subordination Agent or the Trustee may petition any court of competent
jurisdiction for the appointment of a successor Subordination Agent.
If the Subordination Agent fails to comply with Section 6.9
(to the extent applicable), the Trustee or one or more of the Liquidity
Providers may petition any court of competent jurisdiction for the removal of
the Subordination Agent and the appointment of a successor Subordination Agent.
Notwithstanding the foregoing, no resignation or removal of
the Subordination Agent shall be effective unless and until a successor has
been appointed. No appointment of a successor Subordination Agent shall be
effective unless and until the Rating Agencies shall have delivered a Ratings
Confirmation.
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
9.1 Amendments, Waivers, etc. (a) This Agreement may not be
supplemented, amended or modified without the consent of the Trustee (acting
with the consent of holders of Certificates of each Class evidencing interests
in the related Trust or Trusts of such Class aggregating not less than a
majority in interest in such Trust or Trusts of such Class or as otherwise
authorized pursuant to the relevant Trust Agreements), the Subordination Agent
and each Liquidity Provider; provided, however, that this Agreement may be
supplemented, amended or modified without the consent of the Trustee if such
supplement, modification or amendment cures an ambiguity or inconsistency or
does not materially adversely affect the Trustee, the Liquidity Providers or
the holders of the related Class of Certificates; provided, further, however,
that if such supplement, amendment or modification would (x) directly or
indirectly modify or supersede, or otherwise conflict with, Section 2.2(b),
Section 3.6(f) or the second sentence of Section 10.6 (collectively, together
with this proviso, the "United Provisions") or (y) otherwise adversely affect
the interests of a potential Replacement Liquidity Provider or of United with
respect to its payment obligations under any Lease or Owned Aircraft Indenture,
then such supplement, amendment or modification shall not be effective without
the additional written consent of United. Notwithstanding the foregoing,
without the consent of each Certificateholder and each Liquidity Provider, no
supplement, amendment or modification of this Agreement may (i) reduce the
percentage of the interest in any Trust or Trusts of the same Class
52
<PAGE> 57
evidenced by the Certificates issued by such Trust or Trusts necessary to
consent to modify or amend any provision of this Agreement or to waive
compliance therewith or (ii) modify Section 2.4, 3.2, 3.3 or 3.6(f) relating to
the distribution of monies received by the Subordination Agent hereunder from
the Equipment Notes or pursuant to the Liquidity Facilities. Nothing contained
in this Section 9.1 shall require the consent of the Trustee with respect to a
Class of Certificates at any time following the payment of Final Distributions
with respect to such Class of Certificates.
(b) If the Subordination Agent, as the registered holder of
any Equipment Notes, receives a request for its consent to any amendment,
modification or waiver under such Equipment Notes, the Indenture pursuant to
which such Equipment Notes were issued, or if applicable, the Lease,
Participation Agreement or other related document, (i) if no Indenture Default
shall have occurred and be continuing, the Subordination Agent shall request
instructions from the Trustee and the consent of each Primary Liquidity
Provider (which consent shall not be unreasonably withheld or delayed) and
shall vote or consent in accordance with the vote of the Trustee and the
instructions of the Primary Liquidity Providers and (ii) if any Indenture
Default (which, in the case of an Indenture pertaining to a Leased Aircraft,
has not been cured by the Owner Trustee or the Owner Participant thereunder, if
applicable, pursuant to Section 8.03 of such Indenture) shall have occurred and
be continuing with respect to such Indenture, the Subordination Agent will
exercise its voting rights as directed by the Controlling Party, subject to
Section 4.1; provided, however, that no amendment of or supplement to any
Indenture, Lease, Participation Agreement or other Operative Agreement or
waiver or modification of the terms of, or consent under, any thereof, shall
without the consent of each Primary Liquidity Provider, have any of the effects
listed in the proviso of Section 11.02(a) of any Indenture.
9.2 Subordination Agent Protected. If, in the reasonable opinion
of the institution acting as the Subordination Agent hereunder, any document
required to be executed pursuant to the terms of Section 9.1 affects any right,
duty, immunity or indemnity with respect to it under this Agreement or any
Liquidity Facility, the Subordination Agent may in its discretion decline to
execute such document.
9.3 Effect of Supplemental Agreements. Upon the execution of any
amendment or supplement hereto pursuant to the provisions hereof, this
Agreement shall be and be deemed to be and shall be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Agreement of the parties hereto
and beneficiaries hereof shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such supplemental agreement shall be and be
deemed to be and shall be part of the terms and conditions of this Agreement
for any and all purposes. In executing or accepting any supplemental agreement
permitted by this Article IX, the Subordination Agent shall be entitled to
receive, and shall be fully protected in relying upon, an opinion of counsel
stating that the execution of such supplemental agreement is authorized or
permitted by this Article IX.
53
<PAGE> 58
9.4 Copy to Rating Agencies. Promptly following its receipt of
each amendment, consent, modification, supplement or waiver contemplated by
this Article IX, the Subordination Agent shall send a copy thereof to each
Rating Agency.
ARTICLE X
MISCELLANEOUS
10.1 Termination of Intercreditor Agreement. Following payment of
Final Distributions with respect to each Class of Certificates and the payment
in full of all Liquidity Obligations to the Primary Liquidity Providers and so
long as (i) there shall then be no other amounts due to the Certificateholders,
the Trustee, the Primary Liquidity Providers and the Subordination Agent
hereunder or under the Trust Agreements and (ii) the commitment of the
Liquidity Providers under the Liquidity Facilities shall have expired or been
terminated, this Agreement and the trusts created hereby shall terminate and
this Agreement shall be of no further force or effect. Except as aforesaid or
otherwise provided, this Agreement and the trusts created hereby shall continue
in full force and effect in accordance with the terms hereof.
10.2 Intercreditor Agreement for Benefit of Trustee, Liquidity
Providers and Subordination Agent. Nothing in this Agreement, whether express
or implied, shall be construed to give to any Person other than the Trustee,
the Liquidity Providers and the Subordination Agent (and United, in the case of
Section 9.1) any legal or equitable right, remedy or claim under or in respect
of this Agreement.
10.3 Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all notices, requests, demands, authorizations, directions,
consents, waivers or documents provided or permitted by this Agreement to be
made, given, furnished or filed shall be in writing, mailed by certified mail,
postage prepaid, or by confirmed telecopy and
(i) if to the Subordination Agent, addressed to it at its office
at:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopy: (801) 246-5053
54
<PAGE> 59
(ii) if to the Trustee, addressed to it at its office at:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopy: (801) 246-5053
(iii) if to the Primary Liquidity Provider, addressed to it at its
office at:
KREDITANSTALT FUR WIEDERAUFBAU
Palmengartenstrasse 5-9
D-60325 Frankfurt am Main
Germany
Attention: Head of Aircraft
Finance Department K 111 b 1
Telecopy: 011-49-69-7431-2944
(iv) if to the Above-Cap Liquidity Provider, addressed to it at its
office at:
Credit Suisse Financial Products
1 Cabot Square
London E14 4QJ
England
Attention: Director - Legal Department
Telecopy: 011-44-171-516-2686
Whenever any notice in writing is required to be given by the Trustee or any
Liquidity Provider or the Subordination Agent to any of the other of them, such
notice shall be deemed given and such requirement satisfied when such notice is
received, if such notice is received, if such notice is mailed by certified
mail, postage prepaid or by courier service or is sent by confirmed telecopy
addressed as provided above. Any party hereto may change the address to which
notices to such party will be sent by giving notice of such change to the other
parties to this Agreement.
10.4 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.5 No Oral Modifications or Continuing Waivers. No terms or
provisions of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party or other
Person against whom enforcement of the change, waiver,
55
<PAGE> 60
discharge or termination is sought and any other party or other Person whose
consent is required pursuant to this Agreement and any waiver of the terms
hereof shall be effective only in the specific instance and for the specific
purpose given.
10.6 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of
the parties hereto and the successors and assigns of each, all as herein
provided. The agreements contained in Section 9.1 shall inure to the benefit
of United and its successors and assigns.
10.7 Headings. The headings of the various Articles and Sections
herein and in the table of contents hereto are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof.
10.8 Counterpart Form. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same agreement.
10.9 Subordination. (a) As between the Primary Liquidity
Providers, on the one hand, and the Trustee and the Certificateholders, on the
other hand, this Agreement shall be a subordination agreement for purposes of
Section 510 of the United States Bankruptcy Code, as amended from time to time.
(b) Notwithstanding the provisions of this Agreement, if
prior to the payment in full to the Primary Liquidity Providers of all
Liquidity Obligations then due and payable, any party hereto shall have
received any payment or distribution in respect of Equipment Notes or any other
amount under the Indentures or other Operative Agreements which, had the
subordination provisions of this Agreement been properly applied to such
payment, distribution or other amount, would not have been distributed to such
Person, then such payment, distribution or other amount shall be received and
held in trust by such Person and paid over or delivered to the Subordination
Agent for application as provided herein.
(c) If the Trustee, any Primary Liquidity Provider or the
Subordination Agent receives any payment in respect of any obligations owing
hereunder (or, in the case of the Primary Liquidity Providers, in respect of
the Liquidity Obligations), which is subsequently invalidated, declared
preferential, set aside and/or required to be repaid to a trustee, receiver or
other party, then, to the extent of such payment, such obligations (or, in the
case of the Primary Liquidity Providers, such Liquidity Obligations) intended
to be satisfied shall be revived and continue in full force and effect as if
such payment had not been received.
(d) The Trustee (on behalf of itself and the holders of
Certificates), the Primary Liquidity Providers and the Subordination Agent
confirm that the payment priorities specified in Sections 2.4, 3.2 and 3.3
shall apply in all circumstances, notwithstanding the fact that the obligations
owed to the Trustee and the holders of Certificates are secured by certain
assets and the Liquidity Obligations are not so secured. The Trustee expressly
agrees (on behalf of itself
56
<PAGE> 61
and the holders of Certificates) not to assert priority over the holders of
Liquidity Obligations due to their status as secured creditors in any
bankruptcy, insolvency or other legal proceeding.
(e) Each of the Trustee (on behalf of itself and the holders
of Certificates), the Primary Liquidity Providers and the Subordination Agent
may take any of the following actions without impairing its rights under this
Agreement:
(i) obtain a lien on any property to secure any amounts
owing to it hereunder, including, in the case of the Primary Liquidity
Providers, the Liquidity Obligations,
(ii) obtain the primary or secondary obligation of any other
obligor with respect to any amounts owing to it hereunder, including,
in the case of the Primary Liquidity Providers, any of the Liquidity
Obligations,
(iii) renew, extend, increase, alter or exchange any amounts
owing to it hereunder, including, in the case of the Primary Liquidity
Providers, any of the Liquidity Obligations, or release or compromise
any obligation of any obligor with respect thereto,
(iv) refrain from exercising any right or remedy, or delay in
exercising such right or remedy, which it may have, or
(v) take any other action which might discharge a
subordinated party or a surety under applicable law;
provided, however, that the taking of any such actions by any of the
Trustee, the Primary Liquidity Providers or the Subordination Agent
shall not prejudice the rights or adversely affect the obligations of
any other party under this Agreement.
10.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW)), AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
10.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of
Indemnity.
(a) Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other
Operative Agreement, or for recognition and enforcement of any
judgment in respect hereof or thereof, to the non-exclusive
general jurisdiction of the courts of the State of New York,
the courts
57
<PAGE> 62
of the United States of America for the Southern District of
New York, and the appellate courts from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead
or claim the same;
(iii) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form and mail, postage prepaid, to each party hereto at its
address set forth in Section 10.3, or at such other address of
which the other person shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction.
(b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED, including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. Each of the parties warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
(c) Each Liquidity Provider hereby waives any immunity it
may have from the jurisdiction of the courts of the United States or of any
State thereof and waives any immunity any of its properties located in the
United States may have from attachment or execution upon a judgment entered by
any such court under the United States Foreign Sovereign Immunities Act of 1976
or any similar successor legislation.
10.12 Obligations of CSFP. Notwithstanding any obligation set forth
in this Agreement to the contrary, so long as CSFP or any successor is the
Above-Cap Liquidity Provider under the Above-Cap Liquidity Facility, CSFP shall
have no obligations under this Agreement. The obligations of CSFP and such
successor are solely those set forth in the Above-Cap Liquidity Facility.
58
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written, and acknowledge that
this Agreement has been made and delivered in the City of Chicago, and this
Agreement has become effective only upon such execution and delivery.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Trustee for each of the Trusts
By: /s/ C. SCOTT NIELSEN
-------------------------------------------
Name: C. Scott Nielsen
Title: Vice President
S-1 INTERCREDITOR AGREEMENT
<PAGE> 64
KREDITANSTALT FUR
WIEDERAUFBAU,
AS PRIMARY LIQUIDITY PROVIDER
BY: /s/ DR. CHRISTIAN STAAB
-------------------------------------------
NAME: Dr. Christian Staab
TITLE: VP
BY: /s/ WOLFGANG BEHLER
-------------------------------------------
NAME: Wolfgang Behler
TITLE: Senior Project Manager
S-2 INTERCREDITOR AGREEMENT
<PAGE> 65
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity except as
expressly set forth herein but solely as
Subordination Agent and trustee
By: /s/ C. SCOTT NIELSEN
-------------------------------------------
Name: C. Scott Nielsen
Title: Vice President
S-3 INTERCREDITOR AGREEMENT
<PAGE> 66
The undersigned hereby acknowledges
the terms of this Intercreditor Agreement:
CREDIT SUISSE FINANCIAL PRODUCTS,
as Above-Cap Liquidity Provider
By: /s/ JEANETTE WHOMERSLEY
------------------------------------------------
Name: Jeanette Whomersley
Title: Vice President
By: /s/ CHRISTOPHER G. MARTIN
------------------------------------------------
Name: Christopher G. Martin
Title: Managing Director
S-4 INTERCREDITOR AGREEMENT
<PAGE> 67
SCHEDULE 1 TO
INTERCREDITOR AGREEMENT
Indentures
1. Amended and Restated Trust Indenture and Security Agreement (1994 737
B), dated as of December 23, 1997, between State Street Bank and Trust Company
of Connecticut, National Association, as Owner Trustee (the "Owner Trustee")
and First Security Bank, National Association, as Indenture Trustee (the
"Indenture Trustee").
2. Amended and Restated Trust Indenture and Security Agreement (1994 737
C), dated as of December 23, 1997, between State Street Bank and Trust Company
of Connecticut, National Association, as Owner Trustee (the "Owner Trustee")
and First Security Bank, National Association, as Indenture Trustee (the
"Indenture Trustee").
3. Amended and Restated Trust Indenture and Security Agreement (1994 737
D), dated as of December 23, 1997, between State Street Bank and Trust Company
of Connecticut, National Association, as Owner Trustee (the "Owner Trustee")
and First Security Bank, National Association, as Indenture Trustee (the
"Indenture Trustee").
4. Amended and Restated Trust Indenture and Security Agreement (1994 737
E), dated as of December 23, 1997, between State Street Bank and Trust Company
of Connecticut, National Association, as Owner Trustee (the "Owner Trustee")
and First Security Bank, National Association, as Indenture Trustee (the
"Indenture Trustee").
5. Trust Indenture and Mortgage (1997 747-1), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
6. Trust Indenture and Mortgage (1997 747-2), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
7. Trust Indenture and Mortgage (1997 A320-1), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
8. Trust Indenture and Mortgage (1997 A320-2), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
<PAGE> 68
9. Trust Indenture and Mortgage (1997 A320-3), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
10. Trust Indenture and Mortgage (1997 A320-4), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
11. Trust Indenture and Mortgage (1997 777-1), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
12. Trust Indenture and Mortgage (1997 777-2), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
13. Trust Indenture and Mortgage (1997 777-3), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
14. Trust Indenture and Mortgage (1997 777-4), dated as of December 23,
1997, between United Air Lines, Inc., as Owner (the "Owner") and First Security
Bank, National Association, as Indenture Trustee (the "Indenture Trustee").
<PAGE> 69
SCHEDULE 2 TO
INTERCREDITOR AGREEMENT
Note Purchase Agreement
<PAGE> 1
EXHIBIT 4.13
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of December 23, 1997
between
UNITED AIR LINES, INC.
FIRST SECURITY BANK, NATIONAL ASSOCIATION
as Trustee under
UNITED AIRLINES
PASS THROUGH TRUST 1997-1A
UNITED AIRLINES
PASS THROUGH TRUST 1997-1B
and
MORGAN STANLEY & CO. INCORPORATED
BT ALEX. BROWN INCORPORATED
CITICORP SECURITIES, INCORPORATED.
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and
KREDITANSTALT FUR WIEDERAUFBAU
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of December 23, 1997 (the
"Agreement"), between UNITED AIR LINES, INC., a Delaware corporation (the
"Company"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, as trustee under each of
the Trusts (as defined below), and MORGAN STANLEY & CO. INCORPORATED, BT ALEX.
BROWN INCORPORATED, CITICORP SECURITIES, INC., CREDIT SUISSE FIRST BOSTON
CORPORATION and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and
KREDITANSTALT FUR WIEDERAUFBAU ("KfW") (collectively, the "Initial
Purchasers").
WHEREAS, pursuant to the Purchase Agreement, dated as of December 18,
1997 (the "Purchase Agreement"), between the Company and the Initial Purchasers
(other than KfW), the Trustee will issue and sell $445,826,000 principal amount
of the Enhanced Pass Through Certificates, Series 1997-1A of the Class A Trust
(the "Class A Certificates");
WHEREAS, pursuant to the Certificate Purchase Agreement, dated as of
the date hereof (the "Certificate Purchase Agreement" and, together with the
Purchase Agreement, the "Purchase Agreements"), between the Company, the
Trustee and KfW, the Trustee will issue and sell and KfW will purchase
$106,607,000 principal amount of the Enhanced Pass Through Certificates, Series
1997-1B of the Class B Trust (the "Class B Certificates" and, collectively with
the Class A Certificates, the "Initial Certificates"); and
WHEREAS, in order to induce the Initial Purchasers to enter into
their respective Purchase Agreements, the Company has agreed to provide to the
Initial Purchasers and their successors, assigns and direct and indirect
transferees the registration rights set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the
following capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Class A Trust" shall mean the United Airlines 1997-1A Pass Through
Trust.
"Class B Trust" shall mean the United Airlines 1997-1B Pass Through
Trust.
"Closing Date" shall mean the date hereof.
"Company" shall have the meaning set forth in the preamble and shall
include the Company's successors.
<PAGE> 3
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that any such
depositary must have an address in the Borough of Manhattan in the City of New
York.
"Equipment Notes" shall mean the equipment notes that are the property
of the Trusts.
"Exchange Certificates" shall mean the Enhanced Pass Through
Certificates, Series 1997-1A and the Enhanced Pass Through Certificates, Series
1997-1B issued by the Class A Trust and the Class B Trust, respectively, under
the applicable Pass Through Trust Agreements containing terms identical to the
Initial Certificates (except that, with respect to the Exchange Certificates of
each such Trust, (i) interest thereon shall accrue from the last date on which
interest was paid on the Initial Certificates of such Trust or, if no such
interest has been paid, from the Closing Date, (ii) the transfer restrictions
thereon under the 1933 Act shall be eliminated and (iii) certain provisions
relating to an increase in the stated rate of interest thereon shall be
eliminated) to be offered to Holders of Initial Certificates in exchange for
Initial Certificates pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Certificates for Registrable Certificates pursuant to Section 3(a).
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 3(a).
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Holders" shall mean each of the Initial Purchasers and the Company,
for so long as they own any Registrable Certificates, and each of their
successors, assigns and direct and indirect transferees who become registered
owners of Registrable Certificates under the Pass Through Trust Agreements.
"Initial Certificates" shall have the meaning set forth in the
preamble.
"Initial Purchasers" shall have the meaning set forth in the preamble.
"KfW" shall have the meaning set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Certificates; provided,
however, that whenever the consent or approval of Holders of a specified
percentage of Registrable Certificates is required hereunder, Registrable
Certificates held by the Company or any of its affiliates (as such term is
defined in Rule 405 under the 1933 Act) (other than the Initial Purchasers, the
Company or subsequent holders of Registrable Certificates if such subsequent
holders are deemed to be affiliates solely by reason of their holding
2
<PAGE> 4
of such Registrable Certificates) shall be disregarded in determining whether
such consent or approval was given by the Holders of such required percentage
or amount.
"Participating Broker-Dealers" shall have the meaning set forth in
Section 4(f).
"Pass Through Trust Agreements" shall mean each of the Pass Through
Trust Agreements relating to the Initial Certificates and the Exchange
Certificates, dated as of December 23, 1997, between the Company and each
Trustee, as amended from time to time in accordance with the terms thereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, trustee, unincorporated
organization or government or any agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Certificates covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreements" shall have the meaning set forth in the
preamble.
"Registrable Certificates" shall mean the Initial Certificates;
provided, however, that the Initial Certificates shall cease to be Registrable
Certificates when (i) a Shelf Registration Statement with respect to such
Initial Certificates shall have been declared effective under the 1933 Act and
such Initial Certificates shall have been disposed of pursuant to such Shelf
Registration Statement, (ii) such Initial Certificates shall have been sold to
the public pursuant to Rule 144 (or any similar provision then in force, but
not Rule 144A) under the 1933 Act, (iii) such Initial Certificates shall have
ceased to be outstanding or (iv) such Initial Certificates have been exchanged
for Exchange Certificates upon consummation of the Exchange Offer.
"Registration Event" shall have the meaning set forth in Section 3(e).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company and the Trustees with this
Agreement, including: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees; (ii) all fees
and expenses incurred in connection with compliance with state or other
securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with state or other securities or blue sky qualification
of any of the Exchange Certificates or Registrable Certificates); (iii) all
expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
3
<PAGE> 5
performance of and compliance with this Agreement; (iv) all rating agency fees;
(v) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Certificates on any securities exchange or exchanges;
(vi) all fees and disbursements relating to the qualification of the Pass
Through Trust Agreements under applicable securities laws; (vii) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance; (viii) the fees and expenses of the Trustees, including their
counsel, and any escrow agent or custodian; and (ix) any reasonable fees and
disbursements of the underwriters, if any, and the reasonable fees and expenses
of any special experts retained by the Company in connection with any
Registration Statement, in each case as are customarily required to be paid by
issuers or sellers of securities, but excluding fees of counsel to the
underwriters or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Certificates by a Holder.
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Certificates or Registrable
Certificates pursuant to the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration under the 1933 Act
effected pursuant to Section 3(b).
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 3(b) which
covers some or all of the Registrable Certificates on an appropriate form under
Rule 145 under the 1933 Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"TIA" shall have the meaning set forth in Section 4(l).
"Trustees" shall mean the trustees with respect to the Initial
Certificates and the Exchange Certificates of the Trusts under the Pass Through
Trust Agreements.
"Trusts" shall mean the Class A Trust and the Class B Trust.
2. General Interpretive Principles. For purposes of
this Agreement except as otherwise expressly provided: (a) references herein to
"Articles," "Sections," "subsections," "paragraphs" and other subdivisions
without reference to a document are to designated Articles, Sections,
subsections, paragraphs and other subdivisions of this Agreement; (b) the words
"herein," "hereof," "hereunder" and other similar words refer to this Agreement
as a whole and not any
4
<PAGE> 6
particular provision; (c) the term "include" or "including" shall mean without
limitation by reason of enumeration; and (d) "or" is not exclusive.
3. Registration Under the 1933 Act. (a) Exchange Offer
Registration. To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
(A) to file with the SEC within 90 days after the Closing Date an Exchange
Offer Registration Statement covering the offer by the Company to the Holders
to exchange all of the Registrable Certificates for Exchange Certificates, (b)
to cause such Exchange Offer Registration Statement, to be declared effective
by the SEC within 150 days after the Closing Date, (C) to cause such
Registration Statement to remain effective until the closing of the Exchange
Offer and (D) to consummate the Exchange Offer within 180 days after the
Closing Date. Upon effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Exchange Offer, it being the objective
of such Exchange Offer to enable each Holder (other than Participating
Broker-Dealers) eligible and electing to exchange Registrable Certificates for
Exchange Certificates (assuming that such Holder is not an affiliate of the
Company within the meaning of Rule 405 under the 1933 Act, acquires the
Exchange Certificates in the ordinary course of such Holder's business and has
no arrangements or understandings with any person to participate in the
Exchange Offer for the purpose of distributing the Exchange Certificates) to
trade such Exchange Certificates from and after their receipt without any
limitations or restrictions under the 1933 Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Company shall or
shall cause the Trustees to:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders (or longer
if required by applicable law);
(iii) use the services of the Depositary for the Exchange
Offer with respect to Initial Certificates evidenced by global
certificates;
(iv) permit Holders to withdraw tendered Registrable
Certificates at any time prior to the close of business, New York City
time, on the last business day on which the Exchange Offer shall
remain open, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Certificates
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Registrable Certificates exchanged;
(v) use its best efforts to ensure that (i) any Exchange
Offer Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any
5
<PAGE> 7
supplement thereto complies as to form in all material respects with
the 1933 Act and the rules and regulations thereunder, (ii) any
Exchange Offer Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such Prospectus (as amended or
supplemented from time to time), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements, in light of the circumstances under which they
were made, not misleading; and
(vi) otherwise comply in all respects with all applicable
laws relating to the Exchange Offer.
As soon a practicable after the close of the Exchange Offer,
the Company shall or shall cause the Trustees to:
(i) accept for exchange Registrable Certificates duly
tendered and not validly withdrawn pursuant to the Exchange Offer in
accordance with the terms of the Exchange Offer Registration Statement
and the letter of transmittal that is an exhibit thereto;
(ii) cancel or cause to be canceled all Registrable
Certificates so accepted for exchange by the Company; and
(iii) promptly cause to be authenticated and delivered
Exchange Certificates to each Holder of Registrable Certificates equal
in amount to the Registrable Certificates equal in amount to the
Registrable Certificates of such Holder so accepted for exchange.
Interest on each Exchange Certificate shall accrue from the
last date on which interest was paid on the Registrable Certificates
surrendered in exchange therefor or, if no interest has been paid on the
Registrable Certificates, from the Closing Date. The Exchange Offer shall not
be subject to any conditions, other than that the Exchange Offer, or the making
of any exchange by a Holder, does not violate applicable law or any applicable
interpretation of the Staff of the SEC. Each Holder of Registrable
Certificates (other than Participating Broker-Dealers) who wishes to exchange
such Registrable Certificates for Exchange Certificates in the Exchange Offer
shall represent that (i) it is not an affiliate of the Company within the
meaning of Rule 405 under the 1933 Act, (ii) any Exchange Certificates to be
received by it were acquired in the ordinary course of business and (iii) it
has no arrangement with any Person to participate in the distribution (within
the meaning of the 1933 Act) of the Exchange Certificates.
(b) Shelf Registration. (i) If, because of any change
in law or applicable interpretations thereof by the Staff of the SEC, the
Company is not permitted to effect the Exchange Offer as contemplated by
Section 3(a) or (ii) if for any other reason the Exchange Offer Registration
Statement is not declared effective within 150 days after the Closing Date or
the Exchange Offer is not consummated within 180 days after the Closing Date,
or (iii) if any Holder (other than a
6
<PAGE> 8
Purchaser) is not eligible to participate in the Exchange Offer or (iv) upon
the request of any Purchaser (with respect to any Registrable Certificates that
it acquired directly from the Company) following the consummation of the
Exchange Offer if such Purchaser shall hold Registrable Certificates that it
acquired directly from the Company and if such Purchaser is not permitted, in
the opinion of counsel to such Purchaser, pursuant to applicable law or
applicable interpretation of the Staff of the SEC to participate in the
Exchange Offer, the Company shall, at its cost:
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the
Registrable Certificates by the Holders from time to time in
accordance with the methods of distribution elected by the Majority
Holders of such Registrable Certificates and set forth in such Shelf
Registration Statement, and use its best efforts to cause such Shelf
Registration Statement to be declared effective by the SEC by the
180th day after the Closing Date (or promptly in the event of a
request by any Holder pursuant to clause (iii) above or any Purchaser
pursuant to clause (iv) above). If the Company is required to file a
Shelf Registration Statement upon the request of any Holder (other
than a Purchaser) not eligible to participate in the Exchange Offer
pursuant to clause (iii) above or upon the request of any Purchaser
pursuant to clause (iv) above, the Company shall file and have
declared effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 3(a) with respect to all Registrable
Certificates and a Shelf Registration Statement (which may be a
combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable
Certificates held by such Holder or such Purchaser after completion of
the Exchange Offer. If the Company files a Shelf Registration
Statement pursuant to Section 3(b)(ii) the Company will no longer be
required to effect the Exchange Offer;
(B) use its best efforts to keep the Shelf Registration
Statement continuously effective, in order to permit the Prospectus
forming part thereof to be usable by Holders, until the end of the
period referred to in Rule 144(k) (or two years from the Closing Date
if such Shelf Registration Statement is filed upon the request of any
Purchaser pursuant to clause (iv) above) or such shorter period as
shall end when all of the Registrable Certificates covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement; and
(C) notwithstanding any other provisions hereof, use its
best efforts to ensure that (i) any Shelf Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act
and the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any supplement
to such Prospectus (as amended or supplemented from time to time),
does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
7
<PAGE> 9
The Company further agrees, if necessary, to supplement or
amend the Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 4(b), to use all reasonable efforts to cause any such
amendment to become effective and such Shelf Registration to become usable as
soon as practicable thereafter and to furnish to the Holders of Registrable
Certificates copies of any such supplement or amendment promptly after its
being used or filed with the SEC.
The Company shall be allowed a period of five days, beginning
on the first day a Registration Event referred to in Section 3(b)(ii) occurs,
to cure such Registration Event before the Company will be required to comply
with the requirements of Section 3(b).
(c) Expenses. The Company shall pay all Registration
Expenses in connection with the registration pursuant to Section 3(a) or 3(b)
and, in the case of any Shelf Registration Statement, shall reimburse the
Holders or Initial Purchasers for the reasonable fees and disbursements of one
firm or counsel designated in writing by the Majority Holders to act as counsel
for the Holders of the Registrable Certificates in connection therewith. Each
Holder shall pay all expenses of its counsel, other than as set forth in the
preceding sentence, underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Certificates pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Company
shall be deemed not to have used its best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if the Company
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable
Certificates covered thereby not being able to exchange or offer and sell such
Registrable Certificates during the period unless (A) such action is required
by applicable law or (B) such action is taken by the Company in good faith and
for valid business reasons (not including avoidance of the Company's
obligations hereunder), including the acquisition or divestiture of assets, so
long as the Company promptly complies with the requirements of Section 4(j), if
applicable.
(ii) An Exchange Offer Registration Statement pursuant to
Section 3(a) or a Shelf Registration Statement pursuant to Section 3(b) shall
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Certificates pursuant to a Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
shall be deemed not to have been effective during the period of such
interference, until the offering of Registrable Certificates pursuant to such
Registration Statement may legally resume.
(e) Increase in Interest Rate. If either (i) the
Exchange Offer is not consummated on or prior to the 180th calendar day
following the Closing Date, or (ii) a Shelf Registration Statement is not
declared effective on or prior to the 180th calendar day following the Closing
Date (each, a "Registration Event"), the interest rate borne by the Initial
Certificates shall be increased
8
<PAGE> 10
by (1) 0.50% per annum from and including July 1, 1998 to but excluding the
date on which such Registration Event occurs; provided, however, that such
increase shall cease to be in effect from and including, in the case of clause
(i) above, the date on which the Exchange Offer is consummated, and, in the
case of clause (ii) above the date the Shelf Registration Statement is declared
effective. If the Shelf Registration Statement ceases to be effective at any
time during the period specified by Section 3(b) for more than 60 days, whether
or not consecutive, during any 12-month period, the interest rate borne by the
Equipment Notes shall be increased by 0.50% per annum from the 61st day of the
applicable 12-month period such Shelf Registration Statement ceases to be
effective until such time as the Shelf Registration Statement again becomes
effective.
4. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration Statements pursuant
to Sections 3(a) and 3(b), the Company shall:
(a) prepare and file with the SEC a Registration
Statement, within the time period specified in Section 3, on the
appropriate form under the 1933 Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Certificates by the selling
Holders thereof and (iii) shall comply as to form in all material
respects with the requirements of the applicable form;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period and cause each Prospectus to be
supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the 1933 Act;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Certificates when a Shelf Registration Statement
with respect to the Registrable Certificates has been filed and advise
such Holders that the distribution of Registrable Certificates will be
made in accordance with the method elected by the Majority Holders;
(ii) furnish to each Holder of Registrable Certificates included
within the coverage of the Shelf Registration Statement at least one
copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all reports, other documents and
exhibits (including those incorporated by reference) at the expense of
the Company, (iii) furnish to each Holder of Registrable Certificates
included within the coverage of the Shelf Registration Statement, to
counsel for the Holders and to each underwriter of an underwritten
offering of Registrable Certificates, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto as such Holder or underwriter may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Certificates; and (iv) subject to the
last paragraph of Section 4, consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders of
Registrable Certificates included in the Shelf Registration Statement
in connection with the offering and sale of the Registrable
Certificates covered by the Prospectus or any amendment or supplement
thereto;
9
<PAGE> 11
(d) use its best efforts to register or qualify the
Registrable Certificates or cooperate with the Holders of Registrable
Certificates and their counsel in the registration or qualification of
such Registrable Certificates under all applicable state securities or
"blue sky" laws of such jurisdictions as any Holder of Registrable
Certificates covered by a Registration Statement and each underwriter
of an underwritten offering of Registrable Certificates shall
reasonably request in writing to cooperate with the Holders in
connection with any filings required to be made with the NASD, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such Holders to consummate the disposition in each
such jurisdiction of such Registrable Certificates owned by such
Holders; provided, however, that in no event shall the Company be
required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 4(d) or (ii) take any action
which would subject it to general service of process or taxation in
any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Certificates promptly and, if requested by such
Holder or counsel, confirm such advice in writing promptly (i) when a
Shelf Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective,
(ii) of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Shelf Registration
Statement and Prospectus or for additional information after the Shelf
Registration Statement has become effective, (iii) of the issuance by
the SEC or any state securities authority of any stop order suspending
the effectiveness of a Shelf Registration Statement or the initiation
of any proceedings for that purpose, (iv) at the closing of any sale
of Registrable Certificates if, between the effective date of a Shelf
Registration Statement and such closing, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any,
relating to such offering cease to be true and correct in all material
respects, (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Certificates for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the happening
of any material event or the discovery of any material facts during
the period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related
Prospectus untrue or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein (in the case of the Prospectus in light of the circumstances
under which they were made) not misleading and (vii) of any
determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f)(A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution"
section covering the use of the Prospectus included in the Exchange
Offer Registration Statement by broker-dealers who have exchanged
their Registrable Certificates for Exchange Certificates for the
resale of such Exchange Certificates, (ii) furnish to each
broker-dealer who desires to participate in the Exchange Offer,
without charge, as many copies of each Prospectus included in the
10
<PAGE> 12
Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (iii) include in the Exchange
Offer Registration Statement a statement that any broker-dealer who
holds Registrable Certificates acquired for its own account as a
result of market-making activities or other trading activities (a
"Participating Broker-Dealer"), and who receives Exchange Certificates
for Registrable Certificates pursuant to the Exchange Offer, may be a
statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such
Exchange Certificates, and (iv) subject to the last paragraph of
Section 4, hereby consent to the use of the Prospectus forming part of
the Exchange Offer Registration Statement or any amendment or
supplement thereto, by any broker-dealer in connection with the sale
or transfer of the Exchange Certificates covered by the Prospectus or
any amendment or supplement thereto, and (v) include in the
transmittal letter or similar documentation to be executed by an
exchange offeree in order to participate in the Exchange Offer the
following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Certificates. If the
undersigned is a broker-dealer that will receive Exchange
Certificates for its own account in exchange for Registrable
Certificates, it represents that the Registrable Certificates
to be exchanged for Exchange Certificates were acquired by it
as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Certificates pursuant to the
Exchange Offer; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the 1933 Act";
and
(B) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, use its best efforts to cause to
be delivered at the request of an entity representing the
Participating Broker-Dealers (which entity shall be one of the Initial
Purchasers (other than KfW), unless it elects not to act as such
representative) only one, if any, "cold comfort" letter with respect
to the Prospectus in the form existing on the last date for which
exchanges are accepted pursuant to the Exchange Offer and with respect
to each subsequent amendment or supplement, if any, effected during
the period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, use its best efforts to maintain
the effectiveness of the Exchange Offer Registration Statement for the
180 day period specified in clause (D) below; and
(D) not be required to amend or supplement the Prospectus
contained in the Exchange Offer Registration Statement as would
otherwise be contemplated by Section 4(b), or take any other action as
a result of this Section 4(f), for a period exceeding 180 days after
the last date for which exchanges are accepted pursuant to the
Exchange Offer (as such period may be extended by the Company) and
Participating Broker-Dealers shall not be
11
<PAGE> 13
authorized by the Company to, and shall not, deliver such Prospectus
after such period in connection with resales contemplated by this
Section 4;
(g) (A) in the case of an Exchange Offer, furnish counsel
for the Initial Purchasers and (B) in the case of a Shelf
Registration, furnish counsel for the Holders of Registrable
Certificates copies of any request by the SEC or any state securities
authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement
as soon as practicable and provide immediate notice to each Holder of
the withdrawal of any such order;
(i) unless any Registrable Certificates are in book entry
form only, in the case of a Shelf Registration, cause the Trustees to
cooperate with the selling Holders of Registrable Certificates to
facilitate the timely preparation and delivery of certificates
representing Registrable Certificates to be sold free from any
restrictive legends; and cause such Registrable Certificates to be in
such denominations (consistent with the provisions of the Pass Through
Trust Agreements) and registered in such names as the selling Holder
or the underwriters, if any, may reasonably request at least one
business day prior to the closing of any sale of Registrable
Certificates;
(j) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each as
contemplated by Sections 3(d)(i)(B) or 4(e)(ii)-(vi), use its best
efforts to prepare a post-effective amendment to a Registration
Statement or an amendment or supplement to the related Prospectus or
file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Certificates, such Prospectus will
not contain at the time of such delivery any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Company agrees to notify each Holder
to suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event, and each Holder hereby agrees to suspend
use of the Prospectus as promptly as practicable upon receipt of such
notice until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission, provided that the Company shall
cause such suspension not to last more than 30 days per occurrence or
more than 60 days in aggregate in a calendar year. At such time as
such public disclosure is otherwise made or the Company determines
that such disclosure is not necessary, in each case to correct any
misstatement of a material fact or to include any omitted material
fact, the Company agrees promptly to notify each Holder of such
determination and to furnish each Holder such numbers of copies of the
Prospectus, as amended or supplemented, as such Holder may reasonably
request.
(k) obtain a CUSIP number for all Exchange Certificates,
or Registrable Certificates, as the case may be, of each Trust not
later than the effective date of an
12
<PAGE> 14
Exchange Offer Registration Statement or Shelf Registration Statement,
as the case may be, and provide the Trustees with printed certificates
evidencing the Exchange Certificates or the Registrable Certificates,
as the case may be, held in book entry form, in a form eligible for
deposit with the Depositary;
(l) (i) cause the Pass Through Trust Agreements to be
qualified under the Trust Indenture Act of 1939, as amended (the
"TIA"), in connection with the registration of the Exchange
Certificates or Registrable Certificates, as the case may be, (ii)
cooperate with the Trustees and the Holders to effect such changes to
the Pass Through Trust Agreements as may be required for the Pass
Through Trust Agreements to be so qualified in accordance with the
terms of the TIA and (iii) execute, and use its best efforts to cause
the Trustees to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed
with the SEC to enable the Pass Through Trust Agreements to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into such
customary agreements (including underwriting agreements in customary
form) and take all other customary and appropriate actions (including
those reasonably requested by the Holders of a majority in principal
amount of Registrable Certificates being sold) in order to expedite or
facilitate the disposition of such Registrable Certificates and in
such connection whether or not an underwriting agreement is entered
into and whether or not the registration is an underwritten
registration:
(i) make such representations and warranties to
the Holders of such Registrable Certificates and the
underwriters, if any, in form, substance and scope as are
customarily made by the Company to underwriters in similar
underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company
(who may be employees of the Company) and updates thereof
(which counsel and opinions in form, scope and substance shall
be reasonably satisfactory to the managing underwriters, if
any, or if there are no such managing underwriters, to the
Holders of a majority in principal amount of the Registrable
Certificates being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily
covered in opinions requested in sales of securities or
underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters;
(iii) obtain a "cold comfort" letter and updates
thereof from the Company's independent certified public
accountants addressed to the underwriters, if any, and use its
best efforts to have such letters addressed to the selling
Holders of Registrable Certificates, such letter to be in
customary form and covering such matters of the type
customarily covered in "cold comfort" letters in connection
with similar underwritten offerings as the Holders of a
majority in principal amount of the Registration Certificates
being sold shall request;
13
<PAGE> 15
(iv) enter into a securities sales agreement with
the Holders and an agent of the Holders providing for, among
other things, the appointment of such agent for the selling
Holders for the purpose of soliciting purchases of Registrable
Certificates, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause such underwriting agreement to set forth indemnification
provisions and procedures substantially similar to the
indemnification provisions and procedures set forth in Section
6 with respect to all parties to be indemnified pursuant to
Section 6; and
(vi) deliver such other documents and certificates
as may be reasonably requested by Holders of a majority in
principal amount of Registrable Certificates being sold, and
as are customarily delivered in similar offerings.
The above shall be done at (i) the effectiveness of such Registration Statement
(and, if appropriate, each post-effective amendment thereto) if appropriate in
connection with any particular disposition of Registrable Certificates and (ii)
each closing under any underwritten or similar agreement as and to the extent
required thereunder. In the case of any underwritten offering, the Company
shall provide written notice to the Holders of all Registrable Certificates of
such underwritten offering at least 30 days prior to the filing of a prospectus
supplement for such underwritten offering. Such notice shall (x) offer each
such Holder the right to participate in such underwritten offering, (y) specify
a date, which shall be no earlier than 10 days following the date of such
notice, by which such Holder must inform the Company of its intent to
participate in such underwritten offering and (z) include the instructions such
Holder must follow in order to participate in such underwritten offering;
(n) in the case of a Shelf Registration, make available
for inspection by representatives of the Holders of the Registrable
Certificates and any underwriters participating in any disposition
pursuant to a Shelf Registration Statement and any counsel or
accountant retained by such Holders or underwriters, all financial and
other records, pertinent corporate documents and properties of the
Company reasonably requested by it, and cause the respective officers,
directors, employees and any other agents of the Company to make
reasonably available all relevant information reasonably requested by
any such representative, underwriter, counsel or accountant in
connection with a Registration Statement, in each case as is customary
for similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such information
shall be kept confidential by such representatives, underwriters,
counsel or accountant, unless such disclosure is made in connection
with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality; and provided,
further, that the foregoing inspection and information gathering
shall, to the extent reasonably possible, be coordinated on behalf of
the Holders
14
<PAGE> 16
and the other parties entitled thereto by one counsel designated by
and on behalf of such Holders and other parties;
(o) (i) a reasonable time prior to the filing of any
Exchange Offer Registration Statement, any Prospectus forming a part
thereof, any amendment to an Exchange Offer Registration Statement or
amendment or supplement to a Prospectus, provide copies of such
document to the Initial Purchasers, and use its best efforts to
reflect in any such document when filed such comments as any of the
Initial Purchasers or their counsel may reasonably request; (ii) in
the case of a Shelf Registration, a reasonable time prior to filing
any Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement or
amendment or supplement to such Prospectus, provide copies of such
document to the Holders of Registrable Certificates, to the Initial
Purchasers, to counsel on behalf of the Holders and to the underwriter
or underwriters of an underwritten offering of Registrable
Certificates, if any, and use its best efforts to reflect such
comments in any such document when filed as the Holders of Registrable
Certificates, their counsel and any underwriter may reasonably
request; and (iii) cause the representatives of the Company to be
available for discussion of such document as shall be reasonably
requested by the Holders of Registrable Certificates, the Initial
Purchasers on behalf of such Holders or any underwriter and not at any
time make any filing of any such document of which such Holders, the
Initial Purchasers on behalf of such Holders, their counsel or any
underwriter shall not have previously been advised and furnished a
copy or to which such Holders, the Initial Purchasers on behalf of
such Holders, their counsel or any underwriter shall reasonably
object;
(p) in the case of a Shelf Registration, use its best
efforts to cause the Registrable Certificates to be rated with the
appropriate rating agencies at the time of effectiveness of such Shelf
Registration Statement, unless the Registrable Certificates are
already so rated; and
(q) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally
available to its security holders, as soon as reasonably practicable
after the effective date of a Registration Statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the
1933 Act and Rule 158 thereunder.
In the case of a Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Certificates to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Certificates as the Company may from time to time
reasonably request and the Company may exclude from such registration the
Registrable Certificates of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of
any event or the discovery of any facts, each
15
<PAGE> 17
of the kind described in Sections 3(d)(i)(B) or 4(e)(ii)-(vi), such Holder
shall forthwith discontinue disposition of Registrable Certificates pursuant to
such Shelf Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 4(j), and, if so
directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Certificates current at the time or receipt of such notice. If the
Company shall give any such notice to suspend the disposition of Registrable
Certificates pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind
described in Sections 3(d)(i)(B) or 4(e)(ii)-(vi), the Company shall be deemed
to have used best efforts to keep the Shelf Registration Statement effective
during such period of suspension, provided that the Company shall use its best
efforts to file and have declared effective (if an amendment) as soon as
practicable an amendment or supplement to the Shelf Registration Statement and
shall extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during
the period from and including the date of the giving of such notice to and
including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions.
5. Underwritten Offering. The Holders of Registrable
Certificates covered by a Shelf Registration Statement who desire to do so may
sell such Registrable Certificates in an underwritten offering. In any such
underwritten offering, the investment banker or bankers and manager or managers
that will administer the offering will be selected by, and the underwriting
arrangements with respect thereto will be approved by, the Holders of a
majority of the Registrable Securities to be included in such offering;
provided, however, that (i) such investment bankers and managers and
underwriting arrangements must be reasonably satisfactory to the Company and
(ii) the Company shall not be obligated to arrange for more than one
underwritten offering during the period such Shelf Registration Statement is
required to be effective pursuant to Section 3(b)(i)(B). No Holder may
participate in any underwritten offering contemplated hereby unless such Holder
(a) agrees to sell such Holder's Registrable Certificates in accordance with
any approved underwriting arrangements, (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of
such approved underwriting arrangements and (c) at least 20% of the outstanding
Registrable Certificates are included in such underwritten offering. The
Holders participating in any underwritten offering shall be responsible for any
expenses customarily borne by selling security holders, including underwriting
discounts and commissions and fees and expenses of counsel to the selling
security holders.
6. Indemnification and Contribution. (a) The Company
will indemnify and hold harmless each Holder, including Participating Broker
Dealers, each underwriter who participates in an offering of Registrable
Certificates and their respective directors, officers, employees, agents and
each Person, if any, who controls any of such parties within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any losses,
claims, damages or liabilities, joint or several, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained
16
<PAGE> 18
in the Registration Statement pursuant to which Exchange Certificates or
Registrable Certificates were registered under the 1933 Act, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact necessary in order to make the statements therein not misleading, or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and will
reimburse each Holder, including Participating Broker-Dealers, each underwriter
who participates in an offering of Registrable Certificates, their respective
affiliates and their respective directors, officers, employees and agents and
each Person, if any, who controls any of such parties within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act for any legal or other
expenses reasonably incurred by such party as such expenses are incurred in
connection with investigating or defending against any litigation, or any
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or any claim whatsoever arising out of or based upon
any such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid pursuant to clause
(i) of this Section 6(a); provided, however, that the Company shall not be
liable in any such case (a) to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by any Purchaser, any Holder, including Participating
Broker-Dealers, or any underwriter specifically for use in the Registration
Statement or the Prospectus or (b) to the extent that such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission contained in any
preliminary prospectus if the Initial Purchasers, such Holder, including a
Participating Broker-Dealer, or such underwriter from whom the Person asserting
any such losses, claims, damages or liabilities purchased the securities
concerned to the extent that a prospectus relating to such securities was
required to be delivered by such Purchaser, Holder, Participating Dealer or
underwriter and such Purchaser, Holder, Participating Broker-Dealer or
underwriter failed to send or deliver a copy of the Prospectus to the Person
asserting such losses, claims, damages or liabilities on or prior to the
delivery of written confirmation of any sale of securities covered thereby to
such Person in any case where such Prospectus corrected such untrue statement
or omission if the Company had previously furnished copies thereof to such
Purchaser, Holder, Participating Broker-Dealer or underwriter. Any amounts
advanced by the Company to an indemnified party pursuant to this Section 6 as a
result of such losses shall be returned to the Company if it shall be finally
determined by such a court in a judgment not subject to appeal of final review
that such indemnified party was not entitled to indemnification by the Company.
(b) In the case of a Shelf Registration Statement, each
Holder will severally and not jointly indemnify and hold harmless the Company,
each Purchaser, each underwriter who participates in an offering of Registrable
Certificates and the other selling Holders and each of their respective
directors, officers (including each officer of the Company who signed the
Registration Statement), employees and agents and each Person, if any, who
controls the Company, any Purchaser, any underwriter or selling Holder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any losses, claims, damages or liabilities described in the indemnity
contained in Section 6(a), as incurred but only to the extent, that such untrue
statement
17
<PAGE> 19
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement or the Prospectus in reliance upon and in conformity
with written information furnished to the Company by such Holder specifically
for use in the Registration Statement, or the Prospectus, and will reimburse
any legal or other expenses reasonably incurred by the Company, each Purchaser,
each underwriter who participates in an offering of Registrable Certificates
and the other selling Holders and each of their respective directors and
officers (including each officer of the Company who signed the Registration
Statement) and each Person, if any, who controls the Company, any Purchaser,
any underwriter or selling Holder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder for
the sale of Registrable Certificates pursuant to such Shelf Registration
Statement. Any amounts advanced by any Holder to an indemnified party pursuant
to this Section 6 as a result of such losses shall be returned to such Holder
if it shall be finally determined by such a court in a judgment not subject to
appeal of final review that such indemnified party was not entitled to
indemnification by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under Section 6 (a) or (b) above, notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under Section 6 (a) or (b) above, except
to the extent that such indemnifying party is materially prejudiced by such
failure to give notice. If any such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if any such
indemnified party reasonably determines that there may be legal defenses
available to such indemnified party that are different from or in addition to
those available to such indemnifying party or that representation of such
indemnifying party and any indemnified party by the same counsel would present
a conflict of interest, then such indemnifying party or parties shall not be
entitled to assume such defense. If an indemnifying party is not entitled to
assume the defense of such action as a result of the proviso to the preceding
sentence, counsel for such indemnifying party shall be entitled to conduct the
defense of such indemnifying party and counsel for each indemnified party or
parties shall be entitled to conduct the defense of such indemnified party or
parties. If an indemnifying party assumes the defense of an action in
accordance with and as permitted by the provisions of this paragraph, such
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such action,
except as provided for in the immediately preceding sentence. In no
18
<PAGE> 20
event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from its own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 6
is unavailable to an indemnified party under Section 6 (a) or (b) above, then
each indemnifying party in lieu of indemnification such indemnified party shall
contribute to the aggregate losses, claims, damages, liabilities or expenses
incurred by such indemnified party referred to in Section 6 (a) or (b) above
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company, the Initial Purchasers and the Holders from the
offering of the Exchange Certificates or Registrable Certificates included in
such offering or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, the Initial Purchasers and the Holders in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations, provided that no Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person that was not guilty of such fraudulent
misrepresentation. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Initial Purchasers or a
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company, the Initial Purchasers and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 6 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the relevant equitable considerations.
For purposes of this Section 6 (d), each director, officer, employee,
agent and Person, if any, who controls a Purchaser or Holder within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Purchaser or Holder, and each director, officer,
employee and agent of the Company, and each Person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. No party
shall be liable with respect to any action, suit, proceeding or claim settled
without its written consent. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this Section 6 (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending any action or claim which is the subject of this
Section 6 (d). Notwithstanding the provisions of this Section 6, no Purchaser,
Holder or Participating Broker-Dealer shall be required to contribute or
indemnify any amount in excess
19
<PAGE> 21
of the amount by which the total price at which Registrable Certificates were
sold by such Purchaser, Holder or Participating Broker-Dealer exceeds the
amount of any damages that such Purchaser, Holder or Participating
Broker-Dealer has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Initial
Purchasers' obligations in this Section 6 (d) to contribute are several in
proportion to their respective purchase obligations and not joint.
(e) The obligations of the Company under this Section 6
shall be in addition to any liability which the Company may otherwise have.
7. Miscellaneous. (a) Rule 144 and Rule 144A. For so
long as the Company is subject to the reporting requirements of Section 13 or
15 of the 1934 Act, the Company shall file the reports required to be filed by
it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations
adopted by the SEC thereunder, that if it ceases to be so required to file such
reports, it shall upon the request of any Holder of Registrable Certificates
(i) make publicly available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to a
prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the 1933 Act and it will take such further action as any Holder of
Registrable Certificates may reasonably request, and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Certificates without registration under the 1933 Act within the limitation of
the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may
be amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the written request of any Holder of Registrable
Certificates, the Company shall deliver to such Holder a written statement as
to whether it has complied with such requirements.
(b) Other Registration Rights. The Company may grant
registration rights that would permit any Person the right to piggy-back on any
Shelf Registration Statement; provided, however, that if the managing
underwriter, if any, of an offering pursuant to such Shelf Registration
Statement delivers an opinion of the selling Holders that the total amount of
securities which they and the holders of such piggy-back rights intend to
include in any Shelf Registration Statement materially adversely affects the
success of such offering (including the price at which such securities can be
sold), then the amount, number or kind of securities to be offered for the
account of holders of such piggy-back rights shall be reduced to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount, number or kind recommended by such managing
underwriter; and provided, further, that such piggy-back registration rights
shall in no event materially adversely affect the interests of any Holder.
(c) Trustees. The Trustee shall take such action as may
be reasonably requested by the Company in connection with the Company
satisfying its obligations arising under this Agreement.
20
<PAGE> 22
(d) No Inconsistent Agreements. The Company has not
entered into nor will the Company on or after the date of this Agreement enter
into any agreement which is inconsistent with the rights granted to the Holders
of Registrable Certificates in this Agreement or otherwise conflicts with the
provisions hereof.
(e) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Certificates affected by such amendment, modification,
supplement, waiver or departure; provided, however, that no amendment,
modification, supplement or waiver or consent to any departure from the
provisions of Section 6 shall be effective as against any Holder of Registrable
Certificates unless consented to in writing by such Holder.
(f) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 7(f), which address initially is, with respect to the Initial
Purchasers, the address set forth in the applicable Purchase Agreements; and
(ii) if to the Company, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 7(f).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustees,
at the address specified in the Pass Through Trust Agreements.
(g) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees
of each of the parties, including, without the need for an express assignment,
subsequent Holders; provided, however, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable
Certificates in violation of the terms hereof or of the Purchase Agreement or
the Pass Through Trust Agreements. If any transferee of any Holder shall
acquire Registrable Certificates, in any manner, whether by operation of law or
otherwise, such Registrable Certificates shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable
Certificates, such Person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
21
<PAGE> 23
(h) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder and to the obligations of
the Company hereunder and shall have the right to enforce such agreements and
obligations directly to the extent any such Holder deems such enforcement
necessary or advisable to protect its rights hereunder.
(i) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(k) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF (OTHER THAN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW).
(l) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
22
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
UNITED AIR LINES, INC.
By:/s/ THOMAS A. MUTRYN
------------------------------------
Name: Thomas A. Mutryn
Title: Vice President & Treasurer
S-1 REGISTRATION RIGHTS AGREEMENT
<PAGE> 25
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Trustee under each of
the Trusts
By: /s/ C. SCOTT NIELSEN
------------------------------------
Name: C. Scott Nielsen
Title: Vice President
S-2 REGISTRATION RIGHTS AGREEMENT
<PAGE> 26
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
BT ALEX. BROWN INCORPORATED
CITICORP SECURITIES, INC.,
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ PATRICK M. KAUFER
------------------------------------
Name: Patrick M. Kaufer
Title: Attorney-in-fact
S-3 REGISTRATION RIGHTS AGREEMENT
<PAGE> 27
Confirmed and accepted as of
the date first above written:
BY: KREDITANSTALT FUR WIEDERAUFBAU
By: /s/ DR. CHRISTIAN STAAB
------------------------------------
Name: Dr. Christian Staab
Title: VP
By: /s/ WOLFGANG BEHLER
------------------------------------
Name: Wolfgang Behler
Title: Senior Project Manager
S-4 REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 4.14
- --------------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
Dated as of December 23, 1997
between
UNITED AIR LINES, INC.,
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
as Owner Trustee under each
of the Trust Agreements,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Pass Through Trustee under each of the
United Airlines 1997-1 Pass Through Trust Agreements,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent,
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Purchase of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.A. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. Redemption, Purchase or Refinancing of Equipment Notes . . . . . . . . . . . . . . . . . . . 4
SECTION 3. Adjustment of Interest Rates Applicable to Equipment Notes. . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5. Representations, Warranties and Covenants of United . . . . . . . . . . . . . . . . . . . . 13
SECTION 6. Representations, Warranties and Covenants of SSBT and
the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7. Representations, Warranties and Covenants of Other Parties . . . . . . . . . . . . . . . . 19
SECTION 8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
SCHEDULES
Schedule I Names, Addresses and Wire Instructions
Schedule II Pass Through Trust Supplements
Schedule III Equipment Notes, Purchasers and Purchase Prices
i
<PAGE> 3
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT, dated as of December 23, 1997 (this
"Agreement"), between UNITED AIR LINES, INC., a Delaware corporation
("United"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity except as otherwise expressly
provided herein, but solely as Owner Trustee (the "Owner Trustee"; the Owner
Trustee and United being herein referred to as the "Sellers") of the Owner
Trusts (as defined below), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity except as
otherwise expressly provided herein, but solely as trustee (in such capacity,
the "Pass Through Trustee") under each of the four separate Pass Through Trust
Agreements (as defined below), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity except as
otherwise expressly provided herein, but solely as subordination agent (in such
capacity, the "Subordination Agent"), and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity
except as otherwise expressly provided herein, but solely as indenture trustee
(in such capacity, the "Indenture Trustee") under the Indentures (as defined
below).
WHEREAS, United is the owner of two Boeing 747-422 aircraft, four
Airbus A320-232 aircraft and four Boeing 777- 222 aircraft (collectively, the
"Owned Aircraft") for which it desires to obtain financing;
WHEREAS, the Owner Trustee, as trustee of separate owner trusts (the
"Owner Trusts") in connection with four separate leverage lease transactions,
wishes to refinance the current indebtedness of the Owner Trusts originally
incurred to finance the purchase of four Boeing 737-322 aircraft that have been
leased to United (collectively, the "Leased Aircraft"; and together with the
Owned Aircraft, the "Aircraft");
WHEREAS, pursuant to each Trust Indenture and Mortgage, dated as of
the date hereof (each, a "1997 Indenture"), between United and the indenture
trustee thereunder (each, a "1997 Indenture Trustee"), United proposes to issue
up to four series of equipment notes (the "1997 Equipment Notes"), of which
United proposes to issue three series on the Closing Date and may, in the
future, issue such fourth series, all of which, regardless of when issued, are
to be secured by the mortgage and security interest in the related Owned
Aircraft subject to such 1997 Indenture granted pursuant to such 1997 Indenture
by United in favor of the related 1997 Indenture Trustee;
WHEREAS, pursuant to each Amended and Restated Trust Indenture and
Security Agreement, dated as of the date hereof (each, a "1994 Indenture"),
between the Owner Trustee and the indenture trustee thereunder (each, a "1994
Indenture Trustee"; and, together with the 1997 Indenture Trustees, the
"Indenture Trustees"), the Owner Trustee proposes to issue four series of
equipment notes (the "1994 Equipment Notes"; and together with the 1997
Equipment Notes, the "Equipment Notes"), which are to be secured by the
security interest in the related Leased Aircraft and an assignment to the
related 1994 Indenture Trustee of certain of the related Owner Trustee's rights
under the Lease with respect to such Leased Aircraft;
<PAGE> 4
WHEREAS, Series A Equipment Notes, Series B Equipment Notes and Series
C Equipment Notes with respect to each Aircraft and Series D Equipment Notes
with respect to each Leased Aircraft (each, a "Series") will be issued on the
Closing Date (as defined in Section 1 below) to the Subordination Agent acting
on behalf of the Pass Through Trustee for the applicable Pass Through Trust as
evidence of United's, in the case of the Owned Aircraft, and the Owner
Trustee's, in the case of the Leased Aircraft, indebtedness to the Pass Through
Trustee;
WHEREAS, pursuant to each of the Pass Through Trust Supplements set
forth in Schedule II hereto (the "Trust Supplements"; and together with the
Basic Pass Through Trust Agreement, the "Pass Through Trust Agreements"), on
the Closing Date (as defined in Section 1 below), a separate grantor trust
(each, a "Pass Through Trust") will be created to facilitate certain of the
transactions contemplated hereby, including, without limitation, the issuance
and sale of enhanced pass through certificates pursuant thereto (collectively,
the "Pass Through Certificates") to provide the financing of the Aircraft;
WHEREAS, the proceeds from the issuance and sale of the Pass Through
Certificates will be applied by the Subordination Agent, acting on behalf of
the Pass Through Trustee, to purchase from United and the Owner Trustee on
behalf of each Pass Through Trust, Equipment Notes bearing the same interest
rate as the Pass Through Certificates issued by the related Pass Through Trust;
and
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) Kreditanstalt fur Wiederaufbau, a corporation organized under
the public law of the Federal Republic of Germany (the "Primary Liquidity
Provider") entered into two revolving credit agreements (each, a "Primary
Liquidity Facility") for the benefit of the United Airlines 1997- 1A Pass
Through Trust and the United Airlines 1997-1B Pass Through Trust, with the
Subordination Agent, as agent and trustee for the Pass Through Trustee on
behalf of each such Pass Through Trust; (ii) Credit Suisse Financial Products,
an unlimited company incorporated in England and an authorized institution
under the Banking Act of 1987 of the United Kingdom (the "Above-Cap Liquidity
Provider"; and together with the Primary Liquidity Provider, the "Liquidity
Providers"), entered into irrevocable interest rate cap agreements (each an
"Above-Cap Liquidity Facility"; and together with the Primary Liquidity
Facility, the "Liquidity Facilities") for the benefit of the United Airlines
1997-1A Pass Through Trust and the United Airlines 1997-1B Pass Through Trust;
and (iii) the Pass Through Trustee, each Liquidity Provider and the
Subordination Agent entered into the Intercreditor Agreement, dated as of the
date hereof (the "Intercreditor Agreement");
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Purchase of Equipment Notes. (a) Subject to
the satisfaction or waiver of the conditions set forth herein, on December 23,
1997, or on such other date agreed to by the parties hereto (the "Closing
Date"):
2
<PAGE> 5
(i) the Pass Through Trustee for each Pass Through Trust
shall pay to each Seller the purchase price, set forth on Schedule III
below the name of such Seller, for each Equipment Note being issued
and sold by such Seller to such Pass Through Trust; and
(ii) each of United and the Owner Trustee shall issue,
pursuant to Article II of each 1997 Indenture and Article II of each
1994 Indenture, respectively, to the Subordination Agent, on behalf of
the Pass Through Trustee for each of the Pass Through Trusts, an
Equipment Note having a maturity date and principal amount and bearing
the interest rate set forth on Schedule III opposite the name of such
Pass Through Trust.
(b) All payments pursuant to Section 1(a)(i) shall be
made in immediately available funds to such accounts and at such banks as
United and the Owner Trustee shall designate on Schedule I or as either may
otherwise designate in writing not less than one Business Day prior to the
Closing Date.
SECTION 1.A. Certain Definitions. (a) As used in this
Agreement and unless otherwise expressly provided, the following capitalized
terms shall have the following respective meanings:
"FAA" means the Federal Aviation Administration.
"Federal Aviation Act" means Title 49 of the United States
Code (Transportation), as amended.
"Fundamental Documents" shall mean, collectively (i) any
document that is an "Operative Document", a "Pass Through
Document" or a "Fundamental Document" under any Lease relating
to a Leased Aircraft, (ii) any document that is an "Operative
Document," a "Pass Through Document" or a "Fundamental
Document" under any 1997 Indenture and (iii) any amendment to
any of the foregoing executed in connection with the
transactions contemplated hereby.
"Operative Documents" shall mean collectively any document
that is an Operative Document under a Lease relating to a
Leased Aircraft or a 1997 Indenture.
(b) With respect to any Lease relating to a Leased Aircraft, when
used in this Agreement, the terms "Participation Agreement," "First Amendment
to Participation Agreement," "Second Amendment to Participation Agreement,"
"Trust Indenture," "Trust Agreement," "First Amendment to Trust Agreement,"
"Owner Participant Guaranty Agreement," "Certificates," "Lease Supplement,"
"FAA Bill of Sale" and "Original Loan Participants" shall have the respective
meanings specified in such Lease.
(c) Unless otherwise specifically defined herein, capitalized
terms used in this Agreement shall have the respective meanings specified in
the Intercreditor Agreement.
3
<PAGE> 6
SECTION 2. Redemption, Purchase or Refinancing of
Equipment Notes. (a) United or its designee may, at its option, redeem,
purchase or refinance, in the case of the Owned Aircraft, or purchase in the
case of the Leased Aircraft (i) the Equipment Notes of a Series with respect to
one or more Aircraft or (ii) all Equipment Notes related to one or more
Aircraft, upon notice as specified in Section 2(d) by paying an amount equal to
the aggregate unpaid principal amount of such Equipment Notes, together with
accrued and unpaid interest thereon to, but not including, the applicable
redemption or purchase date, as the case may be, plus Break Amount (as defined
in the related Indenture), if any, plus Make-Whole Amount (as defined in the
related Indenture), if any; provided, however, that the Series C Equipment
Notes may not be redeemed or purchased pursuant to this Section 2 prior to
December 2, 2002.
(b) Reissuance or Resale of Equipment Notes. Following the
redemption by United or the purchase by United or its designee pursuant to
Section 2(a) of (i) the Equipment Notes of a Series with respect to one or more
Aircraft or (ii) all of the Equipment Notes related to one or more Aircraft,
United may, upon completion of the actions specified below, (x) reissue
Equipment Notes (the "Reissued Equipment Notes") in place of the Equipment
Notes issued with respect to the Owned Aircraft so redeemed by United and sell
such Equipment Notes to one or more New Pass Through Trusts (as defined below),
as applicable, and/or (y) resell or cause to be resold to one or more New Pass
Through Trusts, as applicable, the Equipment Notes issued with respect to the
Leased Aircraft so purchased by United or its designee (the "Resold Equipment
Notes"; and together with the Reissued Equipment Notes, the "Affected Equipment
Notes"). The Pass Through Trustee agrees, upon the request of United, to take
such actions as may be reasonably requested by United to accomplish the
issuance and sale of Pass Through Certificates to finance the acquisition by
the New Pass Through Trusts of the Affected Equipment Notes, including, without
limitation:
(i) entering into a separate Trust Supplement to the
Basic Pass Through Trust Agreement for each series of Affected
Equipment Notes pursuant to which a separate grantor trust (each a
"New Pass Through Trust") relating to each series of Affected
Equipment Notes shall be created and Pass Through Certificates of the
related class shall be issued; and
(ii) entering into a note purchase agreement with United,
the Owner Trustee, each applicable Indenture Trustee and the
Subordination Agent upon terms substantially similar in all material
respects to the terms set forth herein, pursuant to which the Pass
Through Trustee shall purchase on behalf of each New Pass Through
Trust the Affected Equipment Notes bearing the same interest rate as
the Pass Through Certificates to be issued by the related New Pass
Through Trust; provided, however, that in the event Reissued Equipment
Notes are being sold to the Pass Through Trustee as a result of a
redemption by United of fewer than all outstanding Equipment Notes of
any Series, the interest rate and spread of each series of such
Reissued Equipment Notes must be equal to the interest rate and spread
on all other outstanding Equipment Notes of such Series.
(c) On December 2, 2002 (the "Final Expected Distribution Date"),
United or its designee shall have the option to purchase or refinance pursuant
to Section 17 of the applicable Participation Agreement all of the Equipment
Notes issued with respect to the Leased Aircraft then
4
<PAGE> 7
outstanding at a price equal to the outstanding principal amount of such
Equipment Notes, together with accrued and unpaid interest thereon.
(d) Irrevocable notice of redemption, purchase or refinancing
pursuant to Section 2(a) shall be given by first-class mail, postage prepaid,
mailed not less than 26 nor more than 60 days prior to the date of redemption,
purchase or refinancing, to the Subordination Agent.
All notices of redemption, purchase or refinancing shall state:
(i) the redemption or purchase date, as the case may be;
(ii) the applicable basis for determining the redemption
or purchase price, as the case may be;
(iii) that on the redemption date or purchase date, as the
case may be, the redemption price or purchase price with respect to
such Equipment Notes, as applicable, shall be due and payable;
(iv) the amount of Break Amount (as defined in the related
Indenture), if any, payable with respect to such redemption or
purchase;
(v) the amount of Make-Whole Amount (as defined in the
related Indenture), if any, payable with respect to such redemption or
purchase; and
(vi) the place or places where such Equipment Notes are to
be surrendered for payment of the redemption price or purchase price,
as applicable.
(e) Upon notice as specified in Section 2(d) and delivery of the
redemption price or purchase price specified in Section 2(a) or 2(c), as
applicable, the Pass Through Trustee agrees to cause the Subordination Agent
to, and the Subordination Agent shall, on behalf of the Pass Through Trustee,
transfer the Equipment Notes specified in such notice to United or its designee
and, if all the Equipment Notes relating to an Aircraft have been redeemed or
purchased by United or its designee, the applicable Indenture Trustee shall,
and the Pass Through Trustee hereby authorizes the Indenture Trustee to,
release the Lien of the Indenture in accordance with the provisions of such
Indenture.
SECTION 3. Adjustment of Interest Rates Applicable to
Equipment Notes. (a) Subject to Sections 3(b) and (c), interest on each Series
of Equipment Notes shall be payable at the rates specified for such series in
the applicable Indenture.
(b) If no Registration Event (as defined in the Registration
Rights Agreement) occurs on or prior to the 180th day after the Closing Date,
the interest rate applicable to each Series of Equipment Notes shall be
increased by 0.50% per annum from and including July 1, 1998 to but
5
<PAGE> 8
excluding the date on which such Registration Event occurs; provided, however,
that if the Shelf Registration Statement (as defined in the Registration Rights
Agreement) ceases to be effective at any time during the period specified by
Section 3(b) of the Registration Rights Agreement for more than 60 days,
whether or not consecutive, during any 12-month period, the interest rate
applicable to each series of Equipment Notes shall be increased by 0.50% per
annum from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective until such time as the Shelf
Registration Statement again becomes effective.
(c) The interest rate on each Series of Equipment Notes relating
to the Leased Aircraft shall be reset on the Final Expected Distribution Date.
No later than 60 days prior to the Final Expected Distribution Date, United
shall cause the Pass Through Trustee to hire (and, if United does not so cause
the Pass Through Trustee, the Pass Through Trustee shall, no later than 30 days
prior to the Final Expected Distribution Date, hire) an independent investment
banker (the "Reset Agent") of recognized national standing (which may be an
Initial Purchaser) to (i) determine the interest rate on each Series of the
Equipment Notes relating to the Leased Aircraft to an interest rate that, in
the good faith determination of the Reset Agent, after consideration of the
then current rates for pass through certificates of United and other comparable
equipment lessees having similar tenor, rating and other pricing terms, shall
enable each such Series of Equipment Notes to be sold at 100% of the principal
amount thereof on the Final Expected Distribution Date, and (ii) for such
reasonable fee payable by the applicable Pass Through Trust as shall be
mutually agreed by the Pass Through Trustee and the Reset Agent, use its best
efforts to sell any such Equipment Notes with such new interest rates on the
Final Expected Distribution Date or as soon as practicable thereafter.
SECTION 4. Conditions Precedent. (a) Conditions
Precedent to the Obligations of the Pass Through Trustee. The obligation of
the Pass Through Trustee to make the payments described in Section 1(a)(i) and
to enter into the Fundamental Documents to which it is a party are subject to
the fulfillment, on or prior to the Closing Date, of the following conditions
precedent:
(i) No change shall have occurred after the date of the
execution and delivery of this Agreement in applicable law or
regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of each Pass
Through Trustee, would make it a violation of law or regulations for
the Pass Through Trustee to make the payments described in Section
1(a), to execute, deliver and perform the Fundamental Documents, to
acquire the Equipment Notes or to realize the security afforded by the
Indentures.
(ii) United shall have tendered the 1997 Equipment Notes
to the applicable 1997 Indenture Trustee for authentication and the
Owner Trustee shall have tendered the 1994 Equipment Notes to the
applicable 1994 Indenture Trustee for authentication and in each case
the applicable Indenture Trustee shall have authenticated such
Equipment Notes and shall have tendered the Equipment Notes to the
Subordination Agent on behalf of the Pass Through Trustee in
accordance with Section 1.
6
<PAGE> 9
(iii) The Pass Through Trustee shall have received duly
authorized and validly executed counterparts or conformed copies of
the following documents in form and substance satisfactory to the Pass
Through Trustee and all such documents shall be in full force and
effect:
(A) this Agreement;
(B) the Basic Pass Through Trust Agreement and
each Trust Supplement;
(C) the Intercreditor Agreement;
(D) the Primary Liquidity Facilities;
(E) the Above-Cap Liquidity Facilities;
(F) the Registration Rights Agreement;
(G) With respect to each Leased Aircraft, a
conformed copy of the Lease, the First
Amendment to Lease Agreement, the Second
Amendment to Lease Agreement and the Third
Amendment to Lease Agreement with respect to
such Aircraft, and each of the following
documents referred to therein:
(1) a conformed copy of the
Participation Agreement and the
First Amendment to Participation
Agreement;
(2) the Second Amendment to
Participation Agreement;
(3) the Trust Indenture;
(4) a conformed copy of the Trust
Agreement and the First Amendment to
Trust Agreement;
(5) a letter from the Owner Participant
Guarantor confirming that the Pass
Through Trustee is entitled to the
benefits of the Owner Participant
Guaranty Agreement;
(6) the Assignment and Assumption
Agreements;
(7) acknowledgment copies of a properly
completed Uniform Commercial Code
financing statements (and any
amendments thereto) reflecting
United as debtor and the Owner
Trustee as secured party as filed
with the Secretary of State of
Illinois;
7
<PAGE> 10
(8) acknowledgment copies of properly
completed Uniform Commercial Code
financing statements reflecting the
Owner Trustee as debtor and the
Indenture Trustee as secured party
as filed with the Secretary of State
of Connecticut;
(9) a receipt and release of
indebtedness as to each Certificate
outstanding on the date hereof; and
(10) cancelled Certificates issued to the
Original Loan Participants.
(H) With respect to each Owned Aircraft, the
Indenture and each of the following documents
referred to therein:
(1) the Participation Agreement; and
(2) properly completed Uniform
Commercial Code financing statements
(and any amendments thereto)
reflecting United as debtor and the
Owner Trustee as secured party,
which financing statement shall have
been filed with the Secretary of
State of Illinois.
(iv) Uniform Commercial Code financing statements covering
all the security interests created by or pursuant to the Granting
Clause of each Indenture shall have been executed and delivered by
United and the 1997 Indenture Trustees (in the case of the 1997
Indentures) and the Owner Trustee and the 1994 Indenture Trustees (in
the case of the 1994 Indentures), and such financing statements shall
have been duly filed or, in the case of the 1997 Indentures,
arrangements satisfactory to the Pass Through Trustee shall have been
made for filing within 10 days after the Closing Date, with the
Secretary of State of the State of Illinois, the State of Connecticut
or the State of Massachusetts, as the case may be, and any other
places deemed necessary or advisable.
(v) The Pass Through Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(A) a certified copy of the Restated Certificate
of Incorporation and By-Laws of United and a copy of
resolutions of the board of directors of United or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of United, duly authorizing the execution,
delivery and performance by United of this Agreement and each
other Fundamental Document required to be executed and
delivered by United in accordance with the provisions hereof
and thereof;
(B) a copy of the organizational documents,
by-laws and general authorizing resolutions of the boards of
directors (or executive committees) or other
8
<PAGE> 11
satisfactory evidence of authorization of each of the Owner
Trustee, each Indenture Trustee and the Subordination Agent,
certified as of the Closing Date by the Secretary or an
Assistant Secretary of such parties, respectively, which
authorize the execution, delivery and performance by the Owner
Trustee, each Indenture Trustee and the Subordination Agent,
respectively, of all the Fundamental Documents to which it is
a party, together with such other documents and evidence with
respect to the Owner Trustee, each Indenture Trustee and the
Subordination Agent as the Pass Through Trustee may reasonably
request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance
with the conditions herein set forth;
(C) a copy of the certificate of incorporation
and by-laws, certified as of the Closing Date by the Secretary
or Assistant Secretary of MS Financing Inc. (the "Owner
Participant"), with such other documents and evidence with
respect to the Owner Participant as the Pass Through Trustee
may reasonably request in order to establish the consummation
of the transactions contemplated by this Agreement, the taking
of all corporate proceedings in connection therewith and
compliance with the conditions herein set forth; and
(D) a certificate signed by the Secretary or an
Assistant Secretary of United, the Owner Trustee, each
Indenture Trustee and the Subordination Agent as to the Person
or Persons authorized to execute and deliver this Agreement
and any other Fundamental Document to be executed on behalf of
such party in connection with the transactions contemplated
hereby and as to the signature of such Person or Persons.
(vi) On the Closing Date, (A) the representations and
warranties of United contained in Section 5, the representations and
warranties of SSBT and the Owner Trustee contained in Section 6 and
the representations and warranties of each Indenture Trustee and the
Subordination Agent contained in Section 7 shall be true and correct
in all material respects as though made on and as of such date except
to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties
shall have been true and correct in all material respects on and as
of such earlier date), and (B) no event shall have occurred and be
continuing, or would result from the transactions contemplated hereby,
which constitutes (or would, with the passage of time or the giving of
notice or both, constitute) an Indenture Default under any Indenture;
and the Pass Through Trustee shall have received certificates signed,
in the case of United, by the Chairman of the Board, the President,
any Vice President or any Assistant Vice President or, in the case of
the Owner Trustee, any Indenture Trustee or the Subordination Agent,
by a Responsible Officer of such party, dated the Closing Date,
addressed to the Pass Through Trustee and certifying as to the matters
set forth in clauses (A) and (B) above.
9
<PAGE> 12
(vii) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee from (A) the General
Counsel or Assistant General Counsel for United, (B) Vedder, Price,
Kaufman & Kammholz, special counsel for United and (C) Mayer, Brown &
Platt, special counsel for United, in each case with respect to such
matters and in form and substance reasonably satisfactory to the Pass
Through Trustee.
(viii) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee from Bingham Dana &
Gould LLP, special counsel for the Owner Trustee.
(ix) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee, United and the Owner
Trustee from (A) Milbank, Tweed, Hadley & McCloy, special counsel for
the Primary Liquidity Provider, and (B) General Counsel of the Primary
Liquidity Provider, in each case in form and substance reasonably
satisfactory to the Pass Through Trustee.
(x) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee, United and the Owner
Trustee from Cleary, Gottlieb, Steen & Hamilton, special counsel for
the Above-Cap Liquidity Provider, in form and substance reasonably
satisfactory to the Pass Through Trustee.
(xi) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee, United and the Owner
Trustee from Lytle Soule & Curlee, special counsel in Oklahoma City,
Oklahoma, in form and substance reasonably satisfactory to the Pass
Through Trustee.
(xii) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee, United and the Owner
Trustee from Ray, Quinney & Nebeker, special counsel for the Indenture
Trustees and the Pass Through Trustee, in form and substance
reasonably satisfactory to the Pass Through Trustee.
(xiii) The Pass Through Trustee shall have received an
opinion addressed to the Pass Through Trustee, United and the Owner
Trustee from internal counsel for the Owner Participant, in form and
substance reasonably satisfactory to the Pass Through Trustee.
(xiv) The Pass Through Trustee shall have received an
independent insurance broker's report, and certificates of insurance,
in form and substance reasonably satisfactory to it, as to the due
compliance with the terms of Section 4.03 of each 1997 Indenture with
respect to the Owned Aircraft and Section 11 of each of the Leases
with respect to the Leased Aircraft.
(xv) The Pass Through Trustee shall have received a report
from each of the Appraisers as to the base value of the Aircraft, in
form and substance satisfactory to the Pass Through Trustee and the
Sellers.
10
<PAGE> 13
(xvi) The conditions precedent to the transactions
specified in the Purchase Agreement shall have been satisfied (or
waived) in accordance with the terms thereof.
(xvii) With respect to each Owned Aircraft, the FAA Bill of
Sale (as defined in the applicable Owned Aircraft Indenture) and the
applicable Owned Aircraft Indenture shall have been duly filed with
the FAA.
(xviii) With respect to each Leased Aircraft, the applicable
1994 Indenture, the applicable Third Amendment to Lease Agreement and
the applicable First Amendment to Trust Agreement shall have been duly
filed with the FAA.
(xix) With respect to each Leased Aircraft, the applicable
Indenture Trustee shall have received the "original" copy of the
related Lease and Lease Supplement.
(xx) The conditions precedent under each Participation
Agreement relating to an Owned Aircraft shall have been satisfied (or
waived) in accordance with the terms thereof.
Promptly upon the recording of the Owned Aircraft Indentures pursuant to the
Federal Aviation Act, United shall cause Lytle Soule & Curlee, special counsel
in Oklahoma City, Oklahoma, to deliver to the Pass Through Trustee an opinion
as to the due and valid registration of the Owned Aircraft in the name of
United, the due recording by the FAA of the FAA Bill of Sale and the Owned
Aircraft Indentures and the lack of any intervening filings with respect to the
Owned Aircraft. Promptly upon recording of the 1994 Indentures, the Third
Amendments to Leases and the First Amendments to Trust Agreements pursuant to
the Federal Aviation Act, United shall cause Lytle Soule & Curlee, special
counsel in Oklahoma City, Oklahoma, to deliver to the Pass Through Trustee an
opinion as to the due recording thereof and the lack of filing of any
intervening documents with respect to the applicable Aircraft.
(b) Conditions Precedent to the Obligations of Sellers. The
obligations of each Seller to participate in the transactions contemplated
hereby and to enter into the Fundamental Documents to which such Seller is a
party are all subject to the fulfillment to the satisfaction of or waiver by
such Seller, on or prior to the Closing Date, of the following conditions
precedent:
(i) Those documents described in Section 4(a)(iii) shall
have been duly authorized, executed and delivered by the respective
party or parties thereto (other than such Seller) in the manner
specified in Section 4(a)(iii), shall each be satisfactory in form and
substance to such Seller, shall be in full force and effect on the
Closing Date, and an executed counterpart of each thereof (other than
the Equipment Notes) shall have been delivered to such Sellers or
counsel for such Seller.
(ii) Such Seller shall have received a copy of the
organizational documents, by-laws and general authorizing resolutions
of the boards of directors (or executive committees) or other
satisfactory evidence of authorization of the other Seller, each
Indenture Trustee, the Pass Through Trustee and the Subordination
Agent, certified as of the Closing Date by
11
<PAGE> 14
the Secretary or an Assistant Secretary of each such party,
respectively, that authorize the execution, delivery and performance
by such other Seller, each Indenture Trustee, the Pass Through Trustee
and the Subordination Agent, respectively, of all the Fundamental
Documents to which each such party is a party, together with such
other documents and evidence with respect to such other Seller, each
Indenture Trustee, the Pass Through Trustee and the Subordination
Agent as such Seller or its counsel may reasonably request in order to
establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions set forth herein.
(iii) A copy of the certificate of incorporation and
by-laws, certified as of the Closing Date by the Secretary or
Assistant Secretary of the Owner Participant, together with such other
documents and evidence with respect to the Owner Participant as such
Seller or its counsel may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the
taking of all corporate proceedings in connection therewith and
compliance with the conditions set forth herein;
(iv) A certificate signed by the Secretary or an Assistant
Secretary of the other Seller, each Indenture Trustee, the Pass
Through Trustee and the Subordination Agent as to the Person or
Persons authorized to execute and deliver this Agreement and any other
Fundamental Document to be executed on behalf of such party in
connection with the transactions contemplated hereby and as to the
signature of such Person or Persons.
(v) The representations and warranties of the other
Seller, each Indenture Trustee, the Pass Through Trustee and the
Subordination Agent contained in Section 5, Section 6 or Section 7, as
applicable, shall be true and correct in all material respects as of
the Closing Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and correct in all material respects on and as of such
earlier date); and each Seller shall have received a certificate
signed, in the case of United, by the Chairman of the Board, the
President, any Vice President or any Assistant Vice President or, in
the case of the Owner Trustee, any Indenture Trustee, the Pass Through
Trustee or the Subordination Agent, by a Responsible Officer of the
Owner Trustee, such Indenture Trustee, the Pass Through Trustee and
the Subordination Agent, respectively, certifying as to the foregoing
matters with respect to itself.
(vi) Such Seller shall have received the opinions set
forth in Sections 4(a)(vii)-4(a)(xiii) (except receipt by United of
the opinions set forth in Section 4(a)(vii) shall not be a condition
precedent to its obligations hereunder), in each case addressed to
such Seller and dated the Closing Date and otherwise in form and
substance satisfactory to such Seller.
(vii) Such Seller shall have received a copy of the reports
required to be delivered pursuant to Section 4(a)(xv).
12
<PAGE> 15
(viii) The conditions precedent to the transactions
specified in the Purchase Agreement shall have been satisfied (or
waived) in accordance with the terms thereof.
(ix) No change shall have occurred after the date of the
execution and delivery of this Agreement in applicable law or
regulations thereunder or interpretations thereof by appropriate
regulatory authorities which, in the opinion of such Seller, would
make it a violation of law or regulations for such Seller to enter
into any transaction contemplated by the Fundamental Documents.
SECTION 5. Representations, Warranties and Covenants of
United. United represents, warrants and covenants to the Owner Trustee, the
Pass Through Trustee and each Indenture Trustee that:
(a) United is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Delaware; is an
"air carrier" within the meaning of 49 U.S.C. 40102(a)(15); holds a certificate
of public convenience and necessity in accordance with 49 U.S.C. Section 41102,
and an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of United States Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo, is a "citizen of the United States" as defined in 49 U.S.C. Section
40102; has its chief executive office (as such term is defined in Article 9 of
the Uniform Commercial Code) in Elk Grove Township, Illinois; is duly qualified
to do business as a foreign corporation in each jurisdiction in which its
operations or the nature of its business requires, except where the failure to
be so qualified would not have a material adverse effect on the ability of
United to perform its obligations under the Fundamental Documents to which it
is a party; holds all material licenses, certificates, permits and franchises
from the appropriate agencies of the United States of America and/or all other
governmental authorities having jurisdiction, necessary to authorize United to
engage in all transport and to carry on scheduled passenger service, in each
case as presently conducted; and has, or had on the respective dates of
execution thereof, the corporate power and authority to conduct its business as
it is presently being conducted, and to enter into and perform its obligations
under this Agreement, the Equipment Notes issued under the 1997 Indentures and
each other Fundamental Document to which it is a party.
(b) The execution, delivery and performance by United of
this Agreement, the Equipment Notes issued under the 1997 Indentures and each
other Fundamental Document to which it is a party have been duly authorized by
all necessary corporate action on the part of United, do not require any
stockholder approval or approval or consent of any trustee or holders of any
indebtedness or obligations of United, except such as have been duly obtained,
and none of the execution, delivery and performance by United of this
Agreement, such Equipment Notes or such Fundamental Documents contravenes any
law, judgment, governmental rule, regulation or order binding on United or the
certificate of incorporation or by-laws of United or contravenes the provisions
of, or constitutes a default under, or results in the creation of any Lien
(other than Permitted Liens (as defined in the Indentures)) upon the property
of United under, its certificate of incorporation or bylaws, or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank
loan or credit agreement or other agreement or instrument to which United is
13
<PAGE> 16
a party or by which it or its properties may be bound or affected which
contravention, default or Lien, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the ability of United to
perform its obligations under the Fundamental Documents to which it is a party.
(c) Neither the execution and delivery by United of this
Agreement, the Equipment Notes issued under the 1997 Indentures or any other
Fundamental Document to which it is a party nor the performance by United of
its obligations hereunder or thereunder require the consent or approval of, the
giving of notice to, or the registration with, or the taking of any other
action in respect of any federal, state, local or foreign government authority
or agency, except for (A) the registration of the Exchange Certificates (as
defined in the Basic Pass Through Trust Agreement), if any, pursuant to the
provisions of the Pass Through Trust Agreements under the Securities Act of
1933, as amended, and under the securities laws of any state in which the
Exchange Certificates may be offered for sale if the laws of such state require
such action, (B) the qualification of each Pass Through Trust Agreement under
the Trust Indenture Act of 1939, as amended, which qualification will be duly
obtained upon the effectiveness of any Registration Statement (as defined in
the Registration Rights Agreement) pursuant to an order of the Securities and
Exchange Commission, (C) the filings referred to in Section 4(a)(iv), (D)
authorizations, consents, approvals, actions, notices and filings required to
be obtained, taken, given or made, the failure to obtain, take, give or make
would not have a material adverse effect on the financial condition, properties
or results of operations of United, (E) any normal periodic and other reporting
requirements under the applicable rules and regulations of the Federal Aviation
Administration ("FAA") to the extent required to be given or obtained after the
Closing Date, and (F) the recordings with the FAA described in the opinion
referred to in Section 4(a)(xi).
(d) This Agreement, the Equipment Notes issued under a
1997 Indentures and each other Fundamental Document to which United is a party
have been duly executed and delivered by United and constitute legal, valid and
binding obligations of United enforceable against United in accordance with the
terms thereof, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity, whether considered in
a proceeding at law or in equity.
(e) There has not occurred any event that constitutes an
Indenture Default under any Indenture that is presently continuing and there
has not occurred any event that constitutes or would, with the passage of time
or the giving of notice, or both, constitute an Event of Loss (as defined in
the applicable Indenture or Lease, as the case may be) under any Indenture or
Lease.
(f) Neither United nor anyone acting on behalf of United
has offered any interest in any Pass Through Certificate or any Equipment Note
in a manner that would violate the Securities Act of 1933, as amended, the
regulations thereunder, administrative and judicial interpretation thereof or
the securities laws, rules or regulations of any state.
14
<PAGE> 17
(g) Neither United nor any subsidiary of United is an
"investment company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(h) Except for the proceedings described in the
discussion of Legal Proceedings in United's Annual Report on Form 10-K for the
year ended December 31, 1996 and subsequently filed Form 10-Qs filed prior to
the Closing Date, there are no pending or, to the knowledge of United,
threatened actions or proceedings before any court or administrative agency
which individually (or in the aggregate in the case of any group of related
lawsuits) would have a material adverse effect on the financial condition of
United or the ability of United to perform its obligations hereunder or under
any Fundamental Document to which United is a party.
(i) None of the proceeds from the sale of the Equipment
Notes will be used directly or indirectly by United to purchase or carry any
"margin stock" as such term is defined in Regulation G or U of the Board of
Governors of the Federal Reserve System.
(j) United agrees to pay to the Subordination Agent any
amounts required to be paid by the Subordination Agent pursuant to Sections
2.03, 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07 of any Primary Liquidity Facility.
(k) United agrees to give each Indenture Trustee and the
Pass Through Trustee at least 30 days' prior written notice of any relocation
of its chief executive office from its present location.
(l) If United were to become a debtor under the
Bankruptcy Code, the Owner Trustee as lessor of the Leased Aircraft under the
Leases, and the Indenture Trustee, as assignee of the Owner Trustee's rights
under the Leases pursuant to the 1994 Indentures, and the Indenture Trustee as
mortgagee under the 1997 Indentures, would be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to the relevant Aircraft.
(m) United shall not issue Series D Equipment Notes
pursuant to any Owned Aircraft Indenture unless it shall have obtained written
confirmation from each Rating Agency that the issuance of such Series D
Equipment Notes will not result in (i) a reduction of the rating for any Class
of Pass Through Certificates below the then current rating for such Class of
Pass Through Certificates or (ii) a withdrawal or suspension of the rating of
any Class of Pass Through Certificates.
(n) Each Aircraft has been duly certified by the FAA as
to type and airworthiness and such certification remains in full force and
effect.
(o) With respect to each Lease relating to a Leased
Aircraft, such Lease, the Owner Trustee's FAA Bill of Sale, the First Amendment
to Lease, the Second Amendment to Lease and the Trust Agreement have been duly
recorded with the FAA.
15
<PAGE> 18
(p) Each Leased Aircraft has been registered with the FAA
in the name of the applicable Owner Trustee and United has authority to operate
the Aircraft.
(q) With respect to each Lease relating to a Leased
Aircraft, the applicable Third Amendment to Lease, First Amendment to Trust
Agreement and Trust Indenture have been duly filed for recording with the FAA
pursuant to the Federal Aviation Act.
(r) With respect to the Owned Aircraft, the applicable
1997 Indenture has been duly filed for recording with the FAA pursuant to the
Federal Aviation Act.
SECTION 6. Representations, Warranties and Covenants of
SSBT and the Owner Trustee. (a) State Street Bank and Trust Company of
Connecticut, National Association, in its individual capacity ("SSBT")
represents and warrants to United, the Indenture Trustees, the Pass Through
Trustee and the Subordination Agent that:
(i) SSBT is a national banking association duly
organized and validly existing in good standing under the laws
of the United States of America and has, or had on the
respective dates of execution thereof, the corporate power and
authority to enter into and perform this Agreement, the
Equipment Notes issued under the 1994 Indentures and each
other Operative Document to which it is a party;
(ii) each of this Agreement, the Equipment Notes
issued under the 1994 Indentures and each other Operative
Document to which SSBT or the Owner Trustee is a party has
been duly authorized by all necessary corporate action on its
part, and neither the execution and delivery thereof nor the
performance by SSBT or the Owner Trustee of any of the terms
and conditions of this Agreement, such Equipment Notes or such
other Operative Documents to which SSBT or the Owner Trustee
is a party will violate any federal or Connecticut law or
regulation relating to its banking or trust powers or
contravene or result in any breach of, or constitute any
default under, its charter or by-laws or the provisions of any
indenture, mortgage, contract or other agreements to which it
is a party or by which its properties may be bound or
affected;
(iii) each of the Operative Documents to which SSBT
or the Owner Trustee is a party will have been duly executed
and delivered by it by one of its officers who is duly
authorized to execute and deliver such Operative Documents,
and each of this Agreement and the other Operative Documents
to which SSBT or the Owner Trustee is a party will, on the
Closing Date, constitute a legal, valid and binding obligation
of SSBT or the Owner Trustee, as the case may be, enforceable
against it in accordance with the terms thereof, except as the
same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of
equity, whether considered in a proceeding at law or in
equity;
16
<PAGE> 19
(iv) the Trust Estate (as defined in the Trust
Agreements) is free and clear of Lessor Liens (as defined in
each of the 1994 Indentures) attributable to SSBT, and there
are no Liens affecting the title of the Owner Trustee to the
Leased Aircraft resulting from any act or claim against SSBT
or the Owner Trustee arising out of any event or condition not
related to the ownership, leasing, use or operation of the
Leased Aircraft or to any other transaction contemplated by
this Agreement or any of the other Fundamental Documents,
including any Lien resulting from the nonpayment by SSBT of
any Taxes imposed or measured by its net income;
(v) there has not occurred any event that
constitutes (or to the best of its knowledge, with the passage
of time or the giving of notice or both, would constitute) an
Indenture Default under any 1994 Indenture that has been
caused by or relates to SSBT or the Owner Trustee and that is
presently continuing;
(vi) the principal place of business of SSBT and
the Owner Trustee is Hartford, Connecticut, and the place
where its records concerning the Leased Aircraft and all its
interest in, to and under all documents relating to the Trust
Estate (as defined in the Trust Agreements), is located at
Hartford, Connecticut, and SSBT agrees that it will not change
the location of such office to a location outside Hartford,
Connecticut, without providing written notice to United, the
Indenture Trustees and the Pass Through Trustee within 30 days
following such change in location;
(vii) no consent, approval, order or authorization
of, giving of notice to, or registration or filing with, or
taking of any other action in respect of, any Connecticut
state or local governmental authority or agency or any United
States federal governmental authority or agency regulating the
banking or trust powers of SSBT is required for the execution
and delivery of, or the carrying out by, SSBT, of any of the
transactions contemplated by any of the Operative Documents to
which SSBT is or is to be a party, other than any such
consent, approval, order, authorization, registration, notice
or action as has been duly obtained, given or taken;
(viii) SSBT has not directly or indirectly offered
any Pass Through Certificate, Equipment Note issued under any
1994 Indenture or any interest in or to the Trust Estate (as
defined in the applicable Trust Agreement), any Trust
Agreement or any similar interest for sale to, or solicited
any offer to acquire any of the same from, any Person other
than the Indenture Trustees, the Pass Through Trustee and the
Owner Participant under the applicable Trust Agreement; and
SSBT has not authorized any Person to act on its behalf (other
than for purposes of this paragraph, United, as lessee of the
Leased Aircraft, and the Initial Purchasers) to offer directly
or indirectly any Pass Through Certificate, Equipment Note or
any interest in and to the Trust Estate (as defined in the
applicable Trust Agreement), any Trust Agreement or any
similar interest for sale to, or to solicit any offer to
acquire any of the same from, any Person;
17
<PAGE> 20
(ix) SSBT is a "citizen of the United States" as
defined in 49 U.S.C. Section 40102(a)(15) (without making use
of a voting trust agreement, voting powers agreement or
similar arrangements); and
(x) there are no pending or threatened actions or
proceedings against SSBT or the Owner Trustee before any court
or administrative agency which, if determined adversely to it,
would have a material adverse effect on the ability of SSBT or
the Owner Trustee, as the case may be, to perform its
obligations under this Agreement, the Equipment Notes issued
under the 1994 Indentures or any other Operative Document
executed by SSBT or the Owner Trustee in connection with the
transactions contemplated by the Fundamental Documents.
(b) SSBT solely in its capacity as Owner Trustee further
represents and warrants that:
(i) assuming due authorization, execution and
delivery of the Trust Agreements and the Leased Aircraft
Participation Agreements by the Owner Participant, the Trust
Agreements grant the Owner Trustee the power and authority to
enter into this Agreement, the Equipment Notes issued under
the 1994 Indentures and the other Operative Documents to which
it is a party and to perform its obligations hereunder and
thereunder;
(ii) assuming due authorization, execution and
delivery of the Owner Trust Agreement and the Leased Aircraft
Participation Agreements by the Owner Participant, this
Agreement, the Equipment Notes issued under the 1994
Indentures and each other Operative Document to which the
Owner Trustee is party has been, or on the Closing Date will
have been, duly executed and delivered by it, and each of this
Agreement, such Equipment Notes and such other Operative
Documents to which the Owner Trustee is a party on the Closing
Date, will constitute legal, valid and binding obligations of
the Owner Trustee, enforceable against it in accordance with
the terms thereof, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the rights of creditors generally
and by general principles of equity, whether considered in a
proceeding at law or in equity;
(iii) the Owner Trustee has not directly or
indirectly offered any Pass Through Certificate, Equipment
Note issued under any 1994 Indenture or any interest in or to
the Trust Estate (as defined in the applicable Trust
Agreement), any Trust Agreement or any similar interest for
sale to, or solicited any offer to acquire any of the same
from, any Person other than the Indenture Trustees, the Pass
Through Trustee and the Owner Participant under the applicable
Trust Agreement; and it has not authorized any Person to act
on its behalf (other than for purposes of this paragraph,
United, as lessee of the Leased Aircraft, and the Initial
Purchasers) to offer directly or indirectly any Pass Through
Certificate, Equipment Note or any
18
<PAGE> 21
interest in and to the Trust Estate (as defined in the
applicable Trust Agreement), any Trust Agreement or any
similar interest for sale to, or to solicit any offer to
acquire any of the same from, any Person;
(iv) there are no pending or threatened actions or
proceedings against the Owner Trustee before any court or
administrative agency which, if determined adversely to it,
would have a material adverse effect on its ability to perform
its obligations under this Agreement, the Equipment Notes
issued under the 1994 Indentures or any other Operative
Document to which the Owner Trustee is a party or any other
documents executed by it in connection with the transactions
contemplated by the Fundamental Documents.
SECTION 7. Representations, Warranties and Covenants of
Other Parties. Each of the parties below represents, warrants and covenants to
each of the other parties to this Agreement as follows:
(a) Each Indenture Trustee represents, warrants and
covenants that:
(i) such Indenture Trustee is a national banking
association duly organized, validly existing and in good
standing under the laws of the United States of America, is a
"citizen of the United States" as defined in 49 U.S.C. Section
40102(a)(15) (without making use of a voting trust agreement,
voting powers agreement or similar arrangements) and will
resign as Indenture Trustee promptly after it obtains actual
knowledge that it has ceased to be such a citizen, and has, or
had on the respective dates of execution thereof, the full
corporate power, authority and legal right under the laws of
the State of Utah and the United States of America pertaining
to its banking, trust and fiduciary powers to execute and
deliver this Agreement and each other Fundamental Document to
which it is a party, to authenticate the Equipment Notes and
to carry out its obligations under this Agreement and each
other Fundamental Document to which it is a party;
(ii) the execution and delivery by such Indenture
Trustee of this Agreement and each other Fundamental Document
to which it is a party, the authentication of the Equipment
Notes and the performance by such Indenture Trustee of its
obligations under this Agreement and each other Fundamental
Document to which it is a party have been duly authorized by
such Indenture Trustee and will not violate its charter or
by-laws, the provisions of any indenture, mortgage, contract
or other agreement to which it is a party or by which it is
bound or any federal or Utah law or regulation relating to the
banking, trust or fiduciary powers of such Indenture Trustee;
(iii) this Agreement and each other Fundamental
Document to which such Indenture Trustee is a party have been
duly authorized, executed and delivered by such Indenture
Trustee; this Agreement constitutes, and each Fundamental
19
<PAGE> 22
Document to which such Indenture Trustee is a party, when it
has been executed and delivered by such Indenture Trustee,
will constitute, the legal, valid and binding obligations of
such Indenture Trustee enforceable against it in accordance
with their respective terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, whether
considered in a proceeding at law or in equity;
(iv) such Indenture Trustee (in the case of the
1994 Indenture Trustees) has possession of the chattel paper
original of each Lease;
(v) no consent, approval, order or authorization
of, giving of notice to, or registration or filing with, or
taking of any other action in respect of, any Utah state or
local governmental authority or agency or any United States
federal governmental authority or agency regulating the
banking or trust powers of such Indenture Trustee is required
for the execution and delivery of, or the carrying out by,
such Indenture Trustee, of any of the transactions
contemplated by any of the Fundamental Documents to which such
Indenture Trustee is or is to be a party, other than any such
consent, approval, order, authorization, registration, notice
or action as has been duly obtained, given or taken; and
(vi) there are no pending or threatened actions or
proceedings against such Indenture Trustee before any court or
administrative agency which, if determined adversely to it,
would have a material adverse effect on the ability of such
Indenture Trustee to perform its obligations under this
Agreement or any other Fundamental Document executed by such
Indenture Trustee in connection with the transactions
contemplated by the Fundamental Documents.
(b) The Pass Through Trustee represents, warrants and
covenants that:
(i) the Pass Through Trustee is a national
banking association duly organized, validly existing and in
good standing under the laws of the United States of America,
and has the full corporate power, authority and legal right
under the laws of the State of Utah and the United States of
America pertaining to its banking, trust and fiduciary powers
to execute and deliver this Agreement and each other
Fundamental Document to which it is a party and to perform its
obligations hereunder and thereunder;
(ii) this Agreement and each other Fundamental
Document to which the Pass Through Trustee is a party have
been duly authorized, executed and delivered by the Pass
Through Trustee; this Agreement and each other Fundamental
Document to which the Pass Through Trustee is a party
constitute the legal, valid and binding obligations of the
Pass Through Trustee enforceable against it in accordance with
their respective terms, except as the same may be limited by
applicable bankruptcy,
20
<PAGE> 23
insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general
principles of equity, whether considered in a proceeding at
law or in equity;
(iii) none of the execution, delivery and
performance by the Pass Through Trustee of this Agreement or
any other Fundamental Document to which the Pass Through
Trustee is a party, the purchase by the Pass Through Trustee
of the Equipment Notes pursuant to this Agreement, or the
issuance and sale of the Pass Through Certificates pursuant to
the Pass Through Trust Agreements, and the Purchase
Agreements, contravenes any law, rule or regulation of the
State of Utah or any United States governmental authority or
agency regulating the Pass Through Trustee's banking, trust or
fiduciary powers or any judgment or order applicable to or
binding on the Pass Through Trustee and do not contravene or
result in any breach of, or constitute a default under, the
Pass Through Trustee's charter or by-laws or any agreement or
instrument to which the Pass Through Trustee is a party or by
which it or any of its properties may be bound;
(iv) neither the execution and delivery by the
Pass Through Trustee of this Agreement or any of the other
Fundamental Documents to which the Pass Through Trustee is a
party, nor the consummation by the Pass Through Trustee of any
of the transactions contemplated hereby or thereby, requires
the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action with
respect to, any Utah governmental authority or agency or any
Federal governmental authority or agency regulating the Pass
Through Trustee's banking, trust or fiduciary powers;
(v) there are no Taxes payable by the Pass
Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the
execution, delivery and performance by the Pass Through
Trustee of this Agreement or any other Fundamental Document to
which the Pass Through Trustee is a party (other than
franchise or other taxes based on or measured by any fees or
compensation received by the Pass Through Trustee for services
rendered in connection with the transactions contemplated by
the Pass Through Trust Agreements), and there are no Taxes
payable by the Pass Through Trustee imposed by the State of
Utah or any political subdivision thereof in connection with
the acquisition, possession or ownership by the Pass Through
Trustee of any of the Equipment Notes (other than franchise or
other taxes based on or measured by any fees or compensation
received by the Pass Through Trustee for services rendered in
connection with the transactions contemplated by the Pass
Through Trust Agreements);
(vi) there are no pending or threatened actions or
proceedings against the Pass Through Trustee before any court
or administrative agency which individually or in the
aggregate, if determined adversely to it, would have a
material adverse effect on
21
<PAGE> 24
the ability of the Pass Through Trustee to perform its
obligations under this Agreement or any other Fundamental
Document to which the Pass Through Trustee is a party;
(vii) except for the issue and sale of the
Equipment Notes contemplated hereby, the Pass Through Trustee
has not directly or indirectly offered any Equipment Notes for
sale to any Person or solicited any offer to acquire any
Equipment Notes from any Person, nor has the Pass Through
Trustee authorized anyone to act on its behalf to offer
directly or indirectly any Equipment Note for sale to any
Person, or to solicit any offer to acquire any Equipment Note
from any Person; and the Pass Through Trustee is not in
default under any Pass Through Trust Agreement; and
(viii) the Pass Through Trustee is not directly or
indirectly controlling, controlled by or under common control
with any Initial Purchaser or United.
(c) The Subordination Agent represents, warrants and
covenants that:
(i) the Subordination Agent is a national banking
association duly organized, validly existing and in good
standing under the laws of the United States of America, and
has the full corporate power, authority and legal right under
the laws of the State of Utah and the United States of America
pertaining to its banking, trust and fiduciary powers to
execute and deliver this Agreement and each other Fundamental
Document to which it is a party and to perform its obligations
hereunder and thereunder;
(ii) this Agreement and each other Fundamental
Document to which it is a party have been duly authorized,
executed and delivered by the Subordination Agent; this
Agreement and each other Fundamental Document to which it is a
party constitute the legal, valid and binding obligations of
the Subordination Agent enforceable against it in accordance
with their respective terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, whether
considered in a proceeding at law or in equity;
(iii) none of the execution, delivery and
performance by the Subordination Agent of this Agreement or
any other Fundamental Document to which the Subordination
Agent is a party contravene any law, rule or regulation of the
State of Utah or any United States governmental authority or
agency regulating the Subordination Agent's banking, trust or
fiduciary powers or any judgment or order applicable to or
binding on the Subordination Agent and does not contravene or
result in any breach of, or constitute a default under, the
Subordination Agent's charter or by-laws or any agreement or
instrument to which the Subordination Agent is a party or by
which it or any of its properties may be bound;
22
<PAGE> 25
(iv) neither the execution and delivery by the
Subordination Agent of this Agreement or any other Fundamental
Document to which the Subordination Agent is a party nor the
consummation by the Subordination Agent of any of the
transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, the
registration with, or the taking of any other action with
respect to, any Utah governmental authority or agency or any
federal governmental authority or agency regulating the
Subordination Agent's banking, trust or fiduciary powers;
(v) there are no Taxes payable by the
Subordination Agent imposed by the State of Utah or any
political subdivision or taxing authority thereof in
connection with the execution, delivery and performance by the
Subordination Agent of this Agreement or any other Fundamental
Document to which the Subordination Agent is a party (other
than franchise or other taxes based on or measured by any fees
or compensation received by the Subordination Agent for
services rendered in connection with the transactions
contemplated by the Intercreditor Agreement or any of the
Liquidity Facilities), and there are no Taxes payable by the
Subordination Agent imposed by the State of Utah or any
political subdivision thereof in connection with the
acquisition, possession or ownership by the Subordination
Agent of any of the Equipment Notes (other than franchise or
other taxes based on or measured by any fees or compensation
received by the Subordination Agent for services rendered in
connection with the transactions contemplated by the
Intercreditor Agreement or any of the Liquidity Facilities);
(vi) there are no pending or threatened actions or
proceedings against the Subordination Agent before any court
or administrative agency which individually or in the
aggregate, if determined adversely to it, would materially
adversely affect the ability of the Subordination Agent to
perform its obligations under this Agreement or any other
Fundamental Document to which the Subordination Agent is a
party;
(vii) the Subordination Agent has not directly or
indirectly offered any Equipment Notes for sale to any Person
or solicited any offer to acquire any Equipment Notes from any
Person, nor has the Subordination Agent authorized anyone to
act on its behalf to offer directly or indirectly any
Equipment Note for sale to any Person, or to solicit any offer
to acquire any Equipment Note from any Person; and the
Subordination Agent is not in default under any Liquidity
Facility; and
(viii) the Subordination Agent is not directly or
indirectly controlling, controlled by or under common control
with any Initial Purchaser or United.
SECTION 8. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be in English and in writing, and any such
23
<PAGE> 26
notice shall become effective five days after being deposited in the United
States mail, with proper postage for first- class registered or certified mail
prepaid, or when delivered personally or, if promptly confirmed by mail as
provided above, when dispatched by facsimile or other written
telecommunication, addressed, if to United, the Owner Trustee, the Pass Through
Trustee, the Subordination Agent or any Indenture Trustee, at their respective
addresses or facsimile numbers set forth on Schedule 1.
SECTION 9. Expenses. All of the reasonable
out-of-pocket costs, fees and expenses incurred by the Owner Trustee, the Owner
Participant, the Pass Through Trustee, the Subordination Agent, the Primary
Liquidity Provider and the Indenture Trustees in connection with the
transactions contemplated by this Agreement shall be paid on or prior to the
Closing Date by United on a net after-tax basis.
SECTION 10. Miscellaneous. (a) At any time that United
shall have the right, pursuant to Section 2.2(b) of the Intercreditor Agreement
to direct the investment and reinvestment by the Subordination Agent of funds
on deposit in the Trust Accounts in Eligible Investments, United shall
reimburse the Subordination Agent for any losses charged against the principal
amounts of such Investments.
(b) Each of the parties hereto agrees that the opinions
delivered on behalf of such party to the Pass Through Trustee pursuant to
Sections 4(a)(vii) - 4(a)(xiii) or to the Sellers pursuant to Section 5(b)(vi)
shall be addressed to, among others, the Initial Purchasers and the Owner
Participant.
(c) Provided that the transactions contemplated hereby
have been consummated, and except as otherwise provided for herein, the
representations, warranties and agreements herein of United, the Owner Trustee,
each Indenture Trustee, the Subordination Agent and the Pass Through Trustee,
and United's, the Owner Trustee's, each Indenture Trustee's, the Subordination
Agent's and the Pass Through Trustee's obligations hereunder, shall survive the
expiration or other termination of this Agreement and the other agreements
referred to herein.
(d) This Agreement may be executed in any number of
counterparts and each counterpart of this Agreement, including a signature page
executed by each of the parties hereto, shall be an original counterpart of
this Agreement, but all of such counterparts together shall constitute one
instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended or waived orally, but only by an instrument in writing
signed by the party against which the enforcement of the termination, amendment
or waiver is sought; and no such termination, amendment or waiver shall be
effective unless a signed copy thereof shall have been delivered to each
Indenture Trustee. The index preceding this Agreement and the headings of the
various Sections of this Agreement are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions
hereof. The terms of this Agreement shall be binding upon, and shall inure to
the benefit of, United and its successors and permitted assigns, the Owner
Trustee and its successors as Owner Trustee, the Pass Through Trustee and its
successors as Pass Through Trustee (and any additional trustee properly
appointed) under any of the Trust
24
<PAGE> 27
Supplements, any Indenture Trustee and its successors as Indenture Trustee (and
any additional Indenture Trustee properly appointed) under any Indenture and
the Subordination Agent and its successors as Subordination Agent under the
Intercreditor Agreement.
(e) This Agreement is not intended to, and shall not,
provide any Person not a party hereto with any rights of any nature whatsoever
against any of the parties hereto, and no Person not a party hereto shall have
any right, power or privilege in respect of, or have any benefit or interest
arising out of, this Agreement; provided, however, that each of the parties
hereto agrees and acknowledges that each of the Primary Liquidity Provider, the
Above- Cap Liquidity Provider and the Owner Participant shall be a third party
beneficiary of each of the representations and warranties made herein by such
party, and that the Primary Liquidity Provider, the Above-Cap Liquidity
Provider and the Owner Participant may rely on such representations and
warranties to the same extent as if such representations and warranties were
made to the Primary Liquidity Provider, the Above-Cap Liquidity Provider and
the Owner Participant directly. The terms of this Agreement shall inure to the
benefit of the Primary Liquidity Provider, the Above-Cap Liquidity Provider and
the Owner Participant, its successors and permitted assigns.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN
THE STATE OF ILLINOIS.
(g) Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any
legal action or proceeding relating to this Agreement or any
other Fundamental Document, or for recognition and enforcement
of any judgment in respect hereof or thereof, to the
non-exclusive general jurisdiction of the Circuit Court of
Illinois, Cook County, or the United States District Court for
the Northern District of Illinois;
(ii) consents that any such action or proceeding
may be brought in such courts, and waives any objection that
it may now or hereafter have to the venue of any such action
or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof
by registered or certified mail (or any substantially similar
form and mail, postage prepaid, to each party hereto at its
address set forth in Schedule I, or at such other address of
which the other Person shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the
right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any other
jurisdiction.
25
<PAGE> 28
(h) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED, including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. Each of the parties warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
26
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
UNITED AIR LINES, INC.
By: /s/ THOMAS A. MUTRYN
-------------------------------------
Name: Thomas A. Mutryn
Title: Vice President & Treasurer
S-1 NOTE PURCHASE AGREEMENT
<PAGE> 30
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity, except as
otherwise provided herein, but
solely as Indenture Trustee, Pass
Through Trustee and
Subordination Agent
By: /s/ C. SCOTT NIELSEN
-------------------------------------
Name: C. Scott Nielsen
Title: Vice President
S-2 NOTE PURCHASE AGREEMENT
<PAGE> 31
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except
as otherwise provided herein, but
solely as Owner Trustee
By: /s/ DONALD E. SMITH
-------------------------------------
Name: Donald E. Smith
Title: Vice President
S-3 NOTE PURCHASE AGREEMENT
<PAGE> 32
SCHEDULE I to
Note Purchase Agreement
NAMES; ADDRESSES AND WIRE INSTRUCTIONS
UNITED:
Address for Notices:
If by U.S. Mail
United Air Lines, Inc.
P.O. Box 66100
Chicago, IL 60666
Attn: Vice President and Treasurer
Telecopy: (847) 700-7117
If by Overnight Delivery Service
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
Attn: Vice President and Treasurer
Telecopy: (847) 700-7117
PASS THROUGH TRUSTEE, SUBORDINATION AGENT AND INDENTURE TRUSTEE:
Address for Notices:
First Security Bank, National Association
79 South Main Street
Salt Lake City, UT 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
NOTE PURCHASE AGREEMENT
<PAGE> 33
OWNER TRUSTEE:
Address for Notices:
State Street Bank and Trust Company
of Connecticut, National Association
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attn: Corporate Trust Department
Telecopy: (617) 664-5371
Overnight Delivery Service:
State Street Bank and Trust Company of Connecticut,
National Association
c/o State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attn: Corporate Trust Department
NOTE PURCHASE AGREEMENT
<PAGE> 34
SCHEDULE II to
Note Purchase Agreement
PASS THROUGH TRUST SUPPLEMENTS
1. Trust Supplement No. 1997-1-A-1, dated as of December 23, 1997,
between United and First Security Bank, National Association, as
Trustee.
2. Trust Supplement No. 1997-1-B-1, dated as of December 23, 1997,
between United and First Security Bank, National Association, as
Trustee.
3. Trust Supplement No. 1997-1-C-1, dated as of December 23, 1997,
between United and First Security Bank, National Association, as
Trustee.
4. Trust Supplement No. 1997-1-D-1, dated as of December 23, 1997,
between United and First Security Bank, National Association, as
Trustee.
NOTE PURCHASE AGREEMENT
<PAGE> 35
SCHEDULE III to
Note Purchase Agreement
1997 EQUIPMENT NOTES ISSUED BY UNITED,
PURCHASERS AND PURCHASE PRICE
<TABLE>
<CAPTION>
Purchaser Interest Rate Principal Amount
- --------- ------------- ----------------
<S> <C> <C>
United Airlines
Pass Through Trust
1997-1A Three-Month LIBOR + 0.22% Equipment $ 403,102,000
1997-1B Three-Month LIBOR + 0.325% Equipment $ 96,393,000
1997-1C Three-Month LIBOR + 0.22% Equipment $ 97,926,000
</TABLE>
1994 EQUIPMENT NOTES ISSUED BY THE OWNER TRUSTEE,
PURCHASERS AND PURCHASE PRICE
<TABLE>
<CAPTION>
Purchaser Interest Rate Principal Amount
- --------- ------------- ----------------
<S> <C> <C>
United Airlines
Pass Through Trust
1997-1A Three-Month LIBOR + 0.22% Equipment $42,724,000
1997-1B Three-Month LIBOR + 0.325% Equipment $10,214,000
1997-1C Three-Month LIBOR + 0.22% Equipment $12,074,000
1997-1D Three-Month LIBOR + 0.23% Equipment $11,423,182
</TABLE>
NOTE PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 4.15
*
================================================================================
AMENDED AND RESTATED
TRUST INDENTURE AND SECURITY AGREEMENT
(1994 737 B)
Dated as of December 23, 1997
between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity except as expressly set forth herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
_______________________________
Equipment Notes Covering
One Boeing 737-322 Aircraft
Bearing U.S. Registration No. N398UA
_______________________________
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
HABENDUM CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2
THE EQUIPMENT NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.01. Equipment Notes; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.05. Noteholder Lists; Ownership of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.06. Mutilated, Destroyed, Lost or Stolen Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . 26
2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.08. Payment on Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.09. Payment from Indenture Estate Only; Non-Recourse Obligations . . . . . . . . . . . . . . . . . . . . 28
2.10. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.11. Termination of Interest in the Indenture Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.12. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION OF FUNDS IN THE INDENTURE . . . . . . . . . . . . . . . . . . . . . . 31
3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.02. Payment in Case of Redemption or Purchase of Equipment Notes . . . . . . . . . . . . . . . . . . . . 31
3.03. Application of Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.04. Application of Certain Payments in Case of Requisition or Event of Loss . . . . . . . . . . . . . . . 34
3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . . . . . . . 35
3.06. Payments for Which Application Is Provided in Other Documents . . . . . . . . . . . . . . . . . . . . 37
3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE OF PROPERTY INCLUDED IN T . . . . . . . . . . . . . . . . . . . . . . 40
5.01. Disposition, Substitution and Release of Property Included in the Indenture
Estate During Continuation of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 6
REDEMPTION OF EQUIPMENT NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.01. Redemption of Equipment Notes upon Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.02. Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.03. Notice of Redemption to Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.05. Equipment Notes Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.06. No Prepayment or Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 7
MATTERS CONCERNING THE LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.01. Repayment of Monies for Equipment Note Payments Held by the Indenture Trustee . . . . . . . . . . . . 43
7.02. Change in Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.03. Assumption of Obligations of Owner Trustee by the Lessee . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.07. Rights of Noteholders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.08. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments . . . . . . . . . . . . . . . . . 61
9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.08. Successor Indenture Trustee, Agents by Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 10
TERMINATION OF TRUST INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.01. Termination of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.01. Amendments to this Agreement Without Consent of Noteholders . . . . . . . . . . . . . . . . . . . . 68
11.02. Amendments to this Agreement with Consent of Noteholders . . . . . . . . . . . . . . . . . . . . . . 69
11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.04. Notation on or Exchange of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.06. Amendments, Waivers, etc. of Other Operative Documents . . . . . . . . . . . . . . . . . . . . . . . 71
11.07. Notices to Primary Liquidity Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.02. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.03. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.04. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.05. Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Exhibit A Form of Equipment Notes
Exhibit B-1 Description of Series A Equipment Notes
Exhibit B-2 Description of Series B Equipment Notes
Exhibit B-3 Description of Series C Equipment Notes
Exhibit B-4 Description of Series D Equipment Notes
Exhibit C Form of Trust Agreement and Trust Indenture
and Security Agreement Supplement
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED
TRUST INDENTURE AND SECURITY AGREEMENT
This AMENDED AND RESTATED TRUST INDENTURE AND SECURITY
AGREEMENT (1994 737 B), dated as of December 23, 1997 between STATE STREET BANK
AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association (as assignee of First Security Bank of Utah, National Association
(the "Original Owner Trustee")), not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee under the Trust
Agreement, and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association (as assignee of State Street Bank and Trust Company (the "Original
Indenture Trustee")), as Indenture Trustee hereunder, amends and restates in
its entirety that certain Trust Indenture and Security Agreement (1994 737 B)
dated as of September 1, 1994 (the "Original Indenture") between Original Owner
Trustee and Original Indenture Trustee, as amended by that certain First
Amendment to Trust Indenture and Security Agreement (1994 737 B) dated as of
June 1, 1995) (the "First Amendment"), that certain Second Amendment to Trust
Indenture and Security Agreement (1994 737 B) dated as of December 1, 1995 (the
"Second Amendment") and that certain Third Amendment to Trust Indenture and
Security Agreement (1994 737 B) dated January 26, 1996 (the "Third Amendment"),
in each case between Original Owner Trustee and Original Indenture Trustee, and
as supplemented by that certain Trust Agreement and Trust Indenture and
Security Agreement Supplement (1994 737 B) dated September 28, 1994 (the
"Supplement").
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the Noteholders of the Equipment Notes issued hereunder, and (ii)
the Owner Trustee has been authorized and directed pursuant to the Trust
Agreement to execute and deliver this Amended and Restated Trust Indenture and
Security Agreement;
WHEREAS, all capitalized terms used and not otherwise defined
herein shall have the respective meanings set forth or referred to in Article 1
hereof;
WHEREAS, the Original Indenture and the Supplement were
recorded by the FAA on November 1, 1994 and assigned Conveyance No. II002365;
<PAGE> 7
[Trust Indenture and Securities Agreement (1994 737 B)]
WHEREAS, the First Amendment was recorded by the FAA on August
25, 1995 and assigned Conveyance No. T049370;
WHEREAS, the Second Amendment was recorded by the FAA on March
7, 1996 and assigned Conveyance No. HK005881;
WHEREAS, the Third Amendment was recorded by the FAA on March
7, 1996 and assigned Conveyance No. HK005882;
WHEREAS, pursuant to that certain Assignment and Assumption
Agreement (1994 737 B) dated as of December 11, 1997 between the Owner Trustee
and the Original Owner Trustee, the Original Owner Trustee assigned to the
Owner Trustee, and the Owner Trustee assumed, all of the obligations of the
Original Owner Trustee under the Operative Documents);
WHEREAS, the parties desire by this Agreement, among other
things, to (i) amend and restate in its entirety the Indenture, (ii) provide
for the issuance by the Owner Trustee of the Series A, Series B, Series C and
Series D Equipment Notes and (iii) provide for the assignment, mortgage and
pledge by the Owner Trustee to the Indenture Trustee, as part of the Indenture
Estate hereunder, among other things, of certain of the Owner Trustee's right,
title and interest in and to the Aircraft and the Operative Documents and
certain payments and other amounts received hereunder or thereunder in
accordance with the terms hereof, as security for, among other things, the
Owner Trustee's obligations to the Indenture Trustee, for the ratable benefit
and security of the Noteholders, subject to Section 2.10 and Article 3 hereof;
WHEREAS, all things have been done to make the Equipment
Notes, when executed by the Owner Trustee and authenticated and delivered by
the Indenture Trustee hereunder, the valid, binding and enforceable obligations
of the Owner Trustee; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, 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 AMENDED AND RESTATED TRUST INDENTURE AND
SECURITY AGREEMENT WITNESSETH, subject to Section 2.11(b) hereof, that, to
secure the prompt payment by the Owner Trustee, as and when required
2
<PAGE> 8
[Trust Indenture and Security Agreement (1994 737 B)]
hereunder or under the Equipment Notes, of the principal of, Break Amount, if
any, Make-Whole Amount, if any, and interest on, and all other amounts due with
respect to, all Equipment Notes from time to time outstanding under this
Indenture and all other amounts due hereunder and to secure the performance and
observance by the Owner Trustee of all the agreements, covenants and provisions
contained herein and in the other Operative Documents to which it is a party
(other than the Note Purchase Agreement), for the benefit of the Noteholders
and each of the Indenture Indemnitees, and the prompt payment of any and all
amounts from time to time owing hereunder, under the Lease and under the
Participation Agreement by the Owner Trustee, the Owner Participant or the
Lessee to the Noteholders and the Indenture Indemnitees, and for the uses and
purposes and subject to the terms and provisions hereof, and in consideration
of the premises and of the covenants herein contained, and of the acceptance of
the Equipment Notes by the Noteholders, and of other good and valuable
consideration the receipt and adequacy whereof are hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the Noteholders and the
Indenture Indemnitees from time to time, a first priority security interest in
and first priority mortgage lien on all estate, right, title and interest of
the Owner Trustee in, to and under the following described property, rights,
interests and privileges whether now or hereafter acquired and subject to the
Lien hereof (which collectively, including all property hereafter specifically
subjected to the lien of this Agreement by any instrument supplemental hereto,
but excluding the Excluded Payments, are herein called the "Indenture Estate"):
(1) the Airframe and Engines (each such Engine having 750
or more rated take-off horsepower or the equivalent thereof) as the
same is now and will hereafter be constituted, whether now or
hereafter acquired and subjected to the Lien hereof, 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 and all
substitutions or replacements therefor, as provided in this Agreement,
together with all Parts of whatever nature which are from time to time
included in the "Airframe" or the "Engines", whether now or hereafter
acquired and subjected to the Lien hereof, and all renewals,
substitutions, replacements, additions, improvements, accessories and
accumulations with respect to any of the foregoing, and all records,
logs and other related materials with respect to any of the foregoing
as may be required to be maintained by the FAA;
(2) the Lease and all Rent thereunder, including, without
limitation, all amounts of Basic Rent, Supplemental Rent, and payments
of any kind required to be made by the Lessee thereunder; all amounts
payable to the Owner Trustee under the Participation Agreement that do
not constitute Excluded Payments; the Purchase
3
<PAGE> 9
[Trust Indenture and Security Agreement (1994 737 B)]
Agreement (to the extent assigned by the Owner Trustee's Purchase
Agreement), the Consent and Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's Bill of Sale, the Owner Trustee's FAA
Bill of Sale and any and all contracts or agreements relating to the
Airframe and Engines or any rights or interest therein to which the
Owner Trustee is now or may hereafter be a party or have any interest
in; including, without limitation, all rights of the Owner Trustee to
receive any payments or other amounts or to exercise any election or
option or to make any decision, agreement or determination or to give
or receive any notice, consent, waiver or approval or to take any
other action under or in respect of any such document or to accept
surrender or redelivery of the Aircraft or any part thereof, as well
as all the rights, powers and remedies on the part of the Owner
Trustee, whether acting under any such document or by statute or at
law or in equity, or otherwise, including, without limitation, the
commencement, conduct and consummation of any legal, administrative or
other proceedings, and to do any and all other things whatsoever which
the Owner Trustee is or may be entitled to do under, or in respect of,
any such documents (other than the rights of the Owner Trustee
provided for hereunder);
(3) all rents, issues, profits, revenues and other income
of the property subjected or required to be subjected to the Lien of
this Agreement, including, without limitation, all payments and
proceeds payable to, or receivable by, the Owner Trustee as "Lessor"
under the Lease or payable to, or receivable by, the Owner Trustee
after the termination of the Lease with respect to the Aircraft as a
result of the sale, lease or other disposition thereof;
(4) without limiting the generality of the foregoing, all
requisition proceeds with respect to the Aircraft or any Part thereof
or any other property described in any of the Granting Clauses (to the
extent of the Owner Trustee's interest therein pursuant to the terms
of the Lease) and all insurance proceeds with respect to the Aircraft
or any Part thereof from insurance required to be maintained by the
Lessee under Section 11 of the Lease, but excluding any insurance
maintained by the Lessee and not required under Section 11 of the
Lease;
(5) all moneys and securities now or hereafter paid or
deposited or required to be paid or deposited to or with the Indenture
Trustee pursuant to any term of any Operative Document and held or
required to be held by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
4
<PAGE> 10
[Trust Indenture and Security Agreement (1994 737 B)]
The Owner Trustee has previously delivered to the Indenture Trustee
the original executed counterpart of the Lease and the initial Lease
Supplement, the First Amendment to Lease and the Second Amendment to Lease,
and, concurrently with the delivery hereof, is delivering the original
counterpart of the Third Amendment to Lease (to each of which a chattel paper
receipt is attached), and the Owner Trustee has previously delivered to the
Indenture Trustee executed copies of the Owner Trustee's Purchase Agreement and
the Consent and Agreement.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the security interest
granted by this Agreement all Excluded Payments;
(b) (i) whether or not a Lease Event of Default or an
Indenture Event of Default shall occur and be continuing, the Owner
Trustee and the Owner Participant shall at all times retain the right,
to the exclusion of the Indenture Trustee but subject always to the
provisions of the next succeeding full paragraph (a) to Excluded
Payments and to commence an action at law to obtain such Excluded
Payments, (b) to exercise any election or option or to make any
decision or determination, or to give or receive any notice, consent,
waiver or approval, or to take any other action in respect of, but in
each case only to the extent relating to, Excluded Payments, (c) to
exercise all rights with respect to insurance maintained for its own
account which Section 11(e) of the Lease specifically confers on the
"Lessor" and (d) to exercise, to the extent necessary to enable it to
exercise its rights under Section 8.03(e)(i) hereof, the rights of the
"Lessor" under Section 21 of the Lease;
(ii) whether or not a Lease Event of Default or Indenture
Event of Default shall occur and be continuing, the Owner Trustee and
the Indenture Trustee shall each have the right separately but not to
the exclusion of the other, (a) to receive from the Lessee all
notices, certificates, reports, filings, Opinions of Counsel, copies
of all documents and all information which the Lessee is permitted or
required to give or furnish to the "Lessor" pursuant to the Lease or
to the Owner Trustee pursuant to any other Operative Document, (b) to
exercise inspection rights pursuant to Section 12 of the Lease, (c) to
maintain separate insurance pursuant to Section 11(e) of the Lease and
to retain all rights with respect to such insurance maintained for its
own account, (d) to give any notice of default under Section 14 of the
Lease, (e) to cause the Lessee to take any action and execute and
deliver such documents and assurances as the "Lessor" may from time to
time reasonably request pursuant to Section 16 of the Lease and (f) to
consent (with the concurrent consent of the other such party to the
extent such consent is required) to changes to the list of countries
on Exhibit F or G to the Lease;
5
<PAGE> 11
[Trust Indenture and Security Agreement (1994 737 B)]
(iii) so long as no Indenture Event of Default shall have
occurred and be continuing (but subject to the provisions of Section
11.06), the Owner Trustee shall retain the right, to the exclusion of
the Indenture Trustee, to exercise the following rights of the
"Lessor" under the Lease: (a) the right to approve as satisfactory
any accountants, engineers or counsel to render services for or issue
opinions to the Owner Trustee pursuant to express provisions of the
Operative Documents; and (b) the right to waive the opinion required
pursuant to Section 8(e)(ii)(C) of the Participation Agreement;
(iv) so long as the Indenture Trustee shall not have
foreclosed the Lien of this Indenture, the Owner Trustee and the Owner
Participant shall retain the right, to the exclusion of the Indenture
Trustee, (a) to adjust Basic Rent and the percentages relating to
Stipulated Loss Value and Termination Value, the Special Termination
Value Percentage and the EBO Percentages as provided in Section 3(c)
of the Lease and Section 18 of the Participation Agreement, (b) to
retain the rights of the "Lessor" with respect to solicitations of
bids, and the election to retain the Aircraft pursuant to Section 9 of
the Lease, (c) to retain the rights of the "Lessor" under Section 7(b)
of the Lease and (d) to exercise the right of "Lessor" to determine
the fair market rental value or fair market sales value pursuant to
Section 19 of the Lease;
(c) the leasehold interest granted to the Lessee by the
Lease shall not be subject to the security interest granted by this
Agreement, and nothing in this Agreement shall affect the rights of
the Lessee under the Lease so long as no Lease Event of Default has
occurred and is continuing; and
(d) as between the Owner Trustee and the Indenture
Trustee, nothing contained in this Granting Clause shall prevent the
Owner Trustee, as the "Lessor" under the Lease, from seeking specific
performance of the covenants of the Lessee under the Lease relating to
the protection, insurance, maintenance, possession and use of the
Aircraft and from maintaining separate insurance with respect to the
Aircraft to the extent permitted by Section 11 of the Lease.
Notwithstanding anything to the contrary contained herein, the
Indenture Trustee shall have the right, subject to Section 8.03 hereof, to the
exclusion of the Owner Trustee and the Owner Participant, to declare the Lease
to be in default under Section 15 thereof and to exercise the remedies set
forth in Section 15 of the Lease at any time that a Lease Event of Default
shall have occurred and be continuing.
6
<PAGE> 12
[Trust Indenture and Security Agreement (1994 737 B)]
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Noteholders from time to
time, without, except as provided in Section 2.10 and Article 3, any
preference, priority or distinction of any one Equipment Note over any other by
reason of series, priority of time of issue, sale or negotiation, date of
maturity or otherwise for any reason whatsoever, and for the uses and purposes
and subject to the terms and provisions set forth in this Agreement.
1. It is expressly agreed that anything herein contained
to the contrary notwithstanding, the Owner Trustee shall remain liable under
each of the Operative Documents to which it is a party to perform all of its
obligations thereunder, all in accordance with and pursuant to the terms and
provisions thereof, and the Indenture Trustee and the Noteholders shall have no
obligation or liability under any of the Operative Documents to which the Owner
Trustee is a party by reason of or arising out of the assignment hereunder, nor
shall the Indenture Trustee (except as to the Indenture Trustee, if the
Indenture Trustee shall have become the "Lessor" under the Lease) or the
Noteholders be required or obligated in any manner to perform or fulfill any
obligations of the Owner Trustee under any of the Operative Documents to which
the Owner Trustee is a party, 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.
2. The Owner Trustee does hereby constitute the
Indenture Trustee the true and lawful attorney of the Owner Trustee,
irrevocably, for good and valuable consideration and coupled with an interest
and with full power of substitution, with full power (in the name of the Owner
Trustee or otherwise) subject to the terms and conditions of this Indenture, to
ask, require, demand, receive, sue for, compound and give acquittance for any
and all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of the Lease (subject to
Section 11.06(b)(1) hereof), the Purchase Agreement, the Owner Trustee's Bill
of Sale, the Consent and Agreement and the Owner Trustee's Purchase Agreement,
to endorse any checks or other instruments or orders in connection therewith
and to file any claims or take any action or institute any proceedings which
the Indenture Trustee may deem to be necessary or advisable in the premises as
fully as the Owner Trustee itself could do. The Owner Trustee has directed the
Lessee to make all payments of Rent (other than Excluded Payments) payable to
the Owner Trustee by the Lessee and all other amounts which are required to be
paid to or deposited with the Owner Trustee pursuant to the Lease directly to,
7
<PAGE> 13
[Trust Indenture and Security Agreement (1994 737 B)]
or as directed by, the Indenture Trustee at such address as the Indenture
Trustee shall specify, for application as provided in this Agreement. The
Owner Trustee agrees that promptly on receipt thereof, it will transfer to the
Indenture Trustee any and all moneys from time to time received by it
constituting part of the Indenture Estate, for distribution by the Indenture
Trustee pursuant to this Agreement, except that the Owner Trustee shall accept
for distribution pursuant to the Trust Agreement any amounts distributed to it
by the Indenture Trustee as expressly provided in this Agreement and any
Excluded Payments.
3. The Owner Trustee agrees that at any time and from
time to time, upon the written request of the Indenture Trustee, the Owner
Trustee will promptly and duly execute and deliver or cause to be duly executed
and delivered any and all such further instruments and documents as the
Indenture Trustee may reasonably deem desirable in obtaining the full benefits
of the assignment hereunder and of the rights and powers herein granted.
4. The Owner Trustee does hereby warrant and represent
that it has not assigned or pledged, and hereby covenants that it will not
assign or pledge, so long as the Lien granted hereunder has not been discharged
in accordance with the terms hereof, any of its rights, titles or interests
hereby assigned, to any Person other than the Indenture Trustee, and that it
will not, except as provided in or permitted by this Agreement, accept any
payment under any agreement subject to the Lien hereof, enter into an agreement
amending or supplementing any of the Operative Documents, execute any waiver or
modification of, or consent under the terms of any of the Operative Documents,
settle or compromise any claim (other than claims in respect of Excluded
Payments) arising under any of the Operative Documents, or submit or consent to
the submission of any dispute, difference or other matter arising under or in
respect of any of the Operative Documents, to arbitration thereunder.
It is hereby further agreed that any and all property described or
referred to in the granting clause hereof which is hereafter acquired by the
Owner Trustee shall ipso facto, and without any other conveyance, assignment or
act on the part of the Owner Trustee or the Indenture Trustee, become and be
subject to the Lien herein granted as fully and completely as though
specifically described herein, but nothing contained in this paragraph shall be
deemed to modify or change the obligations of the Owner Trustee contained in
the foregoing paragraphs.
The Owner Trustee does hereby ratify and confirm the Lease and does
hereby agree that it will not violate any covenant or agreement made by it
therein, herein or in any other Operative Document to which it is a party.
8
<PAGE> 14
[Trust Indenture and Security Agreement (1994 737 B)]
IT IS HEREBY FURTHER COVENANTED AND AGREED by and between the
parties hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) each of "Owner Trustee," "Indenture Trustee,"
"Noteholder," "Lessee," "Primary Liquidity Provider,""Subordination
Agent," "Pass Through Trustee" or any other Person includes, without
prejudice to the provisions of any Operative Documents, any successor
in interest to it and any permitted transferee, permitted purchaser or
permitted assignee of it;
(2) the terms defined in this Article 1 have the meanings
assigned to them in this Article 1, and include the plural as well as
the singular;
(3) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(4) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or other subdivision;
(5) all references in this Agreement to Articles,
Sections and Exhibits refer to Articles, Sections and Exhibits of this
Agreement; and
(6) terms used herein without definition shall have the
respective meanings specified therefor in the Lease.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any
9
<PAGE> 15
[Trust Indenture and Security Agreement (1994 737 B)]
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Aircraft" shall have the meaning specified therefor in the
Lease.
"Airframe" shall have the meaning specified therefor in the
Lease.
"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 principal amount of such Equipment Note.
"Amortization Schedule" means, with respect to each Series of
Equipment Notes, the amortization schedule for such Series as set forth on
Exhibit B-1, B-2, B-3 or B-4, as the case may be.
"Applicable Date" has the meaning specified therefor in the
definition of "Break Amount".
"Applicable Margin" means, with respect to any Series of
Equipment Notes, the Series A Margin, the Series B Margin, the Series C Margin,
or the Series D Margin, as the case may be.
"Applicable Rate" means for each Interest Period for each
Series of Equipment Notes, a rate per annum equal to the Three-Month LIBOR for
such Interest Period plus the Applicable Margin.
"Assignment and Assumption Agreements" means each of (i) that
certain Assignment and Assumption Agreement (1994 737 B) dated as of December
11, 1997, between the Owner Trustee and the Original Owner Trustee and (ii)
that certain Assignment and Assumption Agreement (1994 737 B) dated as of
December 11, 1997 between the Original Indenture Trustee and the Indenture
Trustee.
"Bankruptcy Code" shall have the meaning specified therefor in
the Lease.
10
<PAGE> 16
[Trust Indenture and Security Agreement (1994 737 B)]
"Basic Pass Through Trust Agreement" means the Pass Through
Trust Agreement dated as of December 23, 1997 between Lessee and Pass Through
Trustee, but does not include any Pass Through Trust Supplement.
"Basic Rent" shall have the meaning specified therefor in the
Lease.
"Break Amount" means, as of any date of payment, redemption or
acceleration for any Series of Equipment Notes (the "Applicable Date"), an
amount determined by the Calculation Agent on the date that is two (2) LIBOR
Business Days prior to the Applicable Date pursuant to the formula set forth
below:
The Break Amount shall be calculated as follows:
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the
sum of (i) the amount of the outstanding principal
amount for such Series of Equipment Notes as of the
first day of the then applicable Interest Period plus
(ii) interest payable thereon during such entire
Interest Period at then effective Three-Month LIBOR.
Y = X, discounted to present value from the last day of
the then applicable Interest Period to the Applicable
Date using then effective Three-Month LIBOR as the
discount rate.
Z = X, discounted to present value from the last day of
the then applicable Interest Period to the Applicable
Date using a rate equal to the applicable London
interbank offered rate for a period commencing on the
Applicable Date and ending on the last day of the
then applicable Interest Period, determined by the
Calculation Agent as of two LIBOR Business Days prior
to the Applicable Date as the discount rate.
No Break Amount will be payable (x) if the Break Amount, as calculated pursuant
to the formula set forth above, is equal to or less than zero or (y) on or in
respect of any Applicable Date that is an Interest Payment Date.
"Business Day" shall have the meaning specified therefor in
the Lease.
11
<PAGE> 17
[Trust Indenture and Security Agreement (1994 737 B)]
"Calculation Agent" means the Indenture Trustee.
"Citizen of the United States" shall have the meaning
specified therefor in the Lease.
"Closing Date" shall have the meaning specified therefor in
the Lease.
"Commencement Date" shall have the meaning specified therefor
in the Lease.
"Continuous Stay Period" shall have the meaning specified in
Section 8.03(e) hereof.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Corporate Trust Department" means the principal office of the
Indenture Trustee located at the Indenture Trustee's address for notices under
the Participation Agreement or such other office at which the Indenture
Trustee's corporate trust business shall be administered which the Indenture
Trustee shall have specified by notice in writing to Owner Trustee and each
Noteholder.
"Debt" shall mean any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"EBO Date" shall have the meaning specified therefor in the
Lease.
"Eligible Institution" means (a) the corporate trust
department of the Indenture Trustee, the Subordination Agent or any Pass
Through Trustee, as applicable, or (b) a depository institution organized under
the laws of the United States of America or any one of the States thereof or
the District of Columbia (or any U.S. branch of a foreign bank), which has a
long-term unsecured debt rating from Moody's and Standard & Poor's of at least
"A-3" or its equivalent.
"Engine" shall have the meaning specified therefor in the
Lease.
"Equipment Note" or "Equipment Notes" means any equipment note
or notes issued under this Agreement, including each of the Series A, Series B,
Series C and Series D Equipment Notes issued hereunder, substantially in the
form of Exhibit A hereto, as such form may be varied pursuant to the terms
hereof, and any and all Equipment Notes issued in replacement or exchange
therefor in accordance with the provisions hereof.
12
<PAGE> 18
[Trust Indenture and Security Agreement (1994 737 B)]
"Event of Loss" shall have the meaning specified therefor in
the Lease.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective successors, permitted assigns,
directors, officers, employees, servants and agents to any payment which by the
terms of Section 7(b) or 7(c) of the Participation Agreement, Section 5.03 or
7.01 of the Trust Agreement or any section of the Tax Indemnity Agreement or
any corresponding payment under Section 3(d) of the Lease is payable to such
Person, (ii) any insurance proceeds payable under insurance permitted to be
maintained under Section 11(e) of the Lease by the Owner Trustee in its
individual capacity or the Owner Participant (whether directly or through the
Owner Trustee), or to their respective Affiliates, successors, permitted
assigns, directors, officers, employees, servants and agents, (iii) any
insurance proceeds (or proceeds of governmental indemnities in lieu thereof)
payable to the Owner Trustee in its individual capacity or to the Owner
Participant, or to their respective Affiliates, successors, permitted assigns,
directors, officers, employees, servants and agents, under any liability
insurance maintained by the Lessee pursuant to Section 11 of the Lease or by
any other Person (or proceeds of governmental indemnities in lieu thereof),
(iv) any rights of the Owner Participant or the Owner Trustee to demand,
collect, sue for, or otherwise receive and enforce payment of the foregoing
amounts (including interest thereon to the extent provided in the applicable
provisions of the Operative Documents) and the right to give any notice of
default under Section 14 of the Lease, but not including the right to exercise
any remedies under the Lease except for those specifically provided for in this
clause (iv), (v) if the Lessee has assumed the obligations of the Owner Trustee
in respect of the Equipment Notes in accordance with Section 7.03 hereof and
Section 8(r) of the Participation Agreement, the amount payable as purchase
price pursuant to Section 19(b) of the Lease, (vi) amounts or expenses paid or
payable to, or for the benefit of, the Owner Participant pursuant to the
Participation Agreement or the Note Purchase Agreement, (vii) the respective
rights of the Owner Trustee in its individual capacity or the Owner Participant
to the proceeds of the foregoing and (viii) any right to demand, collect or
otherwise receive and enforce the payment of any amount described in clauses
(i) through (vii) above.
"Federal Aviation Act" shall have the meaning specified for
the "Transportation Code" as defined in the Lease.
"Federal Aviation Administration" and "FAA" shall have the
meaning specified therefor in the Lease.
"Final Expected Distribution Date" means December 2, 2002.
13
<PAGE> 19
[Trust Indenture and Security Agreement (1994 737 B)]
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Article 8.
"Indenture Indemnitee" means (i) the Indenture Trustee in its
individual capacity and as Indenture Trustee, (ii) each separate or additional
trustee appointed pursuant to this Agreement, (iii) the Subordination Agent,
(iv) each Primary Liquidity Provider, (v) each Pass Through Trustee, and (vi)
each of the respective directors, officers, employees, agents and servants of
the persons described in clauses (i) through (v) inclusive above.
"Indenture Supplement" means a supplement to this Agreement in
the form of Exhibit C hereto.
"Indenture Trustee" means First Security Bank, National
Association, and each other Person which may from time to time be acting as
Indenture Trustee in accordance with the provisions of this Agreement.
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Primary Liquidity Providers and
the Subordination Agent, dated as of the date hereof, provided that, for
purposes of any obligation of Owner Trustee, no amendment, modification or
supplement to, or substitution or replacement of, such Intercreditor Agreement
shall be effective unless consented to by Owner Trustee.
"Interest Payment Date" means March 2, 1998 and each March 2,
June 2, September 2 and December 2 of each year thereafter.
"Interest Period" means, with respect to each Series of
Equipment Notes initially, the period from (and including) the Issuance Date
for such Series and ending on (but excluding) the first Interest Payment Date
following such Issuance Date, and thereafter each successive quarterly period
from (and including) on the final day of the preceding Interest Period for such
Series of Equipment Notes and ending on the next succeeding Interest Payment
Date.
"Issuance Date" means, with respect to each Series of
Equipment Notes, the date such Equipment Notes are issued by the Owner Trustee
pursuant to the terms hereof.
14
<PAGE> 20
[Trust Indenture and Security Agreement (1994 737 B)]
"Lease" means the Lease Agreement (1994 737 B), dated as of
September 1, 1994, as amended by that certain First Amendment to Lease
Agreement (1994 737 B) dated January 26, 1996, and that certain Second
Amendment to Lease Agreement (1994 737 B) dated January 26, 1996, in each case
between the Original Owner Trustee, as lessor, and the Lessee, as lessee, and
that certain Third Amendment to Lease Agreement (1994 737 B) dated as of
December 23, 1997, between the Owner Trustee, as lessor, and the Lessee, as
lessee, as such Lease Agreement may from time to time be further supplemented,
amended or modified in accordance with the terms thereof and this Agreement.
The term "Lease" shall also include each Lease Supplement entered into pursuant
to the terms of the Lease.
"Lease Event of Default" shall have the meaning specified for
the term "Event of Default" in the Lease.
"Lease Loss Payment Date" shall have the meaning specified for
the term "Loss Payment Date" in the Lease.
"Lease Supplement" shall have the meaning specified therefor
in the Lease.
"Lease Termination Date" shall have the meaning specified for
the term "Termination Date" in the Lease.
"Lessee" means United Air Lines, Inc., a Delaware corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Lessor Liens" shall have the meaning specified therefor in
the Lease.
"LIBOR Business Day" means any day other than Saturday, Sunday
or any other day on which banks in New York, New York or London, England are
required or authorized to be closed.
"Lien" means any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim.
"London Reference Banks" means the principal London offices of
National Westminster Bank Plc, Barclays Bank Plc and Bayerische Landesbank
Girozentrale, or such other bank or banks as may from time to time be agreed by
Lessee and the Calculation Agent.
15
<PAGE> 21
[Trust Indenture and Security Agreement (1994 737 B)]
"Majority in Interest of Noteholders" means, subject to
Section 2.6 of the Intercreditor Agreement, as of a particular date of
determination, the holders of a majority in aggregate unpaid principal amount
of all Equipment Notes outstanding as of such date (excluding any Equipment
Notes held by Owner Trustee, the Owner Participant, the Lessee, Indenture
Trustee or any Affiliate of any such party or any interests of Owner Trustee
therein (unless all Equipment Notes shall be held by any such entity or an
Affiliate thereof; provided, however, if all Equipment Notes are held by the
Lessee or an Affiliate thereof upon the occurrence and during the continuance
of an Event of Default, then the Owner Participant shall be considered the
"Majority in Interest of Noteholders" during the continuance of such Event of
Default)); provided that for the purposes of directing any action or casting
any vote or giving any consent, waiver or instruction hereunder, any Noteholder
of an Equipment Note or Equipment Notes may allocate, in such Noteholder'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" with respect to each of the Series A
Equipment Notes or the Series B Equipment Notes to be redeemed or purchased on
any redemption or purchase date, means an amount which an independent
investment banking institution of national standing selected by the Lessee (or,
following the occurrence and during the continuance of an Event of Default, the
Indenture Trustee) shall determine to be equal to the excess of (i) the sum of
the present values, discounted to such redemption or purchase date, of all the
remaining scheduled payments of principal and interest, using then effective
Three-Month LIBOR plus the Applicable Margin for each such Series for all
remaining interest payments, payable between such redemption date and the Final
Expected Distribution Date (assuming that all principal on the Equipment Notes
payable after the Final Expected Distribution Date is payable on the Final
Expected Distribution Date), discounted quarterly on each Interest Payment
Date, using then effective Three-Month LIBOR less 0.05% as the discount rate
over (ii) the aggregate unpaid principal amount of such Series of Equipment
Notes plus accrued but unpaid interest thereon.
"Moody's" means Moody's Investors Service, Inc. (or any
successor thereto).
"Noteholder" means a person in whose name an Equipment Note is
registered on the Register (including, so long as it holds any Series A, Series
B, Series C or Series D Equipment Notes issued hereunder, the Subordination
Agent on behalf of the Pass Through Trustee under the applicable Pass Through
Trust Agreement pursuant to the provisions of the Intercreditor Agreement).
16
<PAGE> 22
[Trust Indenture and Security Agreement (1994 737 B)]
"Note Purchase Agreement" means that certain Note Purchase
Agreement dated as of December 23, 1997 among the Lessee, Owner Trustee,
Indenture Trustee, Subordination Agent, each Pass Through Trustee and
Kreditanstalt fur Wiederaufbau.
"Owner Participant" shall be the party specified as the "Owner
Participant" in the Participation Agreement, its successors and, to the extent
permitted by Article VIII of the Trust Agreement and Section 8(l) of the
Participation Agreement, its permitted successors and assigns.
"Owner Trustee" means State Street Bank and Trust Company of
Connecticut, National Association, not in its individual capacity, but solely
as trustee under the Trust Agreement, and each other Person which may from time
to time be acting as Owner Trustee in accordance with the provisions of the
Operative Documents.
"Owner Trustee's Purchase Agreement" shall have the meaning
specified therefor in the Lease.
"Participation Agreement" shall have the meaning specified the
refor in the Lease.
"Parts" shall have the meaning specified therefor in the
Lease.
"Pass Through Agreements" means the Pass Through Trust
Agreements, the Note Purchase Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Primary Liquidity Facilities.
"Pass Through Certificates" means any of the Credit Enhanced
Pass Through Certificates issued pursuant to any of the Pass Through Trust
Agreements.
"Pass Through Trust" means each of the four separate pass
through trusts created pursuant to the related Pass Through Trust Agreement.
"Pass Through Trust Agreements" means each of the four
separate Pass Through Trust Supplements, together in each case with the Basic
Pass Through Trust Agreement, each dated as of December 23, 1997 and entered
into by and between the Lessee and a Pass Through Trustee.
"Pass Through Trust Supplement" shall have the meaning
specified for the term "Trust Supplement" in the Basic Pass Through Trust
Agreement.
17
<PAGE> 23
[Trust Indenture and Security Agreement (1994 737 B)]
"Pass Through Trustee" means First Security Bank, National
Association in its capacity as trustee under each Pass Through Trust Agreement,
and such other Person that may from time to time be acting as successor trustee
under any such Pass Through Trust Agreement.
"Past Due Rate" means, with respect to the principal of or
interest, Break Amount, if any, or Make- Whole Amount, if any, on any Equipment
Note not paid in full when due (whether at stated maturity, by acceleration or
otherwise), or with respect to any other amount payable to the holder thereof
thereon or under this Agreement not so paid in full when due, a rate of
interest per annum equal to 1.00% per annum above the Three-Month LIBOR (plus,
in the case of the Series C Equipment Notes only, the Applicable Margin for the
Series C Equipment Notes) for the period applicable thereto (computed on the
basis of a year of 360 days and actual days elapsed); but in no event shall
such rate exceed the maximum rate permitted by applicable law.
"Paying Agent" means any Person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means, with respect to each Series of Equipment
Notes, each Interest Payment Date listed on the Amortization Schedule for such
Series of Equipment Notes set forth in Exhibit B-1, B-2, B-3 or B-4, as the
case may be.
"Permitted Investment" means (a) investments in obligations
of, or guaranteed by, the United States Government having maturities no later
than 90 days following the date of such investment; (b) investments in open
market commercial paper of any corporation incorporated under the laws of the
United States of America or any state thereof with a short-term unsecured debt
rating issued by Moody's and Standard & Poor's of at least "A-1" and "P-1,"
respectively, having maturities no later than 90 days following the date of
such investment; or (c) investments in negotiable certificates of deposit, time
deposits, banker's acceptances, commercial paper or other direct obligations
of, or obligations guaranteed by, commercial banks organized under the laws of
the United States or of any political subdivision thereof (or any U.S. branch
of a foreign bank) with issuer ratings of at least "B/C" by Thomson Bankwatch,
having maturities no later than 90 days following the date of such investment;
provided, however, that: (x) all Permitted Investments that are bank
obligations shall be denominated in U.S. dollars; and (y) the aggregate amount
of Permitted Investments at any one time that are bank obligations issued by
any one bank shall not be in excess of 5% of such bank's capital and surplus;
provided further that (1) any investment of the types described in clauses (a),
(b) and (c) above may be made through a repurchase agreement in commercially
reasonable form with a bank or other financial institution qualifying as an
Eligible Institution so long as such investment is held by a third party
18
<PAGE> 24
[Trust Indenture and Security Agreement (1994 737 B)]
custodian also qualifying as an Eligible Institution, and (2) all such
investments set forth in clauses (a), (b) and (c) above mature no later than
the Business Day preceding the next Interest Payment Date; and provided
further, that in the case of any Permitted Investment issued by a domestic
branch of a foreign bank, the income from such investment shall be from sources
within the United States for purposes of the Code.
"Permitted Lien" shall have the meaning specified therefor in
the Lease.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Primary Liquidity Facilities" means the two Revolving Credit
Agreements (consisting of a separate Revolving Credit Agreement with the
applicable Primary Liquidity Provider with respect to each of the Class A Trust
and the Class B Trust) between the Subordination Agent, as borrower, and such
Primary Liquidity Provider, each dated as of December 23, 1997; provided that,
for purposes of any obligation of Owner Trustee or Lessee, no amendment,
modification or supplement to, or substitution or replacement of, any such
Primary Liquidity Facility shall be effective unless consented to by Owner
Trustee or Lessee, as the case may be.
"Primary Liquidity Providers" means Kreditanstalt fur
Wiederaufbau, as the Primary Liquidity Provider under the Class A Primary
Liquidity Facility and the Class B Primary Liquidity Facility (as such terms
are defined in the Intercreditor Agreement) or any successor thereto.
"Purchase Agreement" shall have the meaning specified therefor
in the Lease.
"Purchase Option Date" shall have the meaning specified
therefor in the Lease.
"Record Date" for the interest or Amortization Amount payable
on any Equipment Note on any Interest Payment Date or Payment Date (other than
the maturity date) for such Equipment Note, as the case may be, means the
calendar day (whether or not a Business Day) which is 15 calendar days prior to
the related Interest Payment Date or Payment Date.
"Redemption Date" means the date on which the Equipment Notes
are to be redeemed or purchased pursuant to Section 6.01 or Section 6.02, as
the case may be, as specified in the notice delivered pursuant to Section 6.03
hereof.
19
<PAGE> 25
[Trust Indenture and Security Agreement (1994 737 B)]
"Redemption Price" means the price at which the Equipment
Notes are to be redeemed or purchased, determined as of the applicable
Redemption Date, pursuant to Section 6.01 or Section 6.02, as the case may be.
"Refinancing Date" shall mean the date designated by the
Lessee as the date for a refinancing of the Equipment Notes in accordance with
Section 17 of the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Registration Rights Agreement" shall have the meaning
specified therefor in the Note Purchase Agreement.
"Rent" shall have the meaning specified therefor in the Lease.
"Replacement Airframe" shall have the meaning specified
therefor in the Lease.
"Replacement Engine" shall have the meaning specified therefor
in the Lease.
"SEC" means the Securities and Exchange Commission.
"Secured Obligations" shall have the meaning specified
therefor in Section 2.11.
"Senior Noteholder" has the meaning specified in Section 2.11.
"Series" means any of Series A, Series B, Series C or Series
D.
"Series A" or "Series A Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series A," in the original principal amount
and maturities and bearing interest as specified in Exhibit B-1.
"Series A Margin" means the margin applicable to the Series A
Equipment Notes, as the same is specified on Exhibit B-1.
"Series B" or "Series B Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series B," in the original principal amount
and maturities and bearing interest as specified in Exhibit B-2.
20
<PAGE> 26
[Trust Indenture and Security Agreement (1994 737 B)]
"Series B Margin" means the margin applicable to the Series B
Equipment Notes, as the same is specified on Exhibit B-2.
"Series C" or "Series C Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series C," in the original principal amount
and maturities and bearing interest as specified in Exhibit B-3.
"Series C Margin" means the margin applicable to the Series C
Equipment Notes, as the same is specified on Exhibit B-3.
"Series D" or "Series D Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series D," in the original principal amount
and maturities and bearing interest as specified in Exhibit B-4.
"Series D Margin" means the margin applicable to the Series D
Equipment Notes, as the same is specified on Exhibit B-4.
"Special Purchase Option Date" shall have the meaning
specified therefor in the Lease.
"Standard & Poor's" means Standard & Poor's Ratings Services,
a division of McGraw-Hill Inc. (or any successor thereto).
"Stipulated Loss Value" shall have the meaning specified
therefor in the Lease.
"Subordination Agent" means First Security Bank, National
Association as Subordination Agent under the Intercreditor Agreement, or any
successor thereto.
"Supplemental Rent" shall have the meaning specified therefor
in the Lease.
"Tax Indemnity Agreement" shall have the meaning specified
therefor in the Lease.
"Termination Value" shall have the meaning specified therefor
in the Lease.
"Three-Month LIBOR" means, in relation to any Interest Period,
the interest rate per annum (calculated on the basis of a 360-day year and
actual days elapsed) at which deposits in United States dollars are offered to
prime banks in the London interbank market as indicated on display page 3750
(British Bankers Association-LIBOR) of the Dow Jones Markets Service (or such
other page as may replace such display page 3750 for the purpose of displaying
London interbank offered rates for Dollar deposits) or, if not so indicated,
the average (rounded upwards to the nearest 1/100%), as determined by the
Calculation Agent,
21
<PAGE> 27
[Trust Indenture and Security Agreement (1994 737 B)]
of such rates as indicated on the Reuters Screen LIBO Page (or such other page
as may replace such Reuters Screen LIBO Page for the purpose of displaying
London interbank offered rates for Dollar deposits) or, if neither such
alternative is indicated, the average (rounded upwards to the nearest 1/100%),
as determined by the Calculation Agent, of such rates offered by the London
Reference Banks to prime banks in the London interbank market, in each case at
or about 11:00 a.m. (London time) on the LIBOR Business Day that is two LIBOR
Business Days prior to the first day of such Interest Period for deposits of a
duration equal to such Interest Period (or other period most nearly
corresponding to such period) in an amount substantially equal to the principal
amount of the Equipment Notes outstanding as of the first day of such Interest
Period. The Calculation Agent will, if necessary, request that each of the
London Reference Banks provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the average of the quotations
(rounded upwards to the nearest 1/100%). If no such quotation can be obtained,
the rate will be the Three-Month LIBOR for the immediately preceding Interest
Period.
"Trust Agreement" shall have the meaning specified therefor in
the Lease.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "Indenture" or "this
Agreement" means this Amended and Restated Trust Indenture and Security
Agreement (1994 737 B), as the same may from time to time be supplemented,
amended or modified.
"Trust Indenture Estate" shall have the meaning specified for
the term "Indenture Estate" hereunder.
"Trust Office" shall mean the principal corporate trust office
of the Owner Trustee located at the Owner Trustee's address for notices under
the Participation Agreement, or such other office at which the Owner Trustee's
corporate trust business shall be administered which the Owner Trustee shall
have specified by notice in writing to the Lessee, the Indenture Trustee and
each Noteholder.
"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement in the form of Exhibit C hereto.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
"United States" or "U.S." means the United States of America.
22
<PAGE> 28
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 2
THE EQUIPMENT NOTES
Section 2.01. Equipment Notes; Title and Terms. The Equipment
Notes shall be issued in four separate series designated as Series A, Series B,
Series C and Series D, shall be dated the applicable Issuance Date with respect
to such Series, and shall be in the maturities and principal amounts and shall
bear interest as specified in Exhibit B- 1, B-2, B-3 or B-4, as the case may
be. Each Series A, Series B, Series C and Series D Equipment Note shall be
issued to the Subordination Agent as nominee for the Pass Through Trustee under
the applicable Pass Through Trust Agreement. The Issuance Date for the Series
A, Series B, Series C and Series D Equipment Notes will be the Closing Date.
The Owner Trustee agrees to pay to the Indenture Trustee for
distribution in accordance with Section 3.06 hereof: (i) an amount equal to
the fees payable to the relevant Primary Liquidity Provider under the related
Fee Letter (as defined in the Intercreditor Agreement as originally in effect
or as amended with the consent of the Owner Participant) multiplied by a
fraction the numerator of which shall be the sum of the then outstanding
aggregate principal amount of the Series A Equipment Notes and Series B
Equipment Notes, and the denominator of which shall be the sum of the then
outstanding aggregate principal amount of all "Series A Equipment Notes" and
"Series B Equipment Notes" (each as defined in the Intercreditor Agreement);
(ii) (x) the amount equal to interest on any Downgrade Advance (other than any
Applied Downgrade Advance) payable under Section 3.07 of each Primary Liquidity
Facility minus Investment Earnings from such Downgrade Advance multiplied by
(y) the fraction specified in the foregoing clause (i); (iii) (x) any amounts
owed to the Primary Liquidity Providers by the Subordination Agent as borrower
under Section 3.01 (other than in respect of an Unpaid Advance or Applied
Downgrade Advance), 3.02, 3.03 (other than in respect of an Unpaid Advance or
Applied Downgrade Advance) 7.05 or 7.07 of each Primary Liquidity Facility (or
similar provisions of any succeeding liquidity facility) multiplied by (y) the
fraction specified in the foregoing clause (i); and (iv) if any payment default
shall have occurred and be continuing with respect to interest on any Series A
Equipment Note or Series B Equipment Note, (x) the excess, if any, of (1) the
sum of (x) the amount equal to interest on any Unpaid Advance or Applied
Downgrade Advance payable under Section 3.07 of each Primary Liquidity Facility
plus (y) any other amounts payable in respect of such Unpaid Advance or Applied
Downgrade Advance under Section 3.01, 3.03 or 3.09 of the applicable Primary
Liquidity Facility over (2) the sum of Investment Earnings from any such Unpaid
Advance or Applied Downgrade Advance plus any amount of interest at the Past
Due Rate actually payable (whether or not in fact paid) by the Owner Trustee on
the overdue scheduled interest on the Equipment Notes in respect of which such
Unpaid Advance or Applied Downgrade Advance was made, multiplied by (y) a
fraction the
23
<PAGE> 29
[Trust Indenture and Security Agreement (1994 737 B)]
numerator of which shall be the then aggregate overdue amounts of interest on
the Series A Equipment Notes and Series B 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 Equipment Notes" and "Series B
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"). For purposes of this paragraph, the terms "Applied
Downgrade Advance", "Downgrade Advance", "Final Advance", "Investment Earnings"
and "Unpaid Advance" shall have the meanings specified in each Primary
Liquidity Facility or the Intercreditor Agreement referred to therein.
The Applicable Margin or the Applicable Rate for certain
Series of Equipment Notes may be adjusted under the following circumstances:
(a) in the case of the Series A and Series B
Equipment Notes, if the Lessee has failed to effect a Registration
Event (as defined in the Registration Rights Agreement) on or prior to
July 1, 1998, or if the Shelf Registration Statement (as defined in
the Registration Rights Agreement) ceases to be effective for more
than 60 days in any twelve-month period, whether or not consecutive,
the Applicable Margin shall be increased by .50% per annum from July
1, 1998, if no Registration Event has occurred, or from the 61st day
of such twelve-month period in the case of such Shelf Registration
Statement ceasing to be effective, until the Lessee effects a
Registration Event, or causes such Shelf Registration Statement to be
effective, as more particularly set forth in the Registration Rights
Agreement; and
(b) in the case of all Equipment Notes, effective
on the Final Expected Distribution Date, the Applicable Rate shall be
equal to the interest rate determined by the Reset Agent (as defined
in the Note Purchase Agreement) pursuant to Section 3(c) thereof, as
more particularly set forth in the Note Purchase Agreement.
Section 2.02. Execution and Authentication. (a) Equipment
Notes shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its President, a senior vice president, a vice
president, an assistant vice president, its treasurer or other authorized
officer.
(b) If any officer of the Owner Trustee executing an
Equipment Note no longer holds that office at the time such Equipment Note is
executed on behalf of the Owner Trustee, such Equipment Note shall be valid
nevertheless.
24
<PAGE> 30
[Trust Indenture and Security Agreement (1994 737 B)]
(c) At any time and from time to time after the execution
of the Equipment Notes, the Owner Trustee may deliver such Equipment Notes to
the Indenture Trustee for authentication and, subject to the provisions of
Section 2.10, the Indenture Trustee shall authenticate the Equipment Notes by
manual signature upon written orders of the Owner Trustee. Equipment Notes
shall be authenticated on behalf of the Indenture Trustee by any authorized
officer or signatory of the Indenture Trustee.
(d) An Equipment Note shall not be valid or obligatory
for any purpose or entitled to any security or benefit hereunder until executed
on behalf of the Owner Trustee by the manual or facsimile signature of an
officer of the Owner Trustee as provided in Section 2.02(a) and until
authenticated on behalf of the Indenture Trustee by the manual signature of an
authorized officer or signatory of the Indenture Trustee as provided in Section
2.02(c). Such signatures shall be conclusive evidence that such Equipment Note
has been duly executed, authenticated and issued under this Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Equipment Notes may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Equipment Notes
may be presented for payment or for exchange (the "Paying Agent"). The
Registrar shall keep a register (the "Register") with respect to the Equipment
Notes and to their transfer and exchange and the payments of Amortization
Amounts thereon, if any. The Indenture Trustee may appoint one or more
co-registrars (the "Co-Registrars") and one or more additional Paying Agents
for the Equipment Notes and the Indenture Trustee may terminate the appointment
of any Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
Section 2.04. Transfer and Exchange. At the option of the
Noteholder thereof, Equipment Notes may be exchanged for an equal aggregate
principal amount of other Equipment Notes of the same Series, maturity and type
and of any authorized denominations or transferred upon surrender of the
Equipment Notes to be exchanged or transferred at the principal corporate trust
office of the Indenture Trustee, or at any office or agency maintained for such
purpose pursuant to Section 2.03. Whenever any Equipment Notes are so
surrendered for exchange, the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver, the replacement Equipment Notes, dated
the same date as the Equipment Note or Equipment Notes being replaced which the
Noteholder making the exchange is entitled to receive.
25
<PAGE> 31
[Trust Indenture and Security Agreement (1994 737 B)]
All Equipment Notes issued upon any registration of transfer
or exchange of Equipment Notes shall be the valid obligations of the Owner
Trustee, evidencing the same obligations, and entitled to the same security and
benefits under this Agreement, as the Equipment Notes surrendered upon such
registration of transfer or exchange.
Every Equipment Note presented or surrendered for registration
of transfer or exchange shall (if so required by the Registrar) be duly
endorsed by, or be accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Noteholder thereof or his
attorney duly authorized in writing. Indenture Trustee may require such
evidence reasonably satisfactory to it as to the compliance of any such
transfer with the Securities Act, and the securities laws of any applicable
state. Each initial Noteholder and each transferee of an Equipment Note, by
its acceptance of an Equipment Note, agrees to be bound by and comply with the
provisions of the Participation Agreement, this Indenture, the Note Purchase
Agreement, and each other Fundamental Document applicable to a Noteholder.
No service charge shall be made to a Noteholder for any
registration of transfer or exchange of Equipment Notes, but the Registrar may,
as a condition to any transfer or exchange hereunder, 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.
The Registrar shall not be required to register the transfer
of or to exchange any Equipment Note called for redemption or purchase pursuant
to such Section 6.01 or 6.02.
Section 2.05. Noteholder Lists; Ownership of Equipment Notes.
(a) The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Lessee for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee quarterly on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Noteholders.
(b) Ownership of the Equipment Notes shall be proved by
the Register kept by the Registrar. Prior to due presentment for registration
of transfer of any Equipment Note, the Owner Trustee, the Owner Participant,
the Lessee, the Indenture Trustee,
26
<PAGE> 32
[Trust Indenture and Security Agreement (1994 737 B)]
the Paying Agent and the Registrar may deem and treat the Person in whose name
any Equipment Note is registered as the absolute owner of such Equipment Note
for the purpose of receiving payment of principal (including, subject to the
provisions herein regarding the applicable Record Dates, Amortization Amounts)
of, Break Amount, if any, Make-Whole Amount, if any, and interest on such
Equipment Note and for all other purposes whatsoever, whether or not such
Equipment Note is overdue, and none of the Owner Trustee, the Indenture
Trustee, the Paying Agent or the Registrar shall be affected by notice to the
contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen Equipment
Notes. If any Equipment Note shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Noteholder of
such Equipment Note, issue and execute, and the Indenture Trustee shall
authenticate and deliver, in replacement thereof, as applicable, a new
Equipment Note of the same Series and having the same maturity, payable to the
same Noteholder in the same principal amount and dated the same date as the
Equipment Note so mutilated, destroyed, lost or stolen. If the Equipment Note
being replaced has become mutilated, such Equipment Note shall be surrendered
to the Indenture Trustee. If the Equipment Note being replaced has been
destroyed, lost or stolen, the Noteholder of such Equipment Note shall furnish
to the Owner Trustee and the Indenture Trustee such security or indemnity as
may be required by it to save the Owner Trustee and the Indenture Trustee
harmless and evidence satisfactory to the Owner Trustee and the Indenture
Trustee of the destruction, loss or theft of such Equipment Note and of the
ownership thereof.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Equipment Notes surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Equipment Notes surrendered
for replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Equipment Notes.
Section 2.08. Payment on Equipment Notes. The principal
amount of, interest on, Break Amount, if any, 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 11:00
a.m., Chicago, Illinois time, on the due date of payment to the Indenture
Trustee at the Corporate Trust Department for distribution among the
Noteholders in the manner provided herein. The Owner Trustee shall not have
any responsibility for the distribution of such payment to any Noteholder.
Notwithstanding the foregoing or any provision in any Equipment Note to the
contrary, the Indenture Trustee will use reasonable efforts to pay or cause to
be paid, if so directed in writing by any Noteholder (with a copy to the Owner
Trustee), all amounts paid by the Owner Trustee hereunder and under such
Noteholder's Equipment Note or Equipment Notes to such
27
<PAGE> 33
[Trust Indenture and Security Agreement (1994 737 B)]
Noteholder or a nominee therefor (including all amounts distributed pursuant to
Article 3 of this Agreement) by transferring, or causing to be transferred, by
wire transfer of immediately available funds in Dollars, prior to 1:00 p.m.,
Chicago, Illinois time, on the due date of payment, to an account maintained by
such Noteholder with a bank located in the continental United States the amount
to be distributed to such Noteholder, for credit to the account of such
Noteholder maintained at such bank. If the Indenture Trustee 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
Indenture Trustee, in its individual capacity and not as trustee, agrees to
compensate such Noteholders for loss of use of funds at the Applicable Rate
until such payment is made and the Indenture Trustee shall be entitled to any
interest earned on such funds until such payment is made. Any payment made
hereunder shall be made free and clear of and without deduction for or on
account of all wire and like charges 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 Applicable
Trustee for cancellation promptly after such payment. Notwithstanding any
other provision of this Agreement to the contrary, the Indenture Trustee shall
not be required to make, or cause to be made, wire transfers as aforesaid prior
to the first Business Day on which it is practicable for the Indenture Trustee
to do so in view of the time of day when the funds to be so transferred were
received by it if such funds were received after 11:00 a.m., Chicago, Illinois
time, at the place of payment.
Section 2.09. Payment from Indenture Estate Only;
Non-Recourse Obligations. All amounts payable by the Indenture Trustee and the
Owner Trustee under the Equipment Notes and this Agreement shall be made only
from the income and proceeds of the Indenture Estate. Each Noteholder of an
Equipment Note, by its acceptance of such Equipment Note, agrees that (a) it
will look solely to the income and proceeds of the Indenture Estate for the
payment of such amounts, to the extent available for distribution to it as
herein provided, and (b) none of the Owner Trustee, the Owner Participant or
the Indenture Trustee is or shall be personally liable to the Noteholder of any
Equipment Note for any amount payable under such Equipment Note or this
Agreement or, except as expressly provided in this Agreement in the case of the
Owner Trustee and the Indenture Trustee, for any liability thereunder.
Except as expressly provided herein, State Street Bank and
Trust Company of Connecticut, National Association is entering into this
Agreement solely as Owner Trustee under the Trust Agreement and not in its
individual capacity, and in no case whatsoever shall State Street Bank and
Trust Company of Connecticut, National Association (or any entity acting as
successor trustee under the Trust Agreement) be personally liable for, or for
any loss in respect of, any statements, representations, warranties, agreements
or obligations hereunder or thereunder; provided that State Street Bank and
Trust Company of Connecticut,
28
<PAGE> 34
[Trust Indenture and Security Agreement (1994 737 B)]
shall be liable hereunder in its individual capacity, (i) for the performance
of its agreements in its individual capacity under Section 8 of the
Participation Agreement, (ii) for its own willful misconduct or gross
negligence and (iii) for the failure to use ordinary care in the disbursement
of funds. If a successor Owner Trustee is appointed in accordance with the
terms of the Trust Agreement and the Participation Agreement, such successor
Owner Trustee shall, without any further act, succeed to all of the rights,
duties, immunities and obligations hereunder, and its predecessor Owner Trustee
and State Street Bank and Trust Company of Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against State Street Bank and Trust Company of
Connecticut, National Association or such predecessor Owner Trustee for any
default by State Street Bank and Trust Company of Connecticut, National
Association or such predecessor Owner Trustee, respectively, in the performance
of its obligations hereunder prior to such appointment.
Section 2.10. Subordination. (a) The Indenture Trustee and,
by acceptance of its Equipment Notes of any Series, each Noteholder of such
Series, hereby agree that no payment or distribution shall be made on or in
respect of the amounts owed to such Noteholder 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 8.01(f) or (g) hereof,
except as expressly provided in Articles 2 and 3 hereof.
(b) By the acceptance of its Equipment Notes of any
Series (other than Series A), each Noteholder of such Series agrees that in the
event that such Noteholder, in its capacity as a Noteholder, shall receive any
payment or distribution on any amounts in respect of such Series which it is
not entitled to receive under this Section 2.10 or Article 3 hereof, it will
hold any amount so received in trust for the Senior Noteholder (as defined in
Section 2.10(c) hereof) and will forthwith turn over such payment to the
Indenture Trustee in the form received to be applied as provided in Article 3
hereof.
(c) As used in this Section 2.10, the term "Senior
Noteholder" shall mean, (i) the Noteholders of Series A until all amounts in
respect of the Series A Equipment Notes have been paid in full, (ii) after all
amounts in respect of Series A Equipment Notes have been paid in full, the
Noteholders of Series B until all amounts in respect of the Series B Equipment
Notes have been paid in full, (iii) after all amounts in respect of the Series
B Equipment Notes have been paid in full, the Noteholders of Series C until all
amounts in respect of the Series C Equipment Notes have been paid in full and
(iv) after all amounts in respect of the Series C Equipment Notes have been
paid in full, the Series D Equipment Notes.
29
<PAGE> 35
[Trust Indenture and Security Agreement (1994 737 B)]
Section 2.11. Termination of Interest in the Indenture
Estate. (a) No Noteholder or Indenture Indemnitee shall have any further
interest in, or other right with respect to, the Indenture Estate when and if
the principal amount of, Break Amount, if any, Make-Whole Amount, if any, and
interest on all Equipment Notes held by such Noteholder and all other sums
payable to such Noteholder or Indenture Indemnitee, as the case may be,
hereunder, under the Lease, such Equipment Notes and the Participation
Agreement by the Lessee, the Owner Participant and the Owner Trustee
(collectively, the "Secured Obligations") shall have been paid in full.
(b) It is understood and agreed that (i) neither this
Indenture nor the Indenture Estate secures any payment or performance
obligations of any party under the Note Purchase Agreement, (ii) the Secured
Obligations shall not include any of such payment or performance obligations
and (iii) the failure by Lessee to pay, perform or observe any of such payment
or performance obligations shall not constitute an Indenture Default or an
Indenture Event of Default (it being understood that the Owner Trustee's
obligation to pay an increased interest rate on the Equipment Notes pursuant to
the third paragraph of Section 2.01 hereof is a Secured Obligation).
Section 2.12. Withholding Taxes. The Indenture Trustee, as
agent for the Owner Trustee, shall exclude and withhold at the appropriate rate
from each payment of principal amount of, interest on, Break Amount, if any,
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 Indenture Trustee 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 Noteholders, 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 (but in no event later
than 30 days after the due date thereof) it will deliver to each Noteholder
(with a copy to the Owner Trustee) appropriate receipts and a U.S. Treasury
Form 1042-S and Form 8109 or Form 8109-B (or similar form at any relevant time
in effect) showing the payment thereof, together with such additional
documentary evidence as any such Noteholder may reasonably request from time to
time.
If a Noteholder which is a Non-U.S. Person has furnished to
the Indenture Trustee a properly completed, accurate and currently effective
U.S. Internal Revenue Service Form 1001 or W-8 (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
30
<PAGE> 36
[Trust Indenture and Security Agreement (1994 737 B)]
Equipment Note(s) held by such Noteholder is made (but prior to the making of
such payment), or in either of the two preceding calendar years or such other
previous period if such forms continue to apply under applicable law with
respect to the year in which such payment is made, and has not notified the
Indenture Trustee of the withdrawal or inaccuracy of such form prior to the
date of such payment (and the Indenture Trustee has no reason to believe that
any information set forth in such form is inaccurate), the Indenture Trustee
shall withhold only the amount, if any, required by law (after taking into
account any applicable exemptions properly claimed by the Noteholder) to be
withheld from payments hereunder or under the Equipment Notes held by such
Noteholder in respect of United States federal income tax. If a Noteholder (x)
which is a Non-U.S. Person has furnished to the Indenture Trustee a properly
completed, accurate and currently effective U.S. Internal Revenue Service Form
4224 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 or for any other period in which such
form applies under applicable law and in which a payment is made (but prior to
the making of any payment for such year or other period), and has not notified
the Indenture Trustee of the withdrawal or inaccuracy of such certificate or
form prior to the date of such payment (and the Indenture Trustee 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 Indenture Trustee 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 Noteholder, no amount shall be withheld from payments in respect
of United States federal income tax. If any Noteholder has notified the
Indenture Trustee that any of the foregoing forms or certificates is withdrawn
or inaccurate, or if such Noteholder has not filed a form claiming an exemption
from United States withholding tax which is applicable to any relevant period
in which a payment is made 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 Noteholder, the Indenture
Trustee agrees to withhold from each payment due to the relevant Noteholder
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 Trustee shall not have any liability for the failure of
the Indenture Trustee to withhold taxes in the manner provided for herein or
for any false, inaccurate or untrue evidence provided by any Noteholder
hereunder.
31
<PAGE> 37
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption or Purchase of
Equipment Notes. Except as otherwise provided in Section 3.05, in the event the
Equipment Notes are redeemed or purchased in accordance with the provisions of
Section 6.01, the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Lessee or the Owner Trustee in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Series A Equipment
Notes pursuant to Section 6.01 on the Redemption Date shall be applied
to the redemption or purchase of the Series A Equipment Notes on the
Redemption Date;
third, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Series B Equipment
Notes pursuant to Section 6.01 on the Redemption Date shall be applied
to the redemption or purchase of the Series B Equipment Notes on the
Redemption Date;
fourth, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Series C Equipment
Notes pursuant to Section 6.01 on the Redemption Date shall be applied
to the redemption or purchase of the Series C Equipment Notes on the
Redemption Date;
fifth, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Series D Equipment
Notes pursuant to Section 6.01 on the Redemption Date shall be applied
to the redemption or purchase of the Series D Equipment Notes on the
Redemption Date; and
32
<PAGE> 38
[Trust Indenture and Security Agreement (1994 737 B)]
sixth, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
Section 3.03. Application of Basic Rent. Except as otherwise
provided in Section 3.02, 3.04, 3.05 or 3.06, each amount of Basic Rent
received by the Indenture Trustee, any amount of interest on overdue
installments of Basic Rent and any amount received by the Indenture Trustee
pursuant to Section 8.03(e)(i) shall be promptly distributed by the Indenture
Trustee in the following order of priority:
first, (i) so much of such payment as shall be required
to pay in full the aggregate amount of the
payment or payments of principal amount and
interest (as well as any interest on any
overdue principal amount and, to the extent
permitted by applicable law, on any overdue
interest) then due under all Series A
Equipment Notes shall be distributed to the
Noteholders of Series A Equipment Notes
ratably, without priority of one over the
other, in the proportion that the amount of
such payment or payments then due under all
Series A Equipment Notes held by each such
Noteholder bears to the aggregate amount of
the payments then due under all Series A
Equipment Notes held by all such Noteholders;
(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 principal
amount and interest (as well as any interest
on any overdue principal amount and, to the
extent permitted by applicable law, on any
overdue interest) then due under all Series B
Equipment Notes shall be distributed to the
Noteholders of Series B Equipment Notes
ratably, without priority of one over the
other, in the proportion that the amount of
such payment or payments then due under all
Series B Equipment Notes held by each such
Noteholder bears to the aggregate amount of
the payments then due under all Series B
Equipment Notes held by all such Noteholders;
(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 principal
33
<PAGE> 39
[Trust Indenture and Security Agreement (1994 737 B)]
amount and interest (as well as any interest
on any overdue principal amount and, to the
extent permitted by applicable law, on any
overdue interest) then due under all Series C
Equipment Notes shall be distributed to the
Noteholders of Series C Equipment Notes
ratably, without priority of one over the
other, in the proportion that the amount of
such payment or payments then due under all
Series C Equipment Notes held by each such
Noteholder bears to the aggregate amount of
the payments then due under all Series C
Equipment Notes held by all such Noteholders;
and
(iv) after giving effect to paragraph (iii) above,
so much of such payment remaining as shall be
required to pay in full the aggregate amount
of the payment or payments of principal
amount and interest (as well as any interest
on any overdue principal amount and, to the
extent permitted by applicable law, on any
overdue interest) then due under all Series D
Equipment Notes shall be distributed to the
Noteholders of Series D Equipment Notes
ratably, without priority of one over the
other, in the proportion that the amount of
such payment or payments then due under all
Series D Equipment Notes held by each such
Noteholder bears to the aggregate amount of
the payments then due under all Series D
Equipment Notes held by all such Noteholders;
and
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement; provided that, during
the continuance of an Event of Default and prior to the outstanding
principal amount of the Equipment Notes becoming due and payable, the
balance shall be held by the Indenture Trustee as collateral security
for the obligations secured hereby; provided, further, that, at such
time as one or more Lease Events of Default shall have occurred and
any such Lease Event of Default shall have continued for a period of
180 days, such amounts shall be distributed to the Owner Trustee to be
distributed in accordance with the terms of the Trust Agreement so
long as no Event of Default exists other than by virtue of such Lease
Event of Default.
34
<PAGE> 40
[Trust Indenture and Security Agreement (1994 737 B)]
Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05,
any amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other party pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe whether or not in connection with an Event of Loss,
to the extent that such amounts are not at the time required to be paid to the
Lessee pursuant to said Section 10, and any amounts of insurance proceeds for
damage to the Indenture Estate received directly or otherwise pursuant to the
Lease from any insurer pursuant to Section 11 of the Lease with respect thereto
whether or not in connection with an Event of Loss, to the extent such amounts
are not at the time required to be paid to the Lessee pursuant to said Section
11, shall, except as otherwise provided in the next sentence, be applied by the
Indenture Trustee on behalf of the Owner Trustee in reduction of the Lessee's
obligations to pay Stipulated Loss Value and the other amounts payable by the
Lessee pursuant to Section 10 of the Lease for distribution under Section 3.02
hereof and the remainder, if any, shall, except as provided in the next
sentence, be distributed to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease. Any portion of any such amount referred
to in the preceding sentence which is not required to be so paid to the Lessee
pursuant to the Lease, solely because a Lease Event of Default shall have
occurred and be continuing, shall be held by the Indenture Trustee on behalf of
the Owner Trustee as security for the obligations of the Lessee under the Lease
and at such time as there shall not be continuing any Lease Event of Default or
such earlier time as shall be provided for in the Lease, such portion shall be
paid to the Owner Trustee to be held or distributed in accordance with the
terms of the Lease, unless the Indenture Trustee (as assignee from the Owner
Trustee of the Lease) shall have theretofore declared the Lease to be in
default pursuant to Section 15 thereof, in which event such portion shall be
distributed forthwith upon such declaration in accordance with the provisions
of Section 3.05 hereof.
Section 3.05. Payments During Continuance of Indenture Event
of Default. All payments (except Excluded Payments) received and amounts held
or realized by the Indenture Trustee after an Indenture Event of Default shall
have occurred and be continuing (including any amounts realized by the
Indenture Trustee from the exercise of any remedies pursuant to Article 8) and
the outstanding principal amount of the Equipment Notes shall have become due
and payable, as well as all payments or amounts then held or thereafter
received by the Indenture Trustee as part of the Indenture Estate while such
Indenture Event of Default shall be continuing, shall be distributed by the
Indenture Trustee in the following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
35
<PAGE> 41
[Trust Indenture and Security Agreement (1994 737 B)]
second, so much of such payments or amounts remaining as shall
be required to reimburse the then existing or prior Noteholders for
payments made pursuant to Section 9.06 hereof (to the extent not
previously reimbursed), shall be distributed to such then existing or
prior Noteholders ratably, without priority of one over the other, in
accordance with the amount of the payment or payments made by each
such then existing or prior Noteholder pursuant to said Section 9.06
hereof;
third, so much of such payments or amounts remaining as shall
be required to (i) pay, or reimburse the Indenture Trustee for, all
costs, losses, taxes and expenses (including, without limitation,
reasonable attorney's fees and expenses) incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, selling, leasing, disposing
of, controlling or managing the Indenture Estate, and in connection
with all maintenance, insurance, repairs, replacements, alterations,
additions and improvements of and to the Indenture Estate and in
connection with the protection, exercise, enforcement and
investigation into enforcement of any right, power or remedy available
to, or any damages sustained by, the Indenture Trustee, whether
liquidated or otherwise, and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Indenture
Estate or any part thereof (including the employment of engineers and
accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the
Lease, the Lessee) shall be applied for such purposes and (ii) pay, or
reimburse the other Indenture Indemnitees for, all Secured Obligations
payable to any of them; 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 accordance with
the amounts owed to each;
fourth, (i) so much of such payments or amounts remaining as
shall be required to pay in full the aggregate unpaid principal amount
of all Series A Equipment Notes, and the accrued but unpaid interest
and other amounts due thereon (including Break Amount, if any) and all
other Secured Obligations owed in respect of the Series A Equipment
Notes to the date of distribution, shall be distributed to the holders
of Series A Equipment Notes, and in case the aggregate amount so to be
distributed shall be insufficient to pay in full as aforesaid, then
ratably, without priority of one over the other, in the proportion
that the aggregate unpaid principal amount of all Series A Equipment
Notes held by each Noteholder plus the accrued but unpaid interest and
other amounts due hereunder or thereunder (including Break Amount, if
any) to the date of distribution, bears to the aggregate unpaid
principal amount of all Series A Equipment Notes held by all such
Noteholders plus the accrued but unpaid interest and other amounts due
thereon (including Break Amount, if any) to the date of distribution;
36
<PAGE> 42
[Trust Indenture and Security Agreement (1994 737 B)]
(ii) after giving effect to paragraph (i) above, so much of
such payments or amounts remaining as shall be required to pay in full
the aggregate unpaid principal amount of all Series B Equipment Notes,
and the accrued but unpaid interest and other amounts due thereon
(including Break Amount, if any) and all other Secured Obligations in
respect of the Series B Equipment Notes to the date of distribution,
shall be distributed to the holders of Series B Equipment Notes, and
in case the aggregate amount so to be distributed shall be
insufficient to pay in full as aforesaid, then ratably, without
priority of one over the other, in the proportion that the aggregate
unpaid principal amount of all Series B Equipment Notes held by each
Noteholder plus the accrued but unpaid interest and other amounts due
hereunder or thereunder (including Break Amount, if any) to the date
of distribution, bears to the aggregate unpaid principal amount of all
Series B Equipment Notes held by all such holders plus the accrued but
unpaid interest and other amounts due thereon (including Break 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 principal amount of all Series C Equipment Notes,
and the accrued but unpaid interest and other amounts due thereon
(including Break Amount, if any) and all other Secured Obligations in
respect of the Series C Equipment Notes (including Break Amount, if
any) to the date of distribution, shall be distributed to the
Noteholders of Series C Equipment Notes, and in case the aggregate
amount so to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the other, in
the proportion that the aggregate unpaid principal amount of all
Series C Equipment Notes held by each Noteholder plus the accrued but
unpaid interest and other amounts due hereunder or thereunder
(including Break Amount, if any) to the date of distribution, bears to
the aggregate unpaid principal amount of all Series C Equipment Notes
held by all such holders plus the accrued but unpaid interest and
other amounts due thereon (including Break Amount, if any) to the date
of distribution; and
(iv) after giving effect to paragraph (iii) above, so much of
such payments or amounts remaining as shall be required to pay in full
the aggregate unpaid principal amount of all Series D Equipment Notes,
and the accrued but unpaid interest and other amounts due thereon
(including Break Amount, if any) and all other Secured Obligations in
respect of the Series D Equipment Notes (including Break Amount, if
any) to the date of distribution, shall be distributed to the
Noteholders of Series D
37
<PAGE> 43
[Trust Indenture and Security Agreement (1994 737 B)]
Equipment Notes, and in case the aggregate amount so to be distributed
shall be insufficient to pay in full as aforesaid, then ratably,
without priority of one over the other, in the proportion that the
aggregate unpaid principal amount of all Series D Equipment Notes held
by each Noteholder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder (including Break Amount, if any)
to the date of distribution, bears to the aggregate unpaid principal
amount of all Series D Equipment Notes held by all such Noteholders
plus the accrued but unpaid interest and other amounts due thereon
(including Break Amount, if any) to the date of distribution; and
fifth, the balance, if any, of such payments or amounts
remaining thereafter shall be held by the Indenture Trustee as
collateral security for the obligations secured hereby until such time
as no Indenture Event of Default shall be continuing hereunder or the
Equipment Notes have been accelerated and all amounts due thereon or
payable with respect thereto have been paid, at which time such
payments or amounts shall be distributed to the Owner Trustee to be
held or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
No Make-Whole Amount shall be payable in connection with an
Indenture Event of Default or distributable under this Section 3.05.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. (a) Any payments received by the Indenture Trustee for which
no provision as to the application thereof is made in this Agreement and for
which such provision is made in the Lease or the Participation Agreement shall
be applied forthwith to the purpose for which such payment was made in
accordance with the terms of the Lease or the Participation Agreement, as the
case may be.
(b) Notwithstanding anything to the contrary contained in
this Article 3, the Indenture Trustee will distribute promptly upon receipt any
indemnity payment received by it from the Owner Trustee or the Lessee in
respect of the Indenture Trustee in its individual capacity, any Noteholder or
any other Indenture Indemnitee, in each case whether pursuant to Section 7 of
the Participation Agreement or as Supplemental Rent, directly to the Person
entitled thereto. Subject to the foregoing sentence of this Section 3.06(b),
any payment received by the Indenture Trustee under the second paragraph of
Section 2.01 shall be distributed to the Subordination Agent to be distributed
in accordance with the terms of the Intercreditor Agreement.
(c) Notwithstanding anything to the contrary contained in
this Article 3, any payments received by the Indenture Trustee which constitute
Excluded Payments shall be distributed promptly upon receipt by the Indenture
Trustee directly to the Person or Persons entitled thereto.
38
<PAGE> 44
[Trust Indenture and Security Agreement (1994 737 B)]
Section 3.07. Payments for Which No Application Is Otherwise
Provided. Except as otherwise provided in Section 3.06, any payment received
and amounts realized by the Indenture Trustee for which no provision as to the
application thereof is made elsewhere in this Agreement, shall be distributed
by the Indenture Trustee (a) to the extent received or realized at any time
prior to the payment in full of all Secured Obligations to the Noteholders, in
the order of priority specified in Section 3.03 hereof, and (b) to the extent
received or realized or realized after payment in full of all Secured
Obligations to the Noteholders, in the following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed in accordance with the terms of the
Trust Agreement.
Section 3.08. Application of Payments. Each payment of
principal or and interest or other amounts due on each Equipment Note shall,
except as otherwise provided herein, be applied, first, to the payment of
interest on such Equipment Note due and payable to the date of such payment, as
provided in such Equipment Note, as well as any interest on overdue principal,
Break Amount, if any, Make-Whole Amount, if any, and, to the extent permitted
by law, interest and other amounts due thereunder, second, to the payment of
any other amount (other than the principal of such Equipment Note) due
hereunder to the Noteholder of such Equipment Note or under such Equipment
Note, third, to the payment of the principal of such Equipment Note if then due
hereunder or under any such Equipment Note, and fourth, the balance, if any
remaining thereafter, to the principal of such Equipment Note remaining unpaid
(provided that such Equipment Note shall not be subject to prepayment without
the consent of the affected Noteholder except as permitted by Section 6.01
hereof).
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
39
<PAGE> 45
[Trust Indenture and Security Agreement (1994 737 B)]
(i) the Owner Trustee will duly and punctually
pay the principal of, Break Amount, if any, Make-Whole
Amount, if any, and interest on and other amounts due
under the Equipment Notes in accordance with, and
subject to, the terms of such Equipment Notes, this
Agreement and any related supplement hereto;
(ii) (A) the Owner Trustee, in its individual
capacity, will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Lien attributable
to it in its individual capacity with respect to any of
the properties or assets of the Indenture Estate and if
any such Lessor Lien shall nevertheless exist, it will
promptly, at its own expense, take such action as may be
necessary to duly discharge such Lessor Lien; and (B)
the Owner Trustee will, in its individual capacity,
perform all of its covenants and obligations set forth
in the Participation Agreement;
(iii) in the event an officer in the Corporate
Trust Department of the Owner Trustee shall have actual
knowledge of an Indenture Event of Default or Indenture
Default or an Event of Loss, the Owner Trustee will give
prompt written notice of such Indenture Event of Default
or Indenture Default or Event of Loss to the Indenture
Trustee, the Owner Participant and the Lessee;
(iv) except as contemplated by the Operative
Documents, the Owner Trustee will not contract for,
create, incur, assume or permit to exist any Debt, and
will not guarantee (directly or indirectly or by an
instrument having the effect of assuring another's
payment or performance on any obligation or capability
of so doing, or otherwise), endorse or otherwise be or
become contingently liable, directly or indirectly, in
connection with the Debt of any other Person; and
(v) the Owner Trustee will not enter into any
business or other activity other than owning the
Aircraft, the leasing thereof to the Lessee and the
carrying out of the transactions contemplated hereby and
by the Participation Agreement, the Trust Agreement and
the other Operative Documents.
40
<PAGE> 46
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the Lien of this
Agreement and be leased to the Lessee under the Lease; provided that,
to the extent permitted by and as provided in the Lease, the Lessee
shall have the right, at any time and from time to time, without any
release from or consent by the Owner Trustee or the Indenture Trustee,
to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft.
The Indenture Trustee agrees that, to the extent permitted by and as
provided in the Lease, title to any such Part shall vest in the
Lessee. The Indenture Trustee shall, upon written request by the
Lessee or the Owner Trustee, from time to time execute an appropriate
written instrument or instruments to confirm the release of the
security interest of the Indenture Trustee in any Part as provided in
this Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Lessee, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10(b) of the Lease, in the case of an Event of Loss which has occurred
to, or termination of the Lease with respect to, an Engine, substitute
an airframe or engine, as the case may be, in which case, upon
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and Lien in and to the Airframe or such Engine in
accordance with the provisions of the following two sentences. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its Lien in and to the Airframe or such Engine
and shall execute for recording in public offices, such instruments in
writing as the Owner Trustee or the Lessee shall reasonably request
and as shall be reasonably acceptable to the Indenture Trustee in
order to make clear upon public records that such lien has been
released under the laws of the applicable jurisdiction.
41
<PAGE> 47
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 6
REDEMPTION OF EQUIPMENT NOTES
Section 6.01. Redemption of Equipment Notes upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft or Airframe
and the Aircraft or Airframe is not replaced pursuant to Section 10(a)(ii) of
the Lease, each outstanding Equipment Note shall be redeemed in whole at a
redemption price equal to 100% of the outstanding principal amount of such
Equipment Note, the Break Amount, if any, together with accrued and unpaid
interest thereon to but excluding the applicable Redemption Date. No
Make-Whole Amount shall be payable in connection with a redemption under this
Section 6.01(a).
(b) If (i) the Lease shall be terminated by the Lessee at
its option pursuant to Section 9(b) of the Lease or upon the purchase of the
Aircraft by the Lessee at its option on a Special Purchase Option Date or the
EBO Date pursuant to Section 19(b) of the Lease (unless the Lessee shall have
elected to assume the rights and obligations of the Owner Trustee hereunder to
the extent and as provided for in Section 8(r) of the Participation Agreement)
or (ii) the Owner Trustee or the Owner Participant shall have given notice of
redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii), each outstanding Equipment Note shall be redeemed or purchased in
whole on the Redemption Date and at the Redemption Price determined pursuant to
Section 6.02 below. The Redemption Date for Equipment Notes to be redeemed or
purchased (X) pursuant to clause (i) of this Section 6.01(b) shall be (A) in
the case of a termination of the Lease pursuant to Section 9(b) thereof, the
third Business Day following the Lease Termination Date, if any, or, in the
case of purchase of the Aircraft by the Lessee pursuant to Section 19(b) of the
Lease, the applicable Special Purchase Option Date or EBO Date and (Y) pursuant
to clause (ii) of this Section 6.01(b), shall be the date specified in the
notice given by the Owner Trustee or the Owner Participant to the Indenture
Trustee pursuant to Section 8.03(e)(ii). If the Owner Trustee elects to
purchase the Equipment Notes under Section 8.03(e)(ii), nothing herein,
including use of the terms "Redemption Date" and "Redemption Price" shall be
deemed to result in a redemption of the Equipment Notes.
(c) All the outstanding Equipment Notes may be redeemed if
the Lessee shall have requested the Owner Trustee and the Owner Participant to
effect a redemption thereof pursuant to Section 17 of the Participation
Agreement as part of a refunding or refinancing, and if all the conditions to
such refunding or refinancing set forth in such Section 17 of the Participation
Agreement shall have been satisfied. In such event, each outstanding Equipment
Note may be so redeemed at a Redemption Price specified in Section 6.02;
provided, however, that the applicable Redemption Date for Equipment Notes to
be redeemed pursuant to this Section 6.01(c) shall be the applicable
Refinancing Date under Section 17 of the Participation Agreement.
42
<PAGE> 48
[Trust Indenture and Security Agreement (1994 737 B)]
Section 6.02. Redemption Price. If the Equipment Notes are
to be redeemed or purchased pursuant to Section 6.01 or 8.03(e)(ii), each
outstanding Equipment Note shall be redeemed or purchased in whole at a
Redemption Price equal to 100% of its principal amount plus the Break Amount,
if any, plus (except in connection with a redemption or purchase under Section
8.02(e)(ii)) Make-Whole Amount, if any, plus accrued and unpaid interest
thereon to but excluding the applicable Redemption Date as determined below.
Section 6.03. Notice of Redemption to Noteholders. Notice of
redemption or purchase pursuant to Section 6.01 or 6.02 shall be given by
first-class mail, postage prepaid, mailed not less than 26 nor more than 60
days prior to the Redemption Date, to each Noteholder of Equipment Notes to be
redeemed or purchased, at such Noteholder's address appearing in the Register;
provided, that such notice shall become irrevocable 26 days prior to the
applicable Redemption Date; provided that, in the case of a redemption pursuant
to Section 6.01(b)(i) related to Lessee's exercise of its option pursuant to
Section 9(b) of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination 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
interest on Equipment Notes shall cease to accrue on and after such
Redemption Date,
(4) an estimate of the amount of Break Amount, if any,
and/or Make-Whole Amount, if any, that will be payable with respect to
such redemption, and
(5) the place or places where such Equipment Notes are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Equipment Notes to be redeemed or purchased
shall be given by the Indenture Trustee.
43
<PAGE> 49
[Trust Indenture and Security Agreement (1994 737 B)]
Section 6.04. Deposit of Redemption Price. On or before the
Redemption Date, the Owner Trustee (or any person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Equipment Notes to be redeemed or purchased on the Redemption Date shall not
then be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 11:00 a.m., Chicago time, in
immediately available funds the Redemption Price of the Equipment Notes to be
redeemed or purchased on the Redemption Date.
Section 6.05. Equipment Notes Payable on Redemption Date.
Notice of redemption or purchase having been given as aforesaid (and not deemed
revoked as contemplated in the proviso to Section 6.03), the Equipment Notes
shall, on the applicable Redemption Date, become due and payable at the
Corporate Trust Department of the Indenture Trustee or at any office or agency
maintained for such purposes pursuant to Section 2.03, and from and after such
Redemption Date (unless there shall be a default in the deposit of the
Redemption Price pursuant to Section 6.04) any Equipment Notes then outstanding
shall cease to bear interest or be deemed to be outstanding for any other
purpose. Upon surrender of any such Equipment Note for redemption or purchase
in accordance with said notice such Equipment Note shall be paid at the
Redemption Price.
If any Equipment Note called for redemption or purchase shall
not be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Equipment Note.
Section 6.06. No Prepayment or Redemption. Except as
expressly provided in this Article 6 or as expressly provided in any supplement
to this Agreement, the Equipment Notes may not be redeemed or prepaid, in whole
or in part, prior to the respective maturities thereof.
ARTICLE 7
MATTERS CONCERNING THE LESSEE
Section 7.01. Repayment of Monies for Equipment Note Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Break Amount, if
any, Make-Whole Amount, if any, or interest on any Equipment Note, including
without limitation any money deposited pursuant to Section 6.03 or Article 10
and remaining unclaimed for two years after the due date for such payment,
shall be paid to the Owner Trustee. The Noteholders of any
44
<PAGE> 50
[Trust Indenture and Security Agreement (1994 737 B)]
outstanding Equipment Notes shall thereafter, as unsecured general creditors,
look only to the Lessee on behalf of the Owner Trustee for payment thereof, and
all liability of the Indenture Trustee or any such Paying Agent with respect to
such trust money shall thereupon cease; provided that the Indenture Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Lessee cause to be mailed to each such Noteholder notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of mailing, any unclaimed balance
of such money then remaining will be repaid to the Owner Trustee as provided
herein.
Section 7.02. Change in Registration. So long as no Default
under Section 14(a), (b), (f) or (g) of the Lease or any Indenture Event of
Default shall have occurred and be continuing and the Lien of this Indenture
shall not have been discharged, the Indenture Trustee shall, upon the request
of the Lessee and compliance with the applicable provisions of the next two
paragraphs, consent to the deregistration of the Aircraft under the laws of the
jurisdiction in which it is at the time registered and the registration of the
Aircraft under the laws of (i) any country listed on Exhibit F to the Lease
with which the United States then maintains normal diplomatic relations or, if
Taiwan, the United States then maintains diplomatic relations at least as good
as those in effect on the Closing Date (a "Scheduled Country"), or (ii) any
other country, in each case subject to the provisions hereof.
Prior to any such re-registration under the laws of a
Scheduled Country, the Indenture Trustee shall have received a favorable
opinion of counsel addressed to it to the effect that (i) the laws of the new
country of registration will recognize the Owner Trustee's right of ownership
with respect to the Aircraft and will give effect to the priority of the Lien
and security interest created by this Indenture, (ii) this Indenture and the
Indenture Trustee's Lien and right to repossession thereunder is valid and
enforceable under the laws of such country and (iii) the terms (including,
without limitation, the governing-law, service-of-process and
jurisdictional-submission provisions thereof) of the Indenture are legal,
valid, binding and enforceable in such jurisdiction.
Prior to any such re-registration under the laws of any
country other than the U.S. or a Scheduled Country, the Indenture Trustee shall
have received (x) a favorable opinion of counsel in the new jurisdiction of
registry covering the matters set forth in the preceding paragraph and to the
effect that (A) it is not necessary for the Indenture Trustee to register or
qualify to do business in such jurisdiction, (B) that there is no tort
liability of the lender of an aircraft not in possession thereof under the laws
of such jurisdiction other than tort liability which might have been imposed on
such lender under the laws of the United States or any state thereof (it being
understood that, such opinion shall be waived if insurance reasonably
satisfactory to Indenture Trustee is provided, at Lessee's expense, to cover
such risk), and (C) (unless Lessee shall have agreed to provide insurance
covering the risk of
45
<PAGE> 51
[Trust Indenture and Security Agreement (1994 737 B)]
requisition of use or title of the Aircraft by the government of such
jurisdiction so long as the Aircraft is registered under the laws of such
jurisdiction) that the laws of such jurisdiction require fair compensation by
the government of such jurisdiction payable in currency freely convertible into
Dollars for the loss of use or title of the Aircraft in the event of the
requisition by such government of such use or title and (y) assurances (A) to
the effect that the insurance or self-insurance provisions of the Indenture
have been complied with after giving effect to such change of registry, (B) to
the effect that the original indemnities (and any additional indemnities for
which the Lessee is then willing to enter into a binding agreement to
indemnify) in favor of the Indenture Trustee under the Indenture, afford each
such party substantially the same protection as provided prior to such change
of registry.
Section 7.03. Assumption of Obligations of Owner Trustee by
the Lessee. In the event that the Lessee shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement and the
Equipment Notes in connection with the purchase by the Lessee of the Aircraft
pursuant to Section 8(r) of the Participation Agreement and, if on or prior to
the Purchase Option Date:
(a) the Lessee shall have paid to the Owner Trustee all
amounts required to be paid to the Owner Trustee pursuant to Section
19(b) of the Lease in connection with such purchase and assumption and
shall have delivered to the Indenture Trustee an Officer's Certificate
to such effect;
(b) the Indenture Trustee shall have received an opinion or
opinions of counsel for the Lessee (which may be Lessee's General
Counsel), dated the Purchase Option Date, which (subject to customary
qualifications) shall be to the effect that, after giving effect to
the indenture supplement referred to below:
(i) this Agreement, as supplemented by the indenture
supplement described in clause (c) below, constitutes the
legal, valid and binding obligation of the Lessee, enforceable
against the Lessee in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of
equity, and except as limited by applicable laws which may
affect the remedies provided for in this Agreement, which
laws, however, do not in the opinion of such counsel make the
remedies provided for in this Agreement inadequate for the
practical realization of the rights and benefits provided for
in this Agreement;
(ii) the Aircraft is duly registered in compliance with
applicable law;
46
<PAGE> 52
[Trust Indenture and Security Agreement (1994 737 B)]
(iii) the indenture supplement described in clause (c)
below has been duly filed with the FAA and is in due form for
recording with the FAA, the Lien on the Aircraft constitutes a
fully perfected Lien and all other filing, recording or other
action (specifying the same) necessary to perfect and protect
the Lien of this Agreement has been accomplished;
(iv) the Indenture Trustee would be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect
to the Aircraft; provided that such opinion may contain
qualifications of the tenor contained in the opinion of
special counsel for the Lessee delivered pursuant to Section
3(a)(vii) in the Note Purchase Agreement;
(v) no Noteholder will be required to recognize
income, gain or loss for tax purposes in connection with such
assumption;
(c) the Lessee shall have executed and delivered an
indenture supplement hereto, dated the Purchase Option Date, whereby,
among other things:
(i) the Lessee shall assume all of the obligations of
the Owner Trustee with respect to the Equipment Notes as full
recourse obligations of the Lessee;
(ii) the Lessee shall reaffirm that it has acquired
the Aircraft and the Indenture Estate subject to the liens and
security interests granted pursuant to the Indenture with
respect to the Indenture Estate;
(iii) the Lessee shall warrant and covenant to defend
its title to the Indenture Estate and the validity, perfection
and priority of the Lien granted pursuant to this Agreement,
as supplemented by the indenture supplement executed and
delivered by the Lessee;
(iv) the Lessee shall covenant to: (A) (1) register,
maintain, use and operate, reregister, possess and place
appropriate insignia on the Aircraft only as would be
permitted pursuant to Section 7 of the Lease, (2) maintain
insurance coverage as and to the extent as would be required
by Section 11 of the Lease, (3) apply insurance and
requisition proceeds in the manner as would be required by
Section 10 of the Lease, and (4) make any replacements,
pooling arrangements, alterations, modifications, and
additions as would be permitted by Section 8 of the Lease, in
each case, with such changes as may be appropriate to reflect
the ownership of the Aircraft by the Lessee and the
termination of the Lease, (b) not directly or indirectly
create, incur, assume,
47
<PAGE> 53
[Trust Indenture and Security Agreement (1994 737 B)]
permit or suffer to exist any Liens with respect to the
Indenture Estate other than Permitted Liens, and (C) pay all
taxes, fees and charges in connection with its purchase of the
Aircraft, termination of the Lease and assumption of the
Equipment Notes, including, without limitation, in connection
with the maintenance and perfection of the Indenture Trustee's
security interest in the Aircraft and the Indenture Estate;
(v) additional Indenture Events of Default will be
added substantially equivalent to, and consistent with, the
Lease Events of Default contained in Section 14 of the Lease;
and
(vi) such terms, covenants, conditions and provisions
of this Agreement shall be deleted as reasonably requested by
the Indenture Trustee and such terms, covenants, conditions
and provisions of the Lessee shall be added substantially
equivalent to, and consistent with, the obligations of the
Lessee under the Operative Documents;
(d) after giving effect to the indenture supplement
described in clause (c) above, no Indenture Event of Default or
Indenture Default under Section 8.01(a), (f) or (g) shall have
occurred and be continuing immediately subsequent to such purchase and
assumption and the Indenture Trustee shall have received an officer's
certificate from the Lessee, dated the Purchase Option Date, to such
effect;
(e) the purchase and assumption shall comply in all material
respects with all applicable laws, including, without limitation,
securities laws;
(f) after giving effect to such purchase and assumption, no
Lien other than Permitted Liens shall exist upon the Indenture Estate
and the Indenture Trustee shall have received evidence of the
insurances required to be maintained by the Lessee as set forth in the
indenture supplement described in clause (c) above; and
(g) the Indenture Trustee shall have received evidence of
all filings, recordings and other actions referred to in the opinions
of counsel described above.
then, automatically and without the requirement of further action by
any Person, effective as of the Purchase Option Date, the Owner
Trustee shall be released from all of its obligations under the
Agreement in respect of the Equipment Notes or otherwise (other than
any obligations or liabilities of the Owner Trustee in its individual
capacity incurred on or prior to the Purchase Option Date or arising
out of or based upon events occurring on or prior to the Purchase
Option Date, which obligations and liabilities shall remain the sole
responsibility of the Owner Trustee).
48
<PAGE> 54
[Trust Indenture and Security Agreement (1994 737 B)]
If, concurrent with an assumption pursuant to this Section
7.03, the Aircraft is being reregistered the Lessee must comply with the
provisions of Section 7.02 hereof.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. Subject to
Section 2.11(b), the following events shall constitute "Indenture Events of
Default" under this Agreement (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(a) Owner Trustee shall fail to pay (i) any amount of
principal, Break Amount, if any, Make-Whole Amount, if any, or
interest on any Equipment Note when due and payable by the Owner
Trustee under such Equipment Note (whether upon redemption or
purchase, final maturity, acceleration or otherwise) and such failure
shall continue unremedied for 10 days after such amount shall have
become due and payable by the Owner Trustee under such Equipment Note
or (ii) any other amount payable by Owner Trustee hereunder or under
the Participation Agreement to any Noteholder or any Indenture
Indemnitee when due and payable and such failure shall continue
unremedied for 15 days after receipt by Owner Trustee of written
notice from the Indenture Trustee; provided that, in each case, if
such failure to pay results from a Lease Default or Lease Event of
Default, then such failure to pay shall for all purposes of this
Indenture be an Event of Default under Section 8.01(e) and not this
Section 8.01(a); or
(b) any Lien or encumbrance required to be discharged by the
Owner Trustee, in its individual capacity or by the Owner Participant
pursuant to Section 8(g) of the Participation Agreement shall remain
undischarged for a period of 30 calendar days after notice thereof has
been given by the Indenture Trustee to the Owner Trustee and the Owner
Participant; or
(c) other than as provided in paragraphs (a) or (b) above,
any failure by the Owner Trustee, in its individual capacity or as
Owner Trustee, to observe or perform any other covenant or obligation
of the Owner Trustee for the benefit of the Noteholders or any
Indenture Indemnitee contained in this Agreement, any Equipment
49
<PAGE> 55
[Trust Indenture and Security Agreement (1994 737 B)]
Note, or the Participation Agreement or any failure by the Owner
Participant to observe or perform any other covenant or obligation of
the Owner Participant for the benefit of the Noteholders or any
Indenture Indemnitee contained in the Participation Agreement which
failure is not remedied within a period of 30 days after there has
been given to the Owner Trustee and the Owner Participant by
registered or certified mail, a written notice specifying such failure
and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder, by the Indenture Trustee or, subject to
Section 2.6 of the Intercreditor Agreement, by the Noteholders of at
least 25% in principal amount of outstanding Equipment Notes;
provided, however, that, if the Owner Trustee, in its individual
capacity or as Owner Trustee, or the Owner Participant shall have
undertaken to cure any such failure and, notwithstanding the
reasonable diligence of any of them in attempting to cure such
failure, such failure is not cured within said 30 day period but is
curable with future due diligence, there shall exist no Indenture
Event of Default as a consequence of such failure so long as the Owner
Trustee in its individual capacity or as Owner Trustee or the Owner
Participant is proceeding with due diligence to cure such failure,
there exists no adverse effect on the Lien of this Agreement and such
failure is in fact cured within a further period of 90 days; or
(d) any representation or warranty made by the Owner
Trustee, in its individual capacity or as Owner Trustee, or by the
Owner Participant under the Participation Agreement, or by the Owner
Trustee hereunder, or by the Owner Trustee, in its individual capacity
or as Owner Trustee, or by the Owner Participant in any document or
Equipment Note furnished to the Indenture Trustee in connection
herewith or therewith or pursuant hereto or hereto, shall prove at any
time to have been incorrect in any material respect as of the date
made and such incorrectness shall remain material at the date of the
notice referred to below and such incorrectness shall continue
unremedied for a period of 30 days after there has been given to the
Owner Trustee and the Owner Participant by registered or certified
mail, a written notice specifying such incorrectness and requiring it
to be remedied and stating that such notice is a "Notice of Default"
hereunder, by the Indenture Trustee or, subject to Section 2.6 of the
Intercreditor Agreement, by the Noteholders of at least 25% in
principal amount of outstanding Equipment Notes; or
(e) there shall be a Lease Event of Default other than any
such Lease Event of Default arising by reason of nonpayment of any
Excluded Payments when due; or
(f) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or the Owner Participant
50
<PAGE> 56
[Trust Indenture and Security Agreement (1994 737 B)]
Guarantor, if any, as the case may be, shall (i) file, or consent by
answer or otherwise to the filing against it of a petition for relief
or reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, (ii) make an assignment for the benefit of
its creditors, or (iii) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers of itself or
any substantial part of its property; provided that an event referred
to in this Section 8.01(f) with respect to the Owner Participant shall
not constitute an Indenture Event of Default if, within 30 days, an
order, judgment or decree shall be entered in a proceeding by a court
or a trustee, custodian, receiver or liquidator which is either final
and non-appealable or has not been stayed pending any appeal, to the
effect that no part of the Trust Estate created by the Trust Agreement
(except for the Owner Participant's beneficial interest in such Trust
Estate) and no right, title or interest under the Indenture Estate
shall be included in, or be subject to, any declaration or
adjudication of, or proceedings with respect to the bankruptcy,
insolvency or liquidation of the Owner Participant referred to in this
Section 8.01(f); or
(g) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Indenture Estate or the Owner Trustee with respect thereto (and not in
its individual capacity) or the Owner Participant or the Owner
Participant Guarantor, if any, as the case may be, a custodian,
receiver, trustee or other officer with similar powers with respect to
it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Indenture Estate or the Owner Trustee with respect thereto (and
not in its individual capacity) or the Owner Participant or the Owner
Participant Guarantor, if any, as the case may be, and any such order
or petition is not dismissed or stayed within 90 days after the
earlier of the entering of any such order or the approval of any such
petition; provided that an event referred to in this Section 8.01(g)
with respect to the Owner Participant shall not constitute an
Indenture Event of Default if, within 30 days, an order, judgment or
decree shall be entered in a proceeding by a court or a trustee,
custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending an appeal, to the effect
that no part of the Trust Estate created by the Trust Agreement
(except for the Owner Participant's beneficial interest in such Trust
Estate) and no right, title or interest under the Indenture Estate
shall be included in, or be subject to, any declaration or
adjudication of, or proceedings with respect to, the bankruptcy,
insolvency or liquidation of the Owner Participant referred to in this
Section 8.01(g).
51
<PAGE> 57
[Trust Indenture and Security Agreement (1994 737 B)]
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default under Section 8.01(f) or 8.01(g) or a Lease Event of
Default under Section 14(f) or 14(g) of the Lease shall have occurred and is
continuing, then the principal of the Equipment Notes, together with accrued
but unpaid interest thereon, and all other amounts due thereunder and hereunder
shall immediately become due and payable without presentment, demand, protest
or notice, all of which are hereby waived, and if any other Indenture Event of
Default occurs and is continuing, either the Indenture Trustee, by notice to
the Lessee and the Owner Trustee or, subject to Section 2.6 of the
Intercreditor Agreement, Noteholders of at least 25% in principal amount of
outstanding Equipment Notes, by notice to the Lessee, the Indenture Trustee,
the Owner Trustee and the Owner Participant, may declare the principal of all
the Equipment Notes to be immediately due and payable. Upon such declaration,
the principal of all Equipment Notes together with accrued interest thereon
from the date in respect of which interest was last paid hereunder to the date
payment of such principal has been made or duly provided for, and Break Amount,
if any, but without Make-Whole Amount, shall be immediately due and payable
without presentment, demand, protest or other notice, all of which are hereby
waived. At any time after such declaration and prior to the sale or
disposition of the Indenture Estate, a Majority-in-Interest of Noteholders, by
notice to the Indenture Trustee, the Lessee, the Owner Trustee and the Owner
Participant, may rescind such a declaration and thereby annul its consequences
if (i) an amount sufficient to pay all principal on any Equipment Notes which
have become due otherwise than by such declaration and any interest thereon and
interest due or past due, if any, and all sums due and payable to the Indenture
Trustee have been deposited with the Indenture Trustee, (ii) the rescission
would not conflict with any judgment or decree and (iii) all existing Indenture
Defaults and Indenture Events of Default under this Agreement have been cured
or waived except nonpayment of principal of, or interest on, the Equipment
Notes that has become due solely because of such acceleration. No such
rescission shall affect any subsequent default or impair any right consequent
thereon.
Section 8.03. Other Remedies Available to Indenture Trustee.
(a) After an Indenture Event of Default shall have occurred and so long as
such Indenture Event of Default shall be continuing, then and in every such
case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b), 8.03(e), 8.03(f) and
8.03(h), any or all of the rights and powers and pursue any and all of the
remedies accorded to the Owner Trustee pursuant to Section 15 of the Lease and
this Article 8, may recover judgment in its own name as Indenture Trustee
against the Indenture Estate and may take possession of all or any part of the
Indenture Estate and may exclude the Owner Trustee and the Owner Participant
and all Persons claiming under any of them wholly or partly therefrom.
52
<PAGE> 58
[Trust Indenture and Security Agreement (1994 737 B)]
(b) After an Indenture Event of Default shall have occurred
and so long as such Indenture Event of Default shall be continuing, subject to
Sections 8.03(e), 8.03(f) and 8.03(h), the Indenture Trustee may, if at the
time such action may be lawful and always subject to compliance with any
mandatory legal requirements, either with or without taking possession, and
either before or after taking possession and without instituting any legal
proceedings whatsoever, and having first given notice of such sale, assignment,
transfer and/or delivery by registered mail to the Owner Trustee, the Owner
Participant and the Lessee at least 30 days prior to the date of such sale, and
any other notice which may be required by law, sell, assign, transfer, deliver
and dispose of the Indenture Estate, or any part thereof, or interest therein,
at public auction or private sale, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that, notwithstanding any provision
herein to the contrary, the Indenture Trustee may not provide the notice
provided for above of its intention to sell, assign, transfer or deliver any of
the Indenture Estate, exercise remedies under the Lease or exercise other
remedies against the Indenture Estate seeking to deprive the Owner Trustee or
the Owner Participant of its rights therein unless a declaration of
acceleration has been made pursuant to Section 8.02 or the Equipment Notes have
otherwise theretofore become due and payable through redemption or otherwise.
Any such sale or sales may be adjourned from time to time by announcement at
the time and place appointed for such sale or sales, or for any such adjourned
sale or sales, without further notice, and the Indenture Trustee and the
Noteholder or Noteholders of any Equipment Notes, or any interest therein, may
bid and become the purchaser at any such sale and each Noteholder shall be
entitled at any sale to credit against any purchase price bid at such sale by
such Noteholder all or any part of the unpaid Secured Obligations owing to such
Noteholder secured by the Lien of this Indenture. No such sale may be
consummated if the Owner Trustee or the Owner Participant shall, prior to the
consummation thereof, have given notice pursuant to and made the deposit
required by, and in accordance with, Section 8.03(e)(ii). The Indenture
Trustee may exercise such right without possession or production of the
Equipment Notes or proof of ownership thereof, and as representative of the
Noteholders may exercise such right without notice to the Noteholders or
including the Noteholders as parties to any suit or proceeding relating to
foreclosure of any property in the Indenture Estate. The Owner Trustee hereby
irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose of effectuating any sale, assignment, transfer or
delivery for enforcement of the lien created under this Agreement, whether
pursuant to foreclosure or power of sale or otherwise, to execute and deliver
all such bills of sale, assignments and other instruments as the Indenture
Trustee may consider necessary or appropriate, with full power of substitution,
the Owner Trustee hereby ratifying and confirming all that such attorney or any
substitute shall lawfully do by virtue hereof. Nevertheless, if so requested
by
53
<PAGE> 59
[Trust Indenture and Security Agreement (1994 737 B)]
the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery, by executing and
delivering to the Indenture Trustee or such purchaser all bills of sale,
assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
(c) Subject to Sections 8.03(b), 8.03(e), 8.03(f) and
8.03(h) if an Indenture Event of Default has occurred and is continuing, the
Owner Trustee shall, at the request of the Indenture Trustee, promptly execute
and deliver to the Indenture Trustee such instruments of title or other
documents as the Indenture Trustee may deem necessary or advisable to enable
the Indenture Trustee or an agent or representative designated by the Indenture
Trustee, at such time or times and place or places as the Indenture Trustee may
specify, to obtain possession of all or any part of the Indenture Estate. If
the Owner Trustee shall for any reason fail to execute and deliver such
instruments and documents after such request by the Indenture Trustee, the
Indenture Trustee shall be entitled, in a proceeding to which the Owner Trustee
will be a necessary party, to a judgment for specific performance of the
covenants contained in the foregoing sentence, conferring upon the Indenture
Trustee the right to immediate possession and requiring the Owner Trustee to
execute and deliver such instruments and documents to the Indenture Trustee.
The Indenture Trustee shall also be entitled to pursue all or any part of the
Indenture Estate wherever it may be found and may enter any of the premises of
the Owner Trustee or any other Person wherever the Indenture Estate may be or
be supposed to be and search for the Indenture Estate and take possession of
any item of the Indenture Estate pursuant to this Section 8.03(c). The
Indenture Trustee may, from time to time, at the expense of the Indenture
Estate, make all such expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the Indenture
Estate, as it may deem proper. In each such case, the Indenture Trustee shall
have the right to maintain, use, insure, operate, store, lease, control or
manage the Indenture Estate, and to carry on business and exercise all rights
and powers of the Owner Trustee relating to the Indenture Estate as the
Indenture Trustee shall deem appropriate, including the right to enter into any
and all such agreements with respect to the maintenance, use, insurance,
operation, storage, leasing, control or management of the Indenture Estate or
any part thereof; and the Indenture Trustee shall be entitled to collect and
receive directly all tolls, rents (including Rent), issues, profits, products,
revenues and other income of the Indenture Estate and every part thereof,
without prejudice, however, to the right of the Indenture Trustee under any
provision of this Agreement to collect and receive all cash held by, or
required to be deposited with, the Indenture Trustee hereunder. In accordance
with the terms of this Section 8.03(c), such tolls, rents (including Rent),
issues, profits, products, revenues and other income shall be applied to pay
the expenses of using, operating, storing, leasing, controlling or managing the
Indenture Estate, and of all maintenance, insurance, repairs, replacements,
alterations, additions and improvements, and to make all payments which the
Indenture Trustee may be required or may elect to make, if
54
<PAGE> 60
[Trust Indenture and Security Agreement (1994 737 B)]
any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate 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 Trustee and, to the extent permitted by the Lease, the
Lessee), and all other payments which the Indenture Trustee may be required or
authorized to make under any provision of this Agreement, including this
Section 8.03(c), as well as just and reasonable compensation for the services
of the Indenture Trustee, and of all persons properly engaged and employed by
the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Noteholders or any other
Person upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
(d) Subject to Sections 8.03(b), 8.03(e), 8.03(f) and
8.03(h), the Indenture Trustee may proceed to protect and enforce this
Agreement and the Equipment Notes by suit or suits or proceedings in equity, at
law or in bankruptcy, and whether for the specific performance of any covenant
or agreement herein contained or in execution or aid of any power herein
granted; or for foreclosure hereunder, or for the appointment of a receiver or
receivers for the Indenture Estate or any part thereof, or for the recovery of
judgment for the indebtedness secured by the Lien created under this Agreement
or for the enforcement of any other proper, legal or equitable remedy available
under applicable law.
(e) (i) If the Lessee shall fail to make any payment
of Basic Rent under the Lease when the same shall become due, and if
such failure of the Lessee to make such payment of Basic Rent shall
not constitute the seventh consecutive failure to pay Basic Rent prior
to the expiration of the grace period provided for in Section 14(a) of
the Lease or the thirteenth or subsequent cumulative such failure,
then as long as no Indenture Event of Default (other than arising from
a Lease Event of Default not involving any failure to make any
payments to which the Indenture
55
<PAGE> 61
[Trust Indenture and Security Agreement (1994 737 B)]
Trustee or any Noteholder is entitled hereunder when due) shall have
occurred and be continuing, the Owner Participant or the Owner Trustee
may (but need not) pay to the Indenture Trustee, at any time prior to
the day which is the later of (x) the 11th day subsequent to notice of
such failure by the Indenture Trustee to the Owner Trustee or the
Owner Participant and (y) the sixth day subsequent to the expiration
of the grace period provided for in Section 14(a) of the Lease with
respect to the payment of Basic Rent (and the Indenture Trustee shall
not (without the prior written consent of the Owner Trustee) declare
the Lease in default pursuant to Section 15 thereof or exercise any of
the rights, powers or remedies pursuant to such Section 15 or this
Article 8 prior to the occurrence of such later date), an amount equal
to the full amount of such payment of Basic Rent, together with any
interest due thereon on account of the delayed payment thereof to the
date of such payment, and such payment by the Owner Participant or the
Owner Trustee shall be deemed to cure as of the date of such payment
any Indenture Event of Default which arose from such failure of the
Lessee (including any Lease Event of Default arising from the Lessee's
failure to pay interest in respect of such overdue Basic Rent for the
period commencing on the date of such payment), but such cure shall
not relieve the Lessee of any of its obligations. If the Lessee shall
fail to perform or observe any covenant, condition or agreement to be
performed or observed by it under the Lease (other than the obligation
to pay Basic Rent), and if (but only if) the performance or observance
thereof can be effected by the payment of money alone (it being
understood that actions such as the obtaining of insurance and the
procurement of maintenance services can be so effected), then as long
as no other Indenture Event of Default (other than those arising from
such Lease Event of Default) shall have occurred and be continuing,
the Owner Participant or the Owner Trustee may (but need not) pay to
the Indenture Trustee (or to such other Person as may be entitled to
receive the same), at any time prior to the day which is the later of
(x) the 11th day subsequent to notice of such failure by the Indenture
Trustee to the Owner Trustee or the Owner Participant and (y) the
sixth day subsequent to the expiration of the grace period, if any,
provided with respect to such failure on the part of the Lessee in
Section 14 of the Lease (and the Indenture Trustee shall not (without
the prior written consent of the Owner Trustee) declare the Lease in
default pursuant to Section 15 thereof or exercise any of the rights,
powers or remedies pursuant to Section 15 of the Lease or this Article
8 prior to the occurrence of such later date), all sums necessary to
effect the performance or observance of such covenant or agreement of
the Lessee, together with any interest due thereon on account of the
delayed payment thereof to the date of such payments and such payment
by the Owner Participant or the Owner Trustee shall be deemed to cure
as of the date of such payment any Indenture Event of Default which
arose from such failure of the Lessee (including any Lease Event of
Default arising from the Lessee's failure to pay interest in respect
of such overdue payment for the period commencing
56
<PAGE> 62
[Trust Indenture and Security Agreement (1994 737 B)]
on the date of such payment), but such cure shall not relieve the
Lessee of any of its obligations. Upon any payment of Basic Rent by
the Owner Participant or the Owner Trustee in accordance with the
first sentence of this Section 8.03(e)(i), or upon any payment of any
other sums by the Owner Participant or the Owner Trustee in accordance
with the second sentence of this Section 8.03(e)(i), the Owner
Participant or the Owner Trustee shall, to the extent of their
respective payments, be subrogated, in the case of any such payment in
accordance with such first sentence, to the rights of the Indenture
Trustee, as assignee hereunder of the Owner Trustee, or, in the case
of any such payment in accordance with such second sentence, to the
rights of the Indenture Trustee (but shall have no rights as secured
party hereunder) or such other Person as the case may be, which
actually received such payment, to receive such payment of Basic Rent
or such other payment, as the case may be (and any interest due
thereon on account of the delayed payment thereof), and shall be
entitled to receive such payment upon its receipt by the Indenture
Trustee or such other Person, as aforesaid (but in each case only if
all amounts of principal of, and interest at the time due and payable
on, the Equipment Notes together with interest due thereon on account
of the delayed payment thereof shall have been paid in full; provided
that neither the Owner Participant nor the Owner Trustee shall attempt
to recover any such amount paid by it on behalf of the Lessee pursuant
to this Section 8.03(e)(i) except by demanding of the Lessee payment
of such amount or by proceeding by appropriate court action against
the Lessee to enforce the payment of such amount pursuant to Section
15(f), but only said Section 15(f), of the Lease.
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing for a
period of 120 days or more and no Indenture Event of Default (other
than arising out of such Lease Event(s) of Default) shall have
occurred and is continuing, or (B) the Equipment Notes shall have been
become due and payable pursuant to Section 8.02 or (C) Owner
Participant has received notice from the Indenture Trustee that the
Indenture Trustee intends to foreclose the Lien of this Indenture or
after the Indenture Trustee has elected to exercise any other remedy
specified in Sections 8.02 or 8.03 hereof or Section 15 of the Lease
(and the Indenture Trustee hereby agrees that, without limiting the
other provisions of this Indenture, it may not exercise any such other
remedy prior to 10 days after it has given notice to the Owner
Participant of its intention to exercise such other remedy), the Owner
Trustee or the Owner Participant may, at its option, give at least 26
days' prior irrevocable notice to the Indenture Trustee that the Owner
Trustee or the Owner Participant will redeem or purchase all Equipment
Notes then outstanding on the date specified in such notice and,
concurrently with such notice, the Owner Trustee or the Owner
Participant will deposit with the Indenture Trustee an amount
sufficient to redeem or purchase at the applicable Redemption Price
57
<PAGE> 63
[Trust Indenture and Security Agreement (1994 737 B)]
determined consistently with the applicable provisions of Article 6
all Equipment Notes then outstanding (including an estimate of the
Break Amount to be paid on the Redemption Date determined as if the
Redemption Date were the date of such notice (unless the payment date
specified in such notice is a Payment Date, in which case the Break
Amount shall be zero)) and to pay the Indenture Trustee all amounts
then due it hereunder, which funds shall be held by the Indenture
Trustee as provided in Section 9.04. Upon the giving of such notice
and the receipt by the Indenture Trustee of such deposit, the
Indenture Trustee shall (y) deem all instructions received from the
Owner Trustee as having been given by the Noteholders of 100% of the
outstanding principal amount of Equipment Notes for all purposes of
this Indenture and (z) shall not declare the Lease in default pursuant
to Section 15 thereof or exercise any of the rights, powers or
remedies pursuant to such Section 15 or this Article 8 prior to the
occurrence of the applicable Redemption Date. If such notice is
given, the Owner Trustee further agrees that it will deposit or cause
to be deposited with the Indenture Trustee, on or prior to the
Business Day preceding the applicable Redemption Date, whether or not
an Indenture Event of Default is then continuing, funds sufficient,
when added to the funds already held by the Indenture Trustee for such
purpose, to redeem or purchase at the applicable Redemption Price
(including the Break Amount actually payable in respect thereof) on
such Redemption Date all Equipment Notes then outstanding and to pay
the Indenture Trustee all amounts then due it hereunder. No
Make-Whole Amount shall be payable by the Owner Trustee or the Owner
Participant in connection with a redemption or purchase of the
Equipment Notes under this Section 8.03(e)(ii).
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an Indenture Event of Default which arises
solely by reason of one or more events or circumstances which constitute a
Lease Event of Default unless the Indenture Trustee as security assignee of the
Owner Trustee shall have exercised or concurrently be exercising one or more of
the dispossessory remedies provided for in Section 15(a)-(f) of the Lease with
respect to the Aircraft; provided, however, that such requirement to exercise
one or more of such remedies under the Lease shall not apply in circumstances
where the Indenture Trustee is, and has been, for a continuous period in excess
of 60 days or such other period as may be specified in section 1110(a)(l)(A) of
the Bankruptcy Code (such 60-day or other period being the "Section 1110
Period"), involuntarily stayed or prohibited by applicable law or court order
from exercising such remedies under the Lease (a "Continuous Stay Period");
provided further, however, that the requirement to exercise one or more of such
remedies under the Lease shall nonetheless be applicable during a Continuous
Stay Period subsequent to the expiration of the Section 1110 Period to the
extent that the continuation of such Continuous Stay Period subsequent to the
expiration of the Section 1110 Period (A) results from an
58
<PAGE> 64
[Trust Indenture and Security Agreement (1994 737 B)]
agreement by the trustee or the debtor-in possession in such proceeding during
the Section 1110 Period with the approval of the relevant court to perform the
Lease in accordance with Section 1110(a)(1)(A) of the Bankruptcy Code and
continues to perform as required by Section 1110(a)(1)(A-B) of the Bankruptcy
Code or (B) is an extension of the Section 1110 Period with the consent of the
Indenture Trustee pursuant to Section 1110(b) of the Bankruptcy Code or (C)
results from the Lessee's assumption during the Section 1110 period with the
approval of the relevant court of the Lease pursuant to Section 365 of the
Bankruptcy Code or (D) is the consequence of the Indenture Trustee's own
failure to give any requisite notice to any person (unless the Indenture
Trustee is stayed or otherwise precluded by applicable law from giving such
notice) or (E) is pursuant to a judicial stay pending the resolution of
litigation with respect to the applicability of Section 1110 of the Bankruptcy
Code and there is either no Lease Event of Default other than one arising
solely from the Lessee's bankruptcy or any such other Lease Event of Default
has been cured; provided further, however, that the requirement to exercise one
or more of such remedies under the Lease during a Continuous Stay Period
subsequent to the expiration of the Section 1110 period based upon a judicial
stay as provided for in this clause (E) shall in any event cease to be
applicable subsequent to the 120th day of such Continuous Stay Period.
References in this subsection (iii) to particular sections of the Bankruptcy
Code as in effect on the date of the amendment and restatement of this
Indenture shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to the
contrary, including, without limitation, Sections 8.03(b), 8.03(c) and 8.03(d),
as long as no Lease Event of Default shall have occurred and be continuing,
neither the Indenture Trustee nor the Owner Trustee shall take any action in
violation of the Lessee's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Lessee's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given to
the Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Owner Trustee or the Lessee or to be
an acquiescence therein.
59
<PAGE> 65
[Trust Indenture and Security Agreement (1994 737 B)]
(h) Notwithstanding anything contained herein to the
contrary, so long as the Subordination Agent (acting on behalf of the Pass
Through Trustees) or any Pass Through Trustee is a Noteholder, the Indenture
Trustee is not authorized or empowered to acquire title to the Indenture
Estate, or to take any action with respect to any of the Indenture Estate so
acquired by it, if such acquisition or action would cause any Pass Through
Trust to fail to qualify as a "grantor trust" for federal income tax purposes.
Section 8.04. Waiver of Owner Trustee. To the extent now or
at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisal of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of the Owner Trustee acquiring any
interest in or title to the Indenture Estate or any part thereof subsequent to
the date of this Agreement, all benefit and advantage of any such law or laws,
and covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or, in any
manner whatsoever, claim or take any benefit or advantage of or from any law
now or hereafter in force even if it does not possess any of the Equipment
Notes or does not produce any of them in the proceeding. A delay or omission
by the Indenture Trustee or any Noteholder in exercising any right or remedy
accruing upon an Indenture Event of Default under this Agreement shall not
impair the right or remedy or constitute a waiver of or acquiescence in such
Indenture Event of Default.
Section 8.05. Waiver of Existing Defaults. The Majority in
Interest of Noteholders by notice to the Indenture Trustee may waive on behalf
of the Noteholders an existing Indenture Default or Indenture Event of Default
and its consequences except (i) an Indenture Default or Indenture Event of
Default in the payment of the principal of or interest on any Equipment Note or
(ii) in respect of a covenant or provision hereof which pursuant to Section
11.02 cannot be amended or modified without the consent of each Noteholder
affected thereby.
60
<PAGE> 66
[Trust Indenture and Security Agreement (1994 737 B)]
Section 8.06. Control by Majority. (a) Except as otherwise
expressly provided herein, the Majority in Interest of Noteholders may direct
the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Noteholders so affected, or that would subject
the Indenture Trustee to personal liability.
(b) The Owner Trustee may pursuant to the direction and
instruction of the Owner Participant by delivery of written notice to the
Indenture Trustee set a record date to determine the Noteholders entitled to
give any consent, request, demand, authorization, direction, notice, waiver or
other act. Such record date shall be the record date specified in such
Officers' Certificate which shall be a date not more than 30 days prior to the
first solicitation of Noteholders in connection therewith. If such a record
date is fixed, such consent, request, demand, authorization, direction, notice,
waiver or other act may be given before or after such record date, but only the
Noteholders of record at the close of business on such record date shall be
deemed to be Noteholders for the purpose of determining whether Noteholders
holding the requisite percentage of Equipment Notes have authorized or agreed
or consented to such consent, request, demand, authorization, direction,
notice, waiver or other act, and for that purpose the outstanding Equipment
Notes shall be computed as of such record date; provided that no such consent,
request, demand, authorization, direction, notice, waiver or other act by the
Noteholders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not later than
one year after the record date.
Section 8.07. Rights of Noteholders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any
Noteholder to receive payment of principal of, Break Amount, if any, Make-Whole
Amount, if any, and interest on such 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, shall not be
impaired or affected without the consent of such Noteholder.
Section 8.08. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Noteholders allowed in any judicial proceedings
relating to any obligor on the Equipment Notes, its creditors, or its property.
61
<PAGE> 67
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee. (a) The
Indenture Trustee may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
(b) Subject to the provisions of Sections 2.08 and 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Document. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to the
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an officer's certificate or an
opinion of counsel from the Lessee or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors of the Lessee, the written advice of counsel acceptable to the Owner
Trustee, the Lessee and the Indenture Trustee, officer's certificate or
opinions of counsel provided by the Lessee or the Owner Trustee.
(c) The Indenture Trustee may act through agents and shall
not be responsible for the misconduct or negligence of any such agent appointed
with due care; provided that, no such agents shall be appointed by the
Indenture Trustee without the consent of the Lessee and the Owner Trustee,
which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
62
<PAGE> 68
[Trust Indenture and Security Agreement (1994 737 B)]
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Equipment Notes and may otherwise deal with the Owner Trustee,
the Lessee or an Affiliate of the Owner Trustee or the Lessee or a subsidiary
of the Owner Trustee or the Lessee with the same rights it would have if it
were not the Indenture Trustee. Any Agent may do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purpose of this Section 9.04 Permitted Investments constituting the proceeds of
the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $75,000,000, and neither the Indenture Trustee nor the Paying Agent shall
have any liability for interest upon any such monies except as otherwise agreed
in writing or (ii) at any time and from time to time, so long as no Lease Event
of Default shall have occurred and be continuing, at the request (given
directly by the Lessee to the Indenture Trustee) of the Lessee acting as the
agent of the Owner Trustee, shall be invested and reinvested in Permitted
Investments as specified in such request (if such investments are reasonably
available for purchase) and sold, in any case at such prices, including accrued
interest or its equivalent, as are set forth in such request, and such
Permitted Investments shall be held by the Indenture Trustee in trust as part
of the Indenture Estate until so sold; provided that the Lessee pursuant to
Section 22 of the Lease, on behalf of the Owner Trustee, as agent of the Owner
Trustee, shall upon demand pay to the Indenture Trustee the amount of any loss
realized upon maturity, sale or other disposition of any such Permitted
Investment and, so long as no Lease Event of Default shall have occurred and be
continuing, be entitled to receive from the Indenture Trustee, and the
Indenture Trustee shall promptly pay to the Lessee, on behalf of the Owner
Trustee, any profit, income, interest, dividend or gain realized upon maturity,
sale or other disposition of any Permitted Investment. If any Lease Event of
Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain
63
<PAGE> 69
[Trust Indenture and Security Agreement (1994 737 B)]
was realized are required to be distributed in accordance with the provisions
hereof or of the Lease pursuant to which such amounts were required to be held.
The Indenture Trustee shall not be responsible for any losses on any
investments or sales of Permitted Investments made pursuant to the procedure
specified in this Section 9.04. All Permitted Investments held by the
Indenture Trustee or the Paying Agent pursuant to this Section 9.04 shall
either be (a) registered in the name of, payable to the order of, or, specially
indorsed to, the Indenture Trustee or the Paying Agent, as the case may be, or
(b) held in an Eligible Account. For purposes of this Section 9.04, "Eligible
Account" means an account established by and with an Eligible Institution at
the request of the Indenture Trustee or the Paying Agent, as the case may be,
which institution agrees, for all purposes of the applicable Uniform Commercial
Code ("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 Indenture Trustee
or the Paying Agent, as the case may be, shall be the "entitlement holder" (as
defined in Section 8-102(7) of the UCC) in respect of such account, (d) the
Eligible Institution will comply with all entitlement orders issued by the
Indenture Trustee or the Paying Agent, as the case may be, to the exclusion of
the Lessee and the Owner Trustee, and (e) the "securities intermediary
jurisdiction" (under Section 8-110(e) of the UCC) shall be the State of
Illinois. For purposes of this Section 9.04, "Eligible Institution" means the
corporate trust department of (a) First Security Bank, National Association,
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.
Section 9.05. Notice of Defaults. If an Indenture Default or
Indenture Event of Default under this Agreement occurs and is continuing and
the Indenture Trustee has actual knowledge of same, the Indenture Trustee shall
(i) promptly send written notice thereof to the Lessee, the Owner Trustee and
the Owner Participant and (ii) within 90 days after the occurrence of an
Indenture Event of Default, mail to each Noteholder notice of all uncured
Indenture Events of Default under this Agreement. Except in the case of a
default in the payment of the principal of, Break Amount, if any, Make-Whole
Amount, if any, or interest on any Equipment Note, the Indenture Trustee shall
be protected in withholding the notice required under clause (ii) above if and
so long as the executive committee or trust committee of directors of the
Indenture Trustee and/or responsible officers thereof in good faith determines
that withholding such notice is in the interest of the Noteholders. In
addition, if an Indenture Default under this Agreement occurs and is continuing
and if the Indenture Trustee has actual knowledge of same, the Indenture
Trustee shall promptly send written notice thereof by telecopier to the Lessee,
the Owner Trustee and the Owner Participant.
64
<PAGE> 70
[Trust Indenture and Security Agreement (1994 737 B)]
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the negligence or willful misconduct of the Indenture Trustee or the inaccuracy
of any representation or warranty of the Indenture Trustee in its individual
capacity in Section 8 of the Participation Agreement, (B) as otherwise provided
in Section 9.10 hereof and (C) as otherwise excluded by the terms of Sections
7(b) and 7(c) of the Participation Agreement from the Lessee's indemnities
under said Sections; provided that the Indenture Trustee shall not make any
claim under this Section 9.06(a) for any claim or expense indemnified against
by the Lessee under the Participation Agreement without first making demand on
the Lessee for payment of such claim or expense. The Indenture Trustee shall
notify the Owner Trustee and the Lessee promptly of any claim for which it is
entitled to be indemnified hereunder. Subject to the conditions and procedures
equivalent to those set forth in Sections 7(b) and 7(c) of the Participation
Agreement, the Owner Trustee shall defend the claim and the Indenture Trustee
shall cooperate in the defense. The Indenture Trustee may have separate
counsel and the Owner Trustee shall pay the reasonable fees and expenses of
such counsel. The Owner Trustee need not pay for any settlement made without
its and the Lessee's consent.
(b) To secure the payment obligations of the Owner Trustee
pursuant to this Section 9.06, the Indenture Trustee shall have a Lien prior to
that of the Noteholders of the Equipment Notes on all money or property held or
collected by the Indenture Trustee, except that held in trust to pay the
principal of and interest, Break Amount, if any, and Make-Whole Amount, if any,
on the Equipment Notes.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
65
<PAGE> 71
[Trust Indenture and Security Agreement (1994 737 B)]
(b) The Indenture Trustee may resign by giving at least 30
days' prior written notice to the Lessee and the Owner Trustee. The Majority
in Interest of Noteholders may remove the Indenture Trustee by giving at least
30 days' prior written notice to the Indenture Trustee, the Owner Trustee and
the Lessee and may appoint a successor Indenture Trustee for such Equipment
Notes with the Owner Trustee's and (so long as no Lease Event of Default is
continuing) the Lessee's consent. The Owner Trustee may remove the Indenture
Trustee if:
(1) the Indenture Trustee fails to comply with Section 9.09;
(2) the Indenture Trustee is adjudged a bankrupt or an
insolvent;
(3) a receiver or public officer takes charge of the
Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of acting.
(c) If a vacancy exists in the office of Indenture Trustee
for any reason, the Owner Trustee shall promptly appoint a successor Indenture
Trustee which will (so long as no Lease Event of Default is continuing) be
approved by the Lessee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Lessee, the Owner Trustee or the Majority in
Interest of Noteholders may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Noteholder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Lessee
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the Lien provided for in Section 9.06. The Lessee shall
give notice of each appointment of a successor Indenture Trustee if there are
Equipment Notes outstanding, by mailing written notice of such event by
first-class mail to the Noteholders.
66
<PAGE> 72
[Trust Indenture and Security Agreement (1994 737 B)]
(g) All provisions of this Section 9.07 except subparagraphs
(b)(l) and (e) and the words "subject to the lien provided for in Section 9.06"
in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by Merger,
etc. If the Indenture Trustee or any Agent consolidates with, merges or
converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
Section 9.09. Eligibility; Disqualification. This Agreement
shall at all times have an Indenture Trustee which (i) shall have a combined
capital and surplus of at least $75,000,000 or (ii) shall have a combined
capital and surplus in excess of $7,500,000 and the obligations of which,
whether now in existence or hereafter incurred, are fully and unconditionally
guaranteed by a corporation organized and doing business under the laws of the
United States, any State or Territory thereof or of the District of Columbia
and having a combined capital and surplus of at least $75,000,000, and which,
in any case, shall be a Citizen of the United States. If such corporation
publishes reports of conditions at least annually, pursuant to law or to the
requirements of Federal, State, Territorial, or District of Columbia
supervising or examining authority, then for the purposes of this Section 9.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in its
individual capacity agrees that it will at its own cost and expense promptly
take such action as may be necessary to duly discharge and satisfy in full all
Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Documents, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
67
<PAGE> 73
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 10
TERMINATION OF TRUST INDENTURE
Section 10.01. Termination of Indenture. Upon (or at any time
after):
(x) payment in full of the outstanding principal amount of,
Break Amount, if any, 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 Noteholders and the Indenture
Indemnitees shall have been satisfied or paid in full; or
(y) at any time after the Owner Trustee has irrevocably
deposited (except as provided in Section 10.04) with the Indenture
Trustee as funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Noteholders, (1) money in an
amount, or (2) Permitted Investments 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 Permitted Investments
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 Indenture Trustee, to pay in full the outstanding principal amount
of, Break Amount, if any, 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 Indenture Trustee 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 Trustee or the
Lessee to cause the redemption of Equipment Notes (except a
redemption in respect of which irrevocable notice has
theretofore been given) shall terminate;
(B) the Lessee on behalf of the Owner Trustee has
delivered to the Indenture Trustee an officer's certificate
and an opinion of counsel to the effect that there has been
published by the Internal Revenue Service a ruling to the
effect that Noteholders will not recognize income, gain or
loss for Federal income tax purposes as a result of the
exercise by the Owner Trustee of its option under Clause (y)
of this Section 10.01 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;
68
<PAGE> 74
[Trust Indenture and Security Agreement (1994 737 B)]
(C) all amounts then due and payable hereunder have
been paid; and
(D) the Lessee on behalf of the Owner Trustee has
delivered to the Indenture Trustee an officer's certificate
and an opinion of counsel, each stating that all conditions
precedent provided for relating to the satisfaction and
discharge of this Agreement contemplated by this Section 10.01
have been complied with;
the Owner Trustee shall direct the Indenture Trustee to execute and deliver to
or as directed in writing by the Owner Trustee an appropriate instrument
releasing the Aircraft and the Engines and all other property or proceeds
constituting part of the Indenture Estate from the Lien of this Agreement and
the Indenture Trustee shall execute and deliver such instrument as aforesaid;
provided, however, that this Agreement and the trusts created hereby shall
earlier terminate and this Agreement shall be of no further force or effect
upon any sale or other final disposition by the Indenture Trustee of all
property constituting part of the Indenture Estate and the final distribution
by the Indenture Trustee of all monies or other property or proceeds
constituting part of the Indenture Estate in accordance with the terms hereof.
Except as aforesaid otherwise provided, this Agreement and the trusts created
hereby shall continue in full force and effect in accordance with the terms
hereof.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, Section 7.01,
Section 9.10, Section 10.03 and Section 10.04 and the other rights, duties,
immunities and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and
Permitted Investments deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Equipment Notes and this Agreement, to the payment either
directly or through any Paying Agent, as the Indenture Trustee may determine,
to the Noteholders, of all sums due and to become due thereon for principal,
Break Amount, if any, Make-Whole Amount, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Permitted
Investments held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Equipment Notes for which
money or Permitted Investments have been deposited pursuant to Section 10.01.
69
<PAGE> 75
[Trust Indenture and Security Agreement (1994 737 B)]
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Noteholders. The Owner Trustee and the Indenture Trustee may enter into one
or more agreements supplemental hereto without the consent of any Noteholder
for any of the following purposes:
(1) to correct any mistake or cure any ambiguity, 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 Noteholder;
(2) to evidence the succession of another party as the Owner
Trustee in accordance with the terms of the Trust Agreement or to
evidence (in accordance with Article 9) the succession of a new
trustee hereunder, the removal of the trustee hereunder or the
appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee 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 the
Noteholders;
(4) to correct or amplify the description of any property at
any time subject to the Lien of this Agreement or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subject to the Lien of this Agreement or to subject to
the Lien of this Agreement the Airframe or Engines or airframe or
engines substituted for the Airframe or Engines in accordance herewith
or with the Lease; provided that Trust Supplements entered into for
the purpose of subjecting to the Lien of this Agreement the Airframe
or Engines in accordance with the Lease need only be executed by the
Owner Trustee and the Indenture Trustee;
(5) to add to the covenants of the Owner Trustee, for the
benefit of the Noteholders, or to surrender any rights or power herein
conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Noteholders;
70
<PAGE> 76
[Trust Indenture and Security Agreement (1994 737 B)]
(7) to provide for the assumption by the Lessee of the
obligations of the Owner Trustee hereunder in accordance with the
terms and conditions applicable thereto specified in Section 7.03; or
(8) to include on the Equipment Notes any legend as may be
required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Noteholders. (a) With the written consent of a Majority in Interest of
Noteholders, the Owner Trustee and the Indenture Trustee may enter into such
supplemental agreements to add any provisions to or to change or eliminate any
provisions of this Agreement or of any such supplemental agreements or to
modify the rights of the Noteholders; provided, however, that, an amendment
under this Section 11.02 may not without the consent of each of the Noteholders
of the applicable Series of Equipment Notes and in the case of the Series A or
Series B Equipment Notes, the applicable Primary Liquidity Provider:
(1) reduce the principal amount of, Break Amount, if any,
Make-Whole Amount, if any, or any installment of
interest on, such Series of Equipment Notes; or
(2) change the date on which any principal amount of, any
Amortization Amount payable with respect to, Break
Amount, if any, Make-Whole Amount, if any, or interest
on such Series of Equipment Notes, is due or payable; or
(3) with respect to each Series of Equipment Notes, create
any Lien on the Indenture Estate prior to or pari passu
with the Lien thereon under this Agreement except such
as are permitted by this Agreement, or deprive any
Noteholder of the benefit of the Lien on the Indenture
Estate created by this Agreement; or
(4) with respect to such Series of Equipment Notes, reduce
the percentage in principal amount of the outstanding
Equipment Notes, the consent of whose Noteholders is
required for any such supplemental agreement, or the
consent of whose Noteholders is required for any waiver
(of compliance with certain provisions of this Agreement
or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
71
<PAGE> 77
[Trust Indenture and Security Agreement (1994 737 B)]
(5) make any change in Article 3 or Article 6 or Sections
8.01 (except to add Indenture Events of Default) 8.05,
8.08 or Section 11.02(a).
(b) It is not necessary under this Section 11.02 for the
Noteholders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and the
Indenture Trustee of any supplemental agreement pursuant to the provisions of
this Section 11.02, the Indenture Trustee shall transmit by first-class mail a
notice, setting forth in general terms the substance of such supplemental
agreement, to all Noteholders, as the names and addresses of such Noteholders
appear on the Register. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Noteholder is a
continuing consent by the Noteholder and every subsequent Noteholder, even if
notation of the consent is not made on any Equipment Note. However, any such
Noteholder or subsequent Noteholder may revoke the consent as to his Equipment
Note if the Indenture Trustee receives the notice of revocation before the date
the amendment or waiver becomes effective. After an amendment or waiver
becomes effective, it shall bind every Noteholder affected by such amendment or
waiver.
Section 11.04. Notation on or Exchange of Equipment Notes.
The Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Equipment Note thereafter executed. The Indenture Trustee in
exchange for such Equipment Notes may execute new Equipment Notes that reflect
the amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, etc. of Other Operative
Documents.
(a) Subject to Section 11.01, without the consent of a Majority in
Interest of Noteholders, the Owner Trustee and the Indenture Trustee may not
modify, amend or supplement any of the Operative Documents, or give any
consent, waiver, authorization or approval thereunder, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Noteholder.
72
<PAGE> 78
[Trust Indenture and Security Agreement (1994 737 B)]
(b) Subject to the provisions of subsection (c) of this Section
11.06, the Owner Trustee and the Indenture Trustee at any time and from time to
time without the consent of the Indenture Trustee or of any Noteholder may:
(1) so long as no Indenture Event of Default shall have
occurred and be continuing, modify, amend or supplement the Lease, or
give any consent, waiver, authorization or approval with respect
thereto, except that without compliance with subsection (a) of this
Section 11.06 the parties to the Lease shall not modify, amend or
supplement, or give any consent, waiver, authorization or approval for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions thereof or of modifying in any
manner the rights of the respective parties thereunder, with respect
to the following provisions of the Lease as in effect on the date
hereof: Section 2, Section 3(a) (if the result thereof would be to
shorten the term of the Lease to a period shorter than the period
ending with the maturity date of any series of Equipment Notes),
Section 3(c)(iv), Section 3(d) (except to the extent such Section
relates to amounts payable (whether directly or pursuant to the
Indenture) to Persons other than Noteholders, the Primary Liquidity
Providers and the Indenture Trustee in its individual capacity),
Section 3(e) (except insofar as it relates to the address or account
information of the Owner Trustee or the Indenture Trustee) (other than
as such Sections 3(a), 3(d) and 3(e) may be amended pursuant to
Section 3(c) of the Lease in effect on the date hereof), Section 4,
Section 6, Section 7(a), Sections 9(b) through (d) (except that
further restrictions may be imposed on the Lessee), Section 10
(except that additional requirements may be imposed on the Lessee),
Section 11 (except for Section 11(e) and except that additional
insurance requirements may be imposed on the Lessee), Section 12
(except in order to increase the Lessee's liabilities or enhance the
Lessor's rights thereunder), Section 13, Section 14 (except to impose
additional or more stringent Lease Events of Default), Section 15
(except to impose additional remedies), Section 16 (except to impose
additional requirements on the Lessee), Section 18, Section 19 (to the
extent such modification, amendment or supplement affects the rights
and interests of the Owner Trustee or the Indenture Trustee under
Section 1110 of the Bankruptcy Code), Section 20, Section 22 and any
definition of terms used in the Lease, to the extent that any
modification of such definition would result in a modification of the
Lease not permitted pursuant to this subsection (b); provided that in
the event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as "Lessor" under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
73
<PAGE> 79
[Trust Indenture and Security Agreement (1994 737 B)]
thereunder, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of the "Lessor" thereunder;
provided further that without the prior written consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action (including a consent to an
assignment by the Lessee under Section 13 of the Lease) shall be taken
with respect to any of the provisions of Sections 1 (to the extent any
modification of a definition contained therein would result in a
modification of the Lease not permitted by this provision), 3(c), 4,
5, 6 (to the extent such action would reduce the Lessee's
obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 (insofar as it
relates to the Lessor), 18, 19 and 21 of the Lease, or with respect to
any other Section of the Lease to the extent such action with respect
to such other Section shall affect the amount or timing of any amounts
payable by the Lessee under the Lease as in effect on the date hereof
(or as subsequently modified with the consent of the Owner Trustee)
which, absent the occurrence and continuance of an Indenture Event of
Default, will be distributable to the Owner Trustee under Article 3;
and provided further that the parties to the Lease may take any such
action without the consent of the Indenture Trustee or any Noteholder
to the extent such action relates to the payment of amounts
constituting, or the Owner Trustee's, the Owner Participant's or the
Lessee's rights or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust Agreement, or give
any consent, waiver, authorization or approval with respect thereto,
in each case only to the extent any such action shall not adversely
impact the interests of the Noteholders;
(3) modify, amend or supplement the Participation Agreement,
or give any consent, waiver, authorization or approval with respect
thereto, except that without compliance with subsection (a) of this
Section 11.06 the parties to the Participation Agreement shall not
modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Section 1(b), Section
7 (insofar as such Section 7 relates to the Indenture Trustee, any
Primary Liquidity Provider and the Noteholders), Section 8, Section
11, Section 17(f) and any definition of terms used in the
Participation Agreement, to the extent that any modification of such
definition would result in a modification of the Participation
Agreement not permitted pursuant to this subsection (b); and
(4) modify, amend or supplement any of said agreements in
order to cure any ambiguity, to correct or supplement any provisions
thereof which may be
74
<PAGE> 80
[Trust Indenture and Security Agreement (1994 737 B)]
defective or inconsistent with any other provision thereof or of any
provision of this Agreement, or to make any other provision with
respect to matters or questions arising thereunder or under this
Agreement which shall not be inconsistent with the provisions of this
Agreement, provided the making of any such other provision shall not
adversely affect the interests of the Noteholders.
(c) No modification, amendment, supplement, consent, waiver,
authorization or approval with respect to the Lease or the Participation
Agreement, whether effected pursuant to subsection (a) or pursuant to
subsection (b) of this Section 11.06 and anything in such subsections or
elsewhere in this Agreement to the contrary notwithstanding, shall, without the
consent of the holder of each outstanding Equipment Note affected thereby,
(1) modify, amend or supplement the Lease in such a way as
to extend the time of payment of Basic Rent, Termination Value,
Stipulated Loss Value or any other Rents assigned to the Indenture
Trustee hereunder or any other amounts payable to the Indenture
Trustee for its own account or for the account of the Noteholders
(subject in any event to clause (iv) of Section 3(c) of the Lease)
upon the occurrence of an Event of Loss or Termination Value and any
other amounts payable to the Indenture Trustee for its own account or
for the account of the Noteholders (subject in any event to clause
(iii) of Section 3(c) of the Lease) upon termination of the Lease with
respect to the Aircraft, payable under, or as provided in, the Lease
as in effect on the date hereof, release or reduce the amount of any
installment of Basic Rent or Supplemental Rent so that the same is
less than the payment of principal of, Break Amount, if any,
Make-Whole Amount, if any, and interest on the Equipment Notes, as the
case may be, to be made from such installment of Basic Rent or
Supplemental Rent, or reduce the aggregate amount of Stipulated Loss
Value, EBO Percentage, Special Termination Value Percentages, or any
other amounts payable under, or as provided in, the Lease as in effect
on the date hereof upon the occurrence of an Event of Loss so that the
same is less than the accrued interest on and the principal as of the
Lease Loss Payment Date, and Break Amount, if any, and Make-Whole
Amount, if any, of the Equipment Notes at the time Outstanding or
reduce the amount of Termination Value and any other amounts payable
under, or as provided in, the Lease as in effect on the date hereof
upon termination of the Lease with respect to the Aircraft so that the
same is less than the accrued interest on and principal as of the
Lease Termination Date and Break Amount, if any, and Make-Whole
Amount, if any, of Equipment Notes at the time outstanding, or
(2) modify, amend or supplement the Lease in such a way as
to, or consent to any assignment of the Lease or give any consent,
waiver, authorization or approval which would, release the Lessee from
its obligations in respect of payment of Basic
75
<PAGE> 81
[Trust Indenture and Security Agreement (1994 737 B)]
Rent or Supplemental Rent, or Stipulated Loss Value and any other
amounts payable to the Indenture Trustee for its own account or the
account of the Noteholders (subject in any event to clause (iii) of
Section 3(c) of the Lease) or any Primary Liquidity Provider upon the
occurrence of an Event of Loss, or Termination Value and any other
amounts payable to the Indenture Trustee for its own account or the
account of the Noteholders (subject in any event to clause (iii) of
Section 3(c) of the Lease) of the Lease with respect to the Aircraft,
payable under, or as provided in, the Lease as in effect on the date
hereof except for any such assignment pursuant to Section 8(u) of the
Participation Agreement, and except as provided in the Lease as in
effect on the date hereof.
Section 11.07. Notices to Primary Liquidity Providers. Any
request made to any Noteholder for consent to any amendment or supplement
pursuant to this Article 11 shall be promptly furnished by the Indenture
Trustee to each Primary Liquidity Provider.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided for herein, all notices required under the terms and provisions of
this Agreement shall be in English and in writing, and any such notice may be
given by hand-delivery, overnight courier service, mail, or telecopier (to be
confirmed by hand delivery, overnight courier service or mail) addressed as
indicated below and any such notice shall be effective, in the case of
hand-delivery, when delivered, in the case of overnight courier service, one
Business Day after delivery with charges paid to a courier service with
instructions for overnight delivery, in the case of mail, three Business Days
after delivery to the postal service with certified or registered mail charges
paid, and, in the case of telecopier, upon confirmed transmittal:
if to the Lessee, to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attention: Vice President and Treasurer
Telecopier: (847) 700-7117
76
<PAGE> 82
[Trust Indenture and Security Agreement (1994 737 B)]
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Vice President and Treasurer
Telecopier: (847) 700-7117
if to the Indenture Trustee, to:
First Security Bank,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopier: (801) 246-5053
if to the Owner Trustee, to:
State Street Bank and Trust Company
of Connecticut, National Association
225 Franklin Street
Hartford, Connecticut 06113
with a copy to the Owner Participant
if to the Owner Participant, to its address set forth in the
Participation Agreement.
(b) The Lessee, the Owner Trustee, the Indenture Trustee or
the Owner Participant by notice to the others may designate additional or
different addresses for subsequent notices or communications.
(c) Any notice or communication to the Noteholders shall be
mailed by first-class mail to the respective addresses for the Noteholders
shown on the Register kept by the Registrar and to addresses filed with the
Indenture Trustee for other Noteholders. Failure so to mail a notice or
communication or any defect in such notice or communication shall not affect
its sufficiency with respect to other Noteholders of such Equipment Notes of
that or any other Series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) If the Lessee mails a notice or communication to the
Noteholders, it shall mail a copy to the Indenture Trustee and to the Paying
Agent at the same time.
77
<PAGE> 83
[Trust Indenture and Security Agreement (1994 737 B)]
Section 12.02. GOVERNING LAW. THIS AGREEMENT AND THE
EQUIPMENT NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS OF THE STATE OF ILLINOIS.
Section 12.03. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Lessee, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Lessee, the Owner Trustee or the Owner Participant, as the
case may be, under this Agreement or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Noteholder by accepting
an Equipment Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Equipment Notes.
Section 12.04. Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which shall be an original
but such counterparts shall together constitute but one instrument.
Section 12.05. Section 1110. It is the intention of the
parties that the Owner Trustee, as lessor under the Lease (and the Indenture
Trustee as assignee of the Owner Trustee's rights hereunder), shall be entitled
to the benefits of Section 1110 of the Bankruptcy Code with respect to the
right to take possession of the Aircraft, Airframe, Engines and Parts as
provided in the Lease in the event of a case under Chapter 11 of the Bankruptcy
Code in which Lessee is a debtor, and in any instance where more than one
construction is possible of the terms and conditions hereof or of any other
pertinent Operative Document, each such party agrees that a construction which
would preserve such benefits shall control over any construction which would
not preserve such benefits.
* * *
78
<PAGE> 84
[Trust Indenture and Security Agreement (1994 737 B)]
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Trust Indenture and Security Agreement to be duly
executed by their respective officers thereunto duly authorized.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL
ASSOCIATION, not in its
individual capacity, except
as expressly provided herein,
but solely as Owner Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
79
<PAGE> 85
Exhibit A to
Trust Indenture and
Security Agreement
Form of Equipment Note
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.
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
NOT INDIVIDUALLY BUT SOLELY
AS OWNER TRUSTEE
SERIES [______] EQUIPMENT NOTE DUE [_____] ISSUED IN CONNECTION
WITH THE BOEING MODEL ________ AIRCRAFT BEARING UNITED STATES
REGISTRATION NUMBER N_____.
No.______ Date: [___________,____]
Original Principal Amount
Maturity Date
$____________________ ___________________
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not individually but solely as
Owner Trustee (herein, in such capacity, the "Owner Trustee") for value
received, hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent as nominee for the Pass Through Trustee under the
Intercreditor Agreement, or registered assigns, the principal sum of __________
Dollars ($________) in installments, one such installment to be due and payable
on each Payment Date, each such installment to be in an amount equal to the
amount set forth in Schedule I hereto, together with interest on the unpaid
principal amount hereof from time to time outstanding from and including the
date hereof until such principal amount is paid in full. Interest shall accrue
with respect to each Interest Period at the Applicable Rate (calculated on the
basis of a year consisting of 360 days and the actual number of days elapsed)
in effect for such Interest Period and shall be payable in arrears on each
Interest Payment Date and on the date this Equipment Note is paid in full.
Interest shall be payable with respect to the first but not the
<PAGE> 86
[Trust Indenture and Security Agreement (1994 737 B)]
last day of each Interest Period. Notwithstanding the foregoing, the final
payment made on this Equipment Note shall be in an amount sufficient to
discharge in full the unpaid principal amount and all accrued and unpaid
interest on, and any other amounts due under, this Equipment Note.
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, interest at the then Applicable Rate shall accrue
on the amount of such payment during such extension.
For purposes hereof, the term "Indenture" means the Amended
and Restated Trust Indenture and Security Agreement (1994 737 B), dated as of
December 23, 1997 between the Owner Trustee and First Security Bank, National
Association (the "Indenture Trustee"), 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 Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (calculated on the basis of a year of 360 days and the actual
number of days elapsed) on any overdue principal amount, any overdue Break
Amount, if any, 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).
The interest rate borne by this Equipment Note shall be
subject to adjustments to the extent, and under the circumstances, specified by
the Note Purchase Agreement [and the Registration Rights Agreement](1) as more
particularly set forth in the third paragraph of Section 2.01 of the Indenture.
All payments of principal, Break Amount, if any, Make-Whole
Amount, if any, interest and other amounts, if any, to be made by the Owner
Trustee hereunder and under the Indenture shall be made only from the income
and proceeds from the Indenture Estate and only to the extent that the
Indenture Trustee shall have sufficient income or proceeds from the Indenture
Estate to make such payments. Each holder hereof, by its acceptance of this
Equipment Note, agrees that it will look solely to the income and proceeds from
the Indenture Estate to the extent available for distribution to the holder
hereof as above provided and that, none of the Owner Trustee, the Indenture
Trustee and the Owner Participant is or shall be personally liable or liable in
any manner extending to any assets other than the Indenture Estate to the
holder hereof for any amounts payable or for any
______________
(1) To be inserted only in the case of a Series A or Series B Equipment Note.
A-2
<PAGE> 87
[Trust Indenture and Security Agreement (1994 737 B)]
liability under this Equipment Note or the Indenture or, except as provided in
Section 2.09 of the Indenture, under the Participation Agreement or the other
Operative Documents; provided, however, that, nothing herein contained shall
limit, restrict or impair the right of the Indenture Trustee, subject always to
the terms and provisions of the Indenture, to accelerate the maturity of this
Equipment Note upon an Indenture Event of Default under the Indenture, to bring
suit and obtain a judgment against the Owner Trustee on this Equipment Note for
purposes of realizing upon the Indenture Estate and to exercise all rights and
remedies provided under the Indenture or otherwise realize upon the Indenture
Estate.
This Equipment Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Equipment
Note has been executed on behalf of the Owner Trustee by the manual or
facsimile signature of an authorized officer of the Owner Trustee, and
authenticated by the Indenture Trustee by the manual signature of an authorized
officer or signatory of the Indenture Trustee, in each case as specified in
Section 2.02 of the Indenture.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Owner Trustee
pursuant to the terms of the Indenture. Reference is made to the Indenture and
all supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its Corporate Trust Department) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties thereby conveyed, pledged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner Trustee, the Indenture
Trustee and the Noteholders of the Equipment Notes, and the terms upon which
the Equipment Notes are, and are to be, executed and delivered, as well as for
a statement of the terms and conditions of the trust created by the Indenture,
to all of which terms and conditions in the Indenture each Noteholder hereof
agrees by its acceptance of this Equipment Note.
This Equipment Note is subject to redemption as provided in
Article 6 of the Indenture but not otherwise.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Equipment Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
As provided in the Indenture, in certain circumstances this
Equipment Note is transferable, and upon surrender of this Equipment Note for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Noteholder or his attorney
duly authorized in writing, one or more new Equipment Notes of the same
maturity and type and of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
A-3
<PAGE> 88
[Trust Indenture and Security Agreement (1994 737 B)]
The Equipment Notes are issuable only as registered Equipment
Notes. As provided in the Indenture and subject to certain limitations therein
set forth, Equipment Notes are exchangeable for a like aggregate principal
amount of Equipment Notes of the same series, maturity and type and of
authorized denominations, as requested by the Noteholder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer or
exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner Trustee, the Indenture Trustee, the Paying Agent and
the Registrar may deem and treat the person in whose name this Equipment Note
is registered as the absolute owner hereof for the purpose of receiving payment
of the principal of and interest on this Equipment Note and for all other
purposes whatsoever whether or not this Equipment Note be overdue, and neither
the Owner Trustee, the Indenture Trustee, the Paying Agent nor the Registrar
shall be affected by notice to the contrary.
[The indebtedness evidenced by this Equipment Note is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of the Secured Obligations (as
defined in the Indenture) in respect of [Series A Equipment Notes](2) [Series A
and Series B Equipment Notes](3) [Series A, Series B and Series C Equipment
Notes](4) and this Equipment Note is issued subject to such provisions](5) .
The Noteholder of this Equipment Note, by accepting the same, (a) agrees to and
shall be bound by such provisions and each other provision applicable to it in
the Indenture, the Participation Agreement, the Note Purchase Agreement and each
other Fundamental Document ,(b) authorizes and directs the Indenture Trustee on
its behalf to take such action as may be
______________
(2) To be inserted in the case of a Series B Equipment Note.
(3) To be inserted in the case of a Series C Equipment Note.
(4) To be inserted in the case of a Series D Equipment Note.
(5) To be inserted for each Equipment Note other than any Series A Equipment
Note.
A-4
<PAGE> 89
[Trust Indenture and Security Agreement (1994 737 B)]
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Indenture Trustee its attorney-in-fact for such
purpose.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS EQUIPMENT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF
THE STATE OF ILLINOIS.
* * *
A-5
<PAGE> 90
[Trust Indenture and Security Agreement (1994 737 B)]
IN WITNESS WHEREOF, the Owner Trustee has caused this
Equipment Note to be duly executed in its corporate name by its officer duly
authorized as of the date hereof.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee
By:
--------------------------------
Name:
Title:
A-6
<PAGE> 91
[Trust Indenture and Security Agreement (1994 737 B)]
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
-----------------------------------
Authorized officer and signatory
A-7
<PAGE> 92
[Trust Indenture and Security Agreement (1994 737 B)]
SCHEDULE I
AMORTIZATION SCHEDULE
Payment Date Principal Amount (Expressed as a
Percentage of Original Principal Amount
[SEE EXHIBIT [B-1] [B-2] [B-3] [B-4] TO INDENTURE
WHICH IS INSERTED UPON ISSUANCE]
* * *
A-8
<PAGE> 1
EXHIBIT 4.16
*
Doc. No. 1.01
Aircraft N398UA
-------------------------
PARTICIPATION AGREEMENT
(1994 737 B)
Dated as of September 1, 1994
Among
UNITED AIR LINES, INC.,
Lessee,
MS FINANCING INC.,
Owner Participant,
THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH,
Original Loan Participant
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
STATE STREET BANK AND TRUST COMPANY,
In its Individual Capacity and as Indenture Trustee
-------------------------
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
-------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft............................................................ 2
SECTION 2. Lessee's Notice of Delivery Date......................................................... 3
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee........................................................................ 6
SECTION 4. Conditions............................................................................... 7
(a) Conditions Precedent to the
Participations in the Aircraft.................................................. 7
(b) Conditions Precedent to the
Obligations of Lessee........................................................... 16
SECTION 5. Confidentiality of Purchase Agreement.................................................... 18
SECTION 6. Extent of Interest of Holders............................................................ 18
SECTION 7. Lessee's Representations, Warranties
and Indemnitees.......................................................................... 19
(a) In General...................................................................... 19
(b) General Tax Indemnity........................................................... 23
(c) General Indemnity............................................................... 34
(d) Withholding..................................................................... 41
SECTION 8. Representations, Warranties and
Covenants................................................................................ 41
SECTION 9. [Intentionally Omitted].................................................................. 62
SECTION 10. Other Documents; Amendment............................................................... 62
SECTION 11. Certain Covenants of Lessee.............................................................. 63
SECTION 12. Owner for Income Tax Purposes............................................................ 64
SECTION 13. Notices; Consent to Jurisdiction......................................................... 64
SECTION 14. Change of Situs of Owner Trust........................................................... 65
SECTION 15. Miscellaneous............................................................................ 66
SECTION 16. Invoices and Payment of Expenses......................................................... 68
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 17. Optional Prepayment of Certificates...................................................... 68
SECTION 18. Optimization............................................................................. 72
SECTION 19. [Intentionally Omitted].................................................................. 73
SECTION 20. Interim Debt............................................................................. 73
SECTION 21. Payment of Additional Amounts............................................................ 77
</TABLE>
SCHEDULES
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
SCHEDULE III - Legal Opinions
ii
<PAGE> 4
PARTICIPATION AGREEMENT
(1994 737 B)
THIS PARTICIPATION AGREEMENT (1994 737 B) dated as of September 1,
1994 among (i) UNITED AIR LINES, INC., a Delaware corporation ("Lessee"), (ii)
MS FINANCING INC., a corporation organized under the laws of Delaware (the
"Owner Participant"), (iii) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity, except as
expressly provided herein, but solely as Owner Trustee under the Trust Agreement
(the "Owner Trustee"), (iv) THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW
YORK BRANCH, as Original Loan Participant and (v) STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, in its individual capacity and as
Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement between Lessee and the
Manufacturer, the Manufacturer has sold to Lessee, among other things, certain
Boeing 737-322 aircraft, one of which is the subject of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are entering into the Owner
Trustee's Purchase Agreement and Assignment (1994 737 B) dated as of
September 1, 1994 (the "Owner Trustee's Purchase Agreement"), whereby
Lessee assigns to the Owner Trustee certain rights and interests of Lessee
under the Purchase Agreement with respect thereto;
(ii) the Manufacturer is executing the Consent and Agreement
(1994 737 B) dated the Delivery Date substantially in the form attached to
the Owner Trustee's Purchase Agreement, with respect to the Owner Trustee's
Purchase Agreement; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Security
<PAGE> 5
[Participation Agreement (1994 737 B)]
Agreement (1994 737 B) dated as of September 1, 1994 pursuant to which the Owner
Trustee agrees, among other things, to issue one or more Certificates as
evidence of the Owner Trustee's indebtedness to the Holders, which Certificates
are to be secured by the mortgage and security interest in the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into a Lease Agreement (1994 737 B) dated as of September 1,
1994 (the "Lease Agreement" or the "Lease") whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to lease to Lessee, and
Lessee agrees to lease from the Owner Trustee, the Aircraft on the Delivery
Date; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the
Aircraft. (a) The terms "Lessee," "Owner Participant," "Original Loan
Participant," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
but not otherwise defined herein shall have the meanings attributed thereto in
the Lease Agreement. The term "Owner Participant Guarantor" shall mean Morgan
Stanley Group Inc., a Delaware corporation. Unless the context otherwise
requires, any reference herein to any of the Operative Documents refers to such
document as it may be amended from time to time in accordance with its terms and
the terms of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this Agreement, (i) the
Original Loan Participant agrees to finance, in part, the Owner Trustee's
payment of Lessor's Cost for the Aircraft by making a secured loan to the Owner
Trustee (herein called the "Loan") on a date to be designated pursuant to
Section 2 hereof, but in no event later than September 30, 1994, in the amount
in Dollars equal to the percentage of Lessor's Cost set forth opposite its name
on Schedule II hereto and (ii) the Owner Participant hereby agrees, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee pursuant to
the Owner Trustee's Bill of Sale, as contemplated hereby, to make its equity
investment in the beneficial ownership of the Aircraft on a date to be
designated as set forth above, but in no event later than September 30, 1994, in
an amount in Dollars equal to the percentage of Lessor's Cost set forth opposite
its name on Schedule II hereto. In the case of the Owner Participant, the amount
of its participation to be made as provided above in the payment of Lessor's
Cost and, in the case of the Original Loan Participant, the Original Amount of
the
2
<PAGE> 6
[Participation Agreement (1994 737 B)]
Certificates to be issued to it on the Delivery Date, is hereinafter called such
Participant's "Commitment" for the Aircraft. In case either Participant shall
default in its obligation to make the amount of its Commitment available
pursuant to Section 2 hereof in respect of the Aircraft, the other Participant
shall have no obligation to make any portion of such amount available or to
increase the amount of its Commitment and the obligation of the non-defaulting
Participant shall remain subject to the terms and conditions set forth in this
Agreement.
SECTION 2. Lessee's Notice of Delivery Date. (a) Lessee agrees to give
the Owner Participant, the Owner Trustee, the Original Loan Participant and the
Indenture Trustee at least two Business Days' written notice of the Delivery
Date for the Aircraft, which Delivery Date shall be a Business Day not later
than September 30, 1994, which notice shall specify the amount of Lessor's Cost
and the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice. The
Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Owner Trustee shall have received from the Owner Participant funds
in the full amount of the Owner Participant's Commitment and the proceeds of the
sale of the Certificates in the full amount of the Original Loan Participant's
Commitment.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue, and the Indenture Trustee shall
authenticate, the Certificates, in an aggregate principal amount equal to the
Original Loan Participant's Commitment, which shall be delivered simultaneously
to the Original Loan Participant. On the Delivery Date, subject to the terms and
conditions of this Agreement, and in consideration for the transfer of title to
the Aircraft to the Owner Trustee, the following payments shall be made, in each
case in Dollars and in funds immediately available to the recipient: (A) by the
Owner Participant to the Owner Trustee an amount in Dollars equal to the Owner
Participant's Commitment, (B) by the Original Loan Participant to the Owner
Trustee an amount in Dollars equal to such Original Loan Participant's
Commitment and (C) by the Owner Trustee to Lessee the funds made available to it
pursuant to clauses (A) and (B) above, which funds shall aggregate an amount
equal to Lessor's Cost. The payments in clauses (A) and (B) shall be made to the
Owner Trustee's account no. 99003147 at State Street Bank and Trust Company
(Boston, Massachusetts) and the payments in (C) shall be made to the Lessee's
account no. HT0688 at State Street Bank and Trust Company (Boston,
Massachusetts).
Each Participant agrees to make its Commitment available to the Owner
Trustee at or before 11:00 a.m., Boston, Massachusetts time, on the Delivery
Date specified in Lessee's
3
<PAGE> 7
[Participation Agreement (1994 737 B)]
notice referred to in the first paragraph of this Section 2 (such specified
Delivery Date being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the transactions
contemplated hereby is not consummated on the Scheduled Delivery Date, Lessee
may by telephonic notice given by 5:00 p.m., Boston, Massachusetts time, on the
Scheduled Delivery Date to each Participant and the Indenture Trustee designate
a delayed date for such closing (the "Delayed Delivery Date"), not later than
the fifth Business Day after the Scheduled Delivery Date and in no event later
than September 30, 1994, in which event each Participant will keep its funds
available pursuant to this Section 2. In the event that no Delayed Delivery Date
is designated or, if designated, such closing does not occur on the Delayed
Delivery Date, such funds of each Participant shall be promptly returned to it
by the Owner Trustee.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest at the Applicable Rate (as defined below) on the amount of such funds
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the Business
Day on which such Participant's funds are returned if such return is made by
11:00 a.m., Boston, Massachusetts time, or to but excluding the next following
Business Day if such return is not made by such time.
"Applicable Rate" shall mean, with respect to the Owner Participant,
the rate per annum earned on the Owner Participant's funds pursuant to their
investment in accordance with the provisions of the immediately succeeding
paragraph and, with respect to the Original Loan Participant, the rate per annum
borne by the Certificates in respect of which such Original Loan Participant's
Commitment is made available.
First Security Bank of Utah, National Association, agrees that in the
event it has received telephonic notice (to be confirmed promptly in writing)
from Lessee on the Scheduled Delivery Date that the closing of the transactions
contemplated hereby will not be consummated on the Scheduled Delivery Date, it
will, if instructed in the notice from Lessee in regard to the funds received by
it from the Participants, use reasonable efforts to invest, at the risk of
Lessee, the funds received by it from the Participants in obligations of the
United States Government or, obligations guaranteed as to principal and interest
by the United States Government, in each such case having a stated maturity not
later than one year from the date of acquisition. Any such investment may be
made through a repurchase agreement in commercially reasonable form with the
Owner Trustee or a bank or other financial institution having capital, surplus
and undivided profits of at least $100,000,000, provided that title to the
underlying obligations shall pass to the Owner Trustee (in respect of amounts
advanced by the Owner Participant) and the Indenture Trustee (in respect of
amounts advanced by the Original Loan Participant) and that such
4
<PAGE> 8
[Participation Agreement (1994 737 B)]
underlying securities shall be segregated in a custodial or trust account of or
for the benefit of the Owner Trustee and the Indenture Trustee, respectively.
Any such obligations purchased by First Security Bank of Utah, National
Association whether directly or through a repurchase agreement, shall be held in
trust by First Security Bank of Utah, National Association for the benefit of
the respective Participant (and not as part of the Trust Estate or the Indenture
Estate). Lessee shall, on the Delayed Delivery Date or the date the funds
furnished by the Participants are required to be returned to the Participants,
as the case may be, reimburse First Security Bank of Utah, National Association
for the benefit of the respective Participant for any losses incurred on such
investments.
All income and profits on the investment of such funds on behalf of
the Owner Participant shall be for the account of the Owner Participant and
funds for the account of the Original Loan Participant not in excess of the
Applicable Rate shall be for the account of the Original Loan Participant (such
income and profits to be credited against Lessee's obligation to reimburse the
Participants for the loss of use of funds made available to First Security Bank
of Utah, National Association) and all other income and profits (in regard
solely to the funds provided by the Original Loan Participant) and all losses on
the investment of such funds shall be for the account of Lessee; and First
Security Bank of Utah, National Association shall not be liable for failure to
invest such funds or for any losses incurred on such investments except for its
own willful misconduct or negligence.
Prior to 11:00 a.m., Boston, Massachusetts time, on the Commencement
Date, the Owner Participant on behalf of the Owner Trustee shall pay to the
Indenture Trustee in immediately available funds an amount equal to the Excess
Amount due on such date.
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
Subject to the terms and conditions of this Agreement, the Owner Trustee, upon
its receipt in full of each Participant's Commitment for the Aircraft, as
provided in Section 2 hereof, together with instructions from such Participant
or its special counsel to release such funds to Lessee, shall transfer such
funds to the Lessee and the Owner Trustee shall purchase the Aircraft from
Lessee and lease the Aircraft to Lessee and such action shall constitute,
without further act, authorization and direction by the Owner Participant to the
Owner Trustee:
(a) to pay to Lessee the Lessor's Cost in the manner set forth in
Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of Lessee
designated by Lessee) to accept delivery of the Aircraft on the Delivery Date
pursuant to the Owner Trustee's Bill of Sale;
(c) to accept from Lessee the Owner Trustee's Bill of Sale and the
Owner Trustee's FAA Bill of Sale;
5
<PAGE> 9
[Participation Agreement (1994 737 B)]
(d) to execute an aircraft registration application, a Lease
Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow from the Original Loan Participant to finance a portion
of Lessor's Cost and to issue to the Original Loan Participant one or more
Certificates in an aggregate principal amount equal to the amount borrowed
pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be taken by the
Owner Trustee on the Delivery Date by the terms of any Operative Document.
SECTION 4. Conditions. (a) Conditions Precedent to the Participations
in the Aircraft. It is agreed that the respective obligations of the
Participants to participate in the payments of Lessor's Cost are subject to the
satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Original Loan Participant), (xxv) and (xxvi) shall not be a condition
precedent to the obligation of the Original Loan Participant, and paragraphs
(iv), (x) (insofar as it relates to the Owner Participant), (xiv), (xix)(a) and
(xxvii) shall not be a condition precedent to the obligation of the Owner
Participant:
(i) The Participants shall have received due notice with respect
to such participation pursuant to Section 2 hereof (or shall have waived
such notice either in writing or as provided in Section 2).
(ii) No change shall have occurred after the date of the
execution and delivery of this Agreement in applicable law or regulations
thereunder or interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the Original
Loan Participant, as the case may be, would make it a violation of law or
regulations for (x) Lessee, the Indenture Trustee, any Participant or the
Owner Trustee to execute, deliver and perform the Operative Documents to
which any of them is a party or (y) the Original Loan Participant or the
Owner Participant to make its respective Commitment available or, in the
case of the Original Loan Participant, to acquire the Certificates or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Original Loan
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Original Loan Participant, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
6
<PAGE> 10
[Participation Agreement (1994 737 B)]
(v) The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall
each be satisfactory in form and substance to the Participants and shall be
in full force and effect and executed counterparts, shall have been
delivered to the Participants, and their respective counsel, provided that
only the Original Loan Participant shall receive an executed original of
the Certificates, only the Indenture Trustee, acting on behalf of the
Holders, shall receive the original counterpart of the Lease and the
initial Lease Supplement, only the Owner Participant shall receive a copy
of the Purchase Agreement which shall be delivered to and retained by the
Owner Trustee (the Owner Trustee and the Original Loan Participant and
their respective counsel may inspect the Purchase Agreement prior to the
Delivery Date but thereafter shall not have access to the same unless a
Default or Event of Default under the Lease shall have occurred and be
continuing) and provided further that only Lessee and the Owner Participant
shall receive copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the Aircraft and dated the
Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering the Aircraft and dated the
Delivery Date;
(6) the Owner Trustee's Bill of Sale and the Owner Trustee's
FAA Bill of Sale;
(7) the Owner Trustee's Purchase Agreement;
(8) an acceptance certificate covering the Aircraft in the
form agreed to by the Participants and Lessee (the "Acceptance
Certificate") duly completed and executed by the Owner Trustee or its
agent, which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Certificates;
(11) the Consent and Agreement;
7
<PAGE> 11
[Participation Agreement (1994 737 B)]
(12) the Purchase Agreement; and
(13) the Owner Participant Guaranty Agreement.
(vi) A Uniform Commercial Code financing statement or statements
covering all of the security interests created by or pursuant to the
Granting Clause of the Trust Indenture shall have been executed and
delivered by the Owner Trustee and the Indenture Trustee, and such
financing statement or statements shall have been duly filed in all places
necessary or advisable, and any additional Uniform Commercial Code
financing statements deemed advisable by the Owner Participant or the
Original Loan Participant shall have been executed and delivered by Lessee,
the Indenture Trustee or the Owner Trustee and duly filed.
(vii) Each Participant and the Indenture Trustee shall have
received the following, in each case in form and substance satisfactory to
it, provided that only the Owner Participant shall receive a copy of the
Purchase Agreement which shall be delivered to and retained by the Owner
Trustee (the Owner Trustee and the Original Loan Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date but thereafter shall not have access to the same unless a Default or
Event of Default under the Lease shall have occurred and be continuing):
(1) a certified copy of the Certificate of Incorporation and
By-Laws of Lessee and a copy of resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of this Agreement, the
Lease, the Owner Trustee's Purchase Agreement, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with the
provisions hereof and thereof;
(2) such other documents and evidence with respect to Lessee,
the Manufacturer, the Owner Trustee, the Indenture Trustee, the
Participants and the Owner Participant Guarantor, as the Original Loan
Participant or the Owner Participant, or their respective counsel, may
reasonably request in order to establish the authority of such parties
to consummate the transactions contemplated by this Agreement, the
taking of all corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as to the Person or persons
authorized to execute and deliver this Agreement, the other Lessee
Documents, and any other documents to be executed on behalf of Lessee
in connection
8
<PAGE> 12
[Participation Agreement (1994 737 B)]
with the transactions contemplated hereby and as to the signature of
such person or persons;
(4) a copy of the Purchase Agreement certified by the
Secretary or an Assistant Secretary of Lessee as being a true and
accurate copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations or any
right in such Purchase Agreement assigned by Lessee to the Owner
Trustee pursuant to the Owner Trustee's Purchase Agreement; and
(5) a copy of the general authorizing resolutions of the
boards of directors (or executive committees) or other satisfactory
evidence of authorization of the Indenture Trustee, the Owner Trustee,
the Owner Participant and the Owner Participant Guarantor, certified
as of the Delivery Date by the Secretary or an Assistant Secretary of
the Indenture Trustee, the Owner Trustee, the Owner Participant and
the Owner Participant Guarantor, respectively, which authorize the
execution, delivery and performance by the Indenture Trustee, the
Owner Trustee, the Owner Participant and the Owner Participant
Guarantor of all of the Operative Documents to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee, the Owner Trustee, the Owner Participant and the
Owner Participant Guarantor as either the Original Loan Participant
(or its counsel) or the Owner Participant (or its counsel) may
reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not be a
condition precedent as to any Participant as to documents to be
provided by that Participant.
(viii) All appropriate action required to have been taken by the
Federal Aviation Administration, or any governmental or political agency,
subdivision or instrumentality of the United States, prior to the Delivery
Date in connection with the transactions contemplated by this Agreement
shall have been taken, and all orders, permits, waivers, authorizations,
exemptions and approvals of such entities required to be in effect on the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been issued, and all such orders, permits, waivers,
authorizations, exemptions and approvals shall be in full force and effect
on the Delivery Date.
(ix) On the Delivery Date, the following statements shall be
true, and the Participants and the Indenture Trustee shall have received
evidence satisfactory to each of them to the effect that:
9
<PAGE> 13
[Participation Agreement (1994 737 B)]
(1) the Owner Trustee has good and marketable title (subject
to filing and recording of the Owner Trustee's FAA Bill of Sale with
the Federal Aviation Administration) to the Aircraft, free and clear
of Liens other than the rights of Lessee under the Lease and Lease
Supplement covering the Aircraft, the mortgage and security interest
created by the Trust Indenture, the rights of the Owner Participant
under the Trust Agreement and the Trust Supplement and Liens permitted
by clause (iii) (solely for Taxes not yet due) of Section 6 of the
Lease;
(2) application for registration of the Aircraft in the name
of the Owner Trustee (together with any required affidavits) and the
Owner Trustee's FAA Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the Trust Indenture and the Trust
Supplement and the Lease and the Lease Supplement have been duly filed
with the FAA for recordation;
(4) the Owner Trustee, as lessor under the Lease Agreement,
and the Indenture Trustee, as assignee thereof, is entitled to the
protection of Section 1110 of the Bankruptcy Code in connection with
its right to take possession of the Airframe and Engines in the event
of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a
debtor; and
(5) the Aircraft has been duly certified by the FAA as to
type and airworthiness in accordance with the terms of the Lease and
has a current, valid U.S. standard certificate of airworthiness issued
by the FAA.
(x) On the Delivery Date, (A) the respective representations and
warranties of Lessee, the Owner Participant and the Owner Trustee contained
in Sections 7 and 8 of this Agreement and in the Tax Indemnity Agreement,
and of the Owner Participant Guarantor contained in the Owner Participant
Guaranty Agreement shall be true and accurate as though made on and as of
such date except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall be true and accurate on and as of such earlier date), (B)
no event shall have occurred and be continuing, or would result from the
purchase, sale, lease or mortgage of the Aircraft, which constitutes (or
would, with the passage of time or the giving of notice or both,
constitute) an Event of Default as defined in the Lease or the Trust
Indenture, and (C) no event shall have occurred that might have the effect
of materially and adversely affecting the ability of Lessee to carry on its
business as conducted on June 30, 1994 or to perform its obligations under
the Operative Documents except for such matters timely disclosed in press
releases issued by UAL Corporation or Lessee or in public filings,
effective as of the date hereof, with the
10
<PAGE> 14
[Participation Agreement (1994 737 B)]
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, by UAL Corporation or Lessee;
(xi) The Participants shall have received an opinion addressed
to the Participants, the Indenture Trustee, and the Owner Trustee from (a)
Francesca M. Maher, Vice President-Law and Corporate Secretary for Lessee,
in substantially the form of Schedule III-1(a) hereto and (b) Vedder,
Price, Kaufman & Kammholz, special counsel to the Lessee, in substantially
the form of Schedule III-1(b) hereto.
(xii) The Participants shall have received an opinion addressed
to the Participants, the Owner Trustee, the Indenture Trustee and Lessee
from counsel to the Manufacturer, in substantially the form of Schedule
III-2 hereto.
(xiii) The Participants shall have received an opinion addressed
to the Participants, the Indenture Trustee, the Owner Trustee and Lessee,
from Ray, Quinney & Nebeker, special counsel for the Owner Trustee, in
substantially the form of Schedule III-3 hereto.
(xiv) The Original Loan Participant shall have received an
opinion addressed to the Indenture Trustee, the Original Loan Participant,
the Owner Trustee and Lessee from (a) Dewey Ballantine, special counsel to
the Owner Participant and the Owner Participant Guarantor, in substantially
the form of Schedule III-4(a) hereto and (b) Michael Zuckert, Esq., Counsel
to the Owner Participant and Counsel to the Owner Participant Guarantor in
substantially the form of Schedule III-4(b) hereto.
(xv) The Participants shall have received an opinion addressed
to the Participants, the Indenture Trustee, the Owner Trustee and Lessee,
from Crowe & Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, in
substantially the form of Schedule III-5 hereto.
(xvi) The Participants shall have received an opinion addressed
to the Participants, the Owner Trustee and Lessee from Bingham, Dana &
Gould, special counsel for the Indenture Trustee, in substantially the form
of Schedule III-6 hereto.
(xvii) [Intentionally Omitted.]
(xviii) The Participants and the Indenture Trustee shall have
received a certificate signed by the President or any Vice President of
Lessee, dated the Delivery Date, addressed to the Participants and the
Indenture Trustee and certifying as to the fulfillment of all conditions in
this Section 4(a) insofar as they relate to Lessee and as to the matters
stated in paragraphs (viii), (x) (insofar as it relates to Lessee), (xxii)
and (xxiii) (to the knowledge of Lessee, except in regard to matters
relating to the
11
<PAGE> 15
[Participation Agreement (1994 737 B)]
Participants, Indenture Trustee or the Owner Trustee, in which event such
representation shall be to the knowledge of Lessee without any
investigation whatsoever) of this Section 4(a).
(xix) (a) The Owner Participant shall, by making its Commitment
available as provided in Section 1(b)(ii) of this Agreement, (b) the
Indenture Trustee shall by authenticating the Certificates issued on the
Delivery Date and (c) the Owner Trustee shall, by accepting the Owner
Trustee's Bill of Sale and the Owner Trustee's FAA Bill of Sale, be
respectively deemed to have reaffirmed as of the Delivery Date the
representations and warranties made by it in Section 8 of this Agreement.
(xx) The Owner Participant shall have received an opinion, in
form and substance reasonably satisfactory to the Owner Participant, from
BK Associates, independent aircraft appraisers, or such other recognized
aircraft appraiser selected by the Owner Participant, to the effect that
(A) the Aircraft will have, at the end of the Basic Term, (i) at least 20%
of its economic life remaining and (ii) a fair market value of at least 20%
of Lessor's Cost (without taking into account any increase or decrease for
inflation or deflation during the Interim Term and the Basic Term and
assuming the Aircraft is in compliance with the provisions of Section 5 of
the Lease); (B) the fair market value of the Aircraft on the Delivery Date
is equal to Lessor's Cost; (C) the EBO Percentage equals or exceeds a
reasonable current estimate of the fair market value (taking into account
inflation and deflation) of the Aircraft on the EBO Date; and (D) on the
Delivery Date, the Aircraft will not require any improvements,
modifications or additions (other than ancillary items of removable
equipment of a kind customarily selected and furnished by purchasers or
lessees of similar aircraft) in order to be rendered complete for its
intended use by the Lessee.
(xxi) The Participants and the Indenture Trustee shall have
received an independent insurance broker's report, and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of the
Lease relating to insurance with respect to the Aircraft.
(xxii) On the Delivery Date, it shall be true that no Event of
Loss (or event which with the passage of time or the giving of notice or
both would become an Event of Loss) with respect to the Airframe or any
Engine has occurred.
(xxiii) No action or proceeding shall have been instituted nor
shall any governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been
issued or proposed to be issued by any court or governmental agency at the
time of the Delivery Date to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or the transactions
contemplated hereby.
12
<PAGE> 16
[Participation Agreement (1994 737 B)]
(xxiv) The respective representations and warranties of the
Indenture Trustee and the Original Loan Participant contained in Section 8
hereof shall be true and accurate as of the Delivery Date as though made on
and as of such date except to the extent that such representations and
warranties relate solely to an earlier date (in which event such
representations and warranties shall have been true and accurate on and as
of such earlier date) and Lessee and each Participant shall have received a
certificate signed by the Chairman of the Board, the President, any Vice
President or any Assistant Vice President of the Indenture Trustee
certifying as to the foregoing matters with respect to the Indenture
Trustee; by making available its Commitment, the Original Loan Participant
shall be deemed to have reaffirmed the representations and warranties made
by it in such Section 8.
(xxv) The Owner Participant shall have received from Dewey
Ballantine, special counsel to the Owner Participant, a favorable opinion,
in form and substance satisfactory to the Owner Participant, with respect
to certain income tax aspects of the transactions contemplated by the
Operative Documents.
(xxvi) In the opinion of the Owner Participant and its special
counsel, there shall have been, since September 1, 1994, no actual or
proposed amendment, modification, addition, or change in or to (A) the
provisions of the Code (including for this purpose, any non-Code provisions
of legislation affecting the Code such as transition rules or effective
date provisions), (B) the regulations promulgated under the Code (including
temporary regulations), (C) Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, (D) applicable
judicial precedents, (E) any New York state or city taxes or (F) or
Executive Orders of the President of the United States, in each case as in
effect on the date hereof, the effect of which might adversely affect the
Owner Participant's Net Economic Return.
(xxvii) The Original Loan Participant shall have received a copy
of the opinion from BK Associates referred to in (xx) above (without regard
to the form and substance thereof, except that such opinion shall be in
form and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the Delivery
Date is at least equal to Lessor's Cost).
(xxviii) If the Original Loan Participant is required to execute
any form or document in order for payments to it to qualify for exemption
from, or reduction of, withholding tax imposed by the United States
Government in respect to such payments, such Original Loan Participant
shall have executed such form or document (including, without limitation,
United States Internal Revenue Forms 1001, W-8 and/or 4224) and delivered
it to the Indenture Trustee in accordance with applicable regulations to
qualify for such exemption or reduction.
13
<PAGE> 17
[Participation Agreement (1994 737 B)]
Promptly upon the registration of the Aircraft and the recording of
the Lease, the Trust Indenture, the Trust Agreement, the Lease Supplement and
the Trust Supplement covering the Aircraft pursuant to the Transportation Code,
Lessee will cause Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, to deliver to the Owner Participant, the Indenture Trustee, the
Original Loan Participant, the Owner Trustee and Lessee an opinion as to the due
and valid registration of the Aircraft in the name of the Owner Trustee, the due
recording of the Owner Trustee's FAA Bill of Sale, the Trust Indenture, the
Lease Supplement, the Trust Supplement, the Lease and the Trust Agreement and
the lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
that the obligations of Lessee (A) to participate in the sale of the Aircraft to
the Owner Trustee, (B) to accept delivery of the Aircraft under the Lease and
(C) to enter into the other Lessee Documents, are all subject to the fulfillment
to the satisfaction of Lessee prior to or on the Delivery Date of the following
conditions precedent:
(i) The conditions specified in Sections 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and 4(a)(xxviii) hereof shall have been
satisfied, unless such nonsatisfaction is the result of the actions of
Lessee.
(ii) Those documents described in Section 4(a)(v) shall have been
duly authorized, executed and delivered by the respective party or parties
thereto (other than Lessee) in the manner specified in Section 4(a)(v),
shall each be satisfactory in form and substance to Lessee, shall be in
full force and effect on the Delivery Date, and an executed counterpart of
each thereof (other than the Certificates) shall have been delivered to
Lessee or its counsel.
(iii) Lessee shall have received a copy of the general
authorizing resolutions of the boards of directors (or executive
committees) or other satisfactory evidence of authorization of the
Indenture Trustee, the Owner Trustee, the Owner Participant and the Owner
Participant Guarantor, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee, the Owner Trustee, the
Owner Participant and the Owner Participant Guarantor, respectively, which
authorize the execution, delivery and performance by the Indenture Trustee,
the Owner Trustee, the Owner Participant and the Owner Participant
Guarantor of all the Operative Documents to which it is a party, together
with such other documents and evidence with respect to the Indenture
Trustee, the Owner Trustee, the Owner Participant and the Owner Participant
Guarantor as Lessee or its counsel may reasonably request in order to
establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection therewith
and compliance with the conditions herein set forth.
14
<PAGE> 18
[Participation Agreement (1994 737 B)]
(iv) The respective representations and warranties of the
Participants, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof and of the Owner Participant Guarantor contained in the
Owner Participant Guaranty Agreement shall be true and accurate as of the
Delivery Date as though made on and as of such date except to the extent
that such representations and warranties relate solely to an earlier date
(in which event such representations and warranties shall have been true
and accurate on and as of such earlier date) and Lessee shall have received
a certificate signed by the Chairman of the Board, the President, any Vice
President or any Assistant Vice President or other authorized
representative of the Indenture Trustee, the Owner Participant and the
Owner Trustee, respectively, certifying as to the foregoing matters with
respect to the Indenture Trustee, the Owner Participant and the Owner
Trustee, respectively.
(v) Lessee shall have received the opinions set forth in
Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and 4(a)(xvi), in each
case addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the date of the
execution and delivery of this Agreement in applicable law or regulations
thereunder or interpretations thereof by appropriate regulatory authorities
which, in the opinion of Lessee, would make it a violation of law or
regulations for Lessee to enter into any transaction contemplated by the
Operative Documents.
(vii) In the opinion of Lessee and its counsel, there shall have
been, since September 1, 1994, no actual or proposed amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code such as
transition rules or effective date provisions) and the regulations
promulgated under the Code (including temporary regulations), Internal
Revenue Service Revenue Procedures or Revenue Rulings, or other
administrative interpretations, applicable judicial precedents or Executive
Orders of the President of the United States which might give rise to an
indemnity obligation under any of the Operative Documents, or as a result
of which any adjustments to the Lease payments are requested by the Owner
Participant which, in the Lessee's opinion, make the Lease become
uneconomic to the Lessee.
(viii) Lessee shall have received a copy of the opinion from BK
Associates referred to in (xx) of Section 4(a) (without regard to the form
and substance thereof, except that such opinion shall be in form and
substance reasonably satisfactory to Lessee to the effect that the fair
market value of the Aircraft on the Delivery Date is at least equal to
Lessor's Cost).
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
Participants, and the Indenture Trustee shall keep the Purchase Agreement
confidential and shall not disclose
15
<PAGE> 19
[Participation Agreement (1994 737 B)]
the same to any Person, except (A) to prospective and permitted transferees of
Lessor's, the Original Loan Participant's, the Owner Participant's or the
Indenture Trustee's interest who agree to hold such information confidential,
(B) to the aforementioned prospective and permitted transferees', Lessor's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
counsel or special counsel, independent insurance brokers or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, including Federal or state banking examiners or tax auditors or (D)
as may be necessary or desirable for purposes of protecting the interest of any
such Person or for enforcement of the Lease by Lessor, the Participants or the
Indenture Trustee; provided, however, that any and all disclosures of all or any
part of the Purchase Agreement which are permitted by (C) or (D) above shall be
made only to the extent necessary to meet the specific requirements or needs of
the Persons to whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Holders. No Holder shall have any
further interest in, or other right with respect to, the mortgage and security
interests created by the Trust Indenture when and if the Original Amount of,
Break Amount, if any, and interest on all Certificates held by such Holder and
all other sums payable to such Holder hereunder, under the Trust Indenture and
under such Certificates shall have been paid in full. Each Holder by its
acceptance of a Certificate, agrees that it will look solely to the income and
proceeds from the Indenture Estate to the extent available for distribution to
such Holder as provided in Section 2.03 of the Trust Indenture and that neither
the Owner Participant nor the Owner Trustee shall be personally liable to any
Holder for any amounts payable under the Certificates, the Trust Indenture,
hereunder, or under any other Operative Documents (including, without
limitation, amounts payable as Break Amount, if any), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
SECTION 7. Lessee's Representations, Warranties and Indemnitees. (a)
In General. Lessee represents and warrants that as of the Delivery Date:
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its operations or the nature of its business requires, except where
the failure to be so qualified would not have a material adverse effect on
Lessee or its business; is a "citizen of the United States" and an "air
carrier" within the meaning of the Transportation Code operating under
certificates issued under Section 41102 of such Code; holds all material
licenses, certificates, permits and franchises from the appropriate
agencies of the United States of America and/or all other governmental
authorities having jurisdiction, necessary to authorize Lessee to engage in
air transport and to carry on scheduled passenger service, in each case as
presently conducted; has its chief executive office (as such term is
defined in Article 9 of the Uniform Commercial Code) in Elk Grove Township,
Illinois; and has the corporate
16
<PAGE> 20
[Participation Agreement (1994 737 B)]
power and authority to conduct its business as it is presently being
conducted, to hold under lease the Aircraft and to enter into and perform
its obligations under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents will, on the Delivery Date, have been duly authorized by
all necessary corporate action on the part of Lessee, do not require any
stockholder approval, or approval or consent of any trustee or holders of
any indebtedness or obligations of Lessee except such as have been duly
obtained or by the Delivery Date will have been duly obtained, the Lessee
Documents have been duly executed and delivered by Lessee and none of such
Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained or will on or prior to
the Delivery Date be duly obtained, and will on the Delivery Date be in
full force and effect, (B) the registration of the Aircraft referred to in
Section 4(a)(ix)(2) and (C) any normal periodic and other reporting
requirements under the applicable rules and regulations of the FAA to the
extent required to be given or obtained only after the Delivery Date;
(iv) each of the Lessee Documents will upon execution thereof
constitute legal, valid and binding obligations of Lessee enforceable
against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
17
<PAGE> 21
[Participation Agreement (1994 737 B)]
(vi) except for (A) the registration of the Aircraft pursuant
to the Transportation Code, (B) the filing for recording pursuant to said
Code of the Trust Agreement, the Lease with the Lease Supplement covering
the Aircraft, the Trust Indenture and the Trust Supplement attached thereto
and made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Codes of Illinois and Utah (which
financing statements Lessee has caused to be presented in due form for
filing with the appropriate filing office in the States of Illinois and
Utah) and such other states as may be specified in the opinion furnished
pursuant to Section 4(a)(xi) hereof and (D) the taking of possession by the
Indenture Trustee of the original counterparts of the Lease and the Lease
Supplement covering the Aircraft, no further action, including any filing
or recording of any document (including any financing statement in respect
thereof under Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), is necessary or advisable in order to establish and perfect
the Owner Trustee's title to and interest in the Aircraft as against Lessee
and the Indenture Trustee's first priority security interest in the
Aircraft as against the Owner Trustee, and in each case as against any
third parties in any applicable jurisdictions in the United States;
(vii) there has not occurred any event which constitutes a
Default or an Event of Default under the Lease which is presently
continuing and there has not occurred any event which constitutes or would,
with the passage of time or the giving of notice, or both, constitute an
Event of Loss with respect to the Airframe or any Engine;
(viii) the statements of financial position of Lessee as of
December 31, 1993 and June 30, 1994 and the related statements of earnings
and cash flow of Lessee for the year and six months then ended, copies of
which have been furnished to the Participants, fairly present the financial
condition of Lessee as at such dates and the results of operations and cash
flow of Lessee for the periods ended on such dates, in accordance with
generally accepted accounting principles consistently applied (except as
may be stated in the notes thereto), and subject in the case of the June
30, 1994 statements, to normal year-end audit adjustments, and since June
30, 1994, there has been no material adverse change in such condition or
operations, except for such matters timely disclosed in press releases
issued by UAL Corporation or Lessee or in public filings, effective as of
the date hereof, with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, by UAL Corporation or Lessee;
(ix) the Owner Trustee will receive good and marketable title to
the Aircraft from Lessee free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clauses (ii) and
(iii) of Section 6 of the Lease;
18
<PAGE> 22
[Participation Agreement (1994 737 B)]
(x) none of the proceeds from the issuance of the Certificates
or from the acquisition by the Owner Participant of its beneficial interest
in the Trust Estate will be used directly or indirectly by Lessee to
purchase or carry any "margin stock" as such term is defined in Regulation
G or U of the Board of Governors of the Federal Reserve System;
(xi) neither Lessee nor anyone acting on behalf of Lessee has
(A) directly or indirectly offered any interest in the Trust Estate for
sale to, or solicited any offer to acquire any of the same from, anyone
other than the Owner Participant, and not more than five (5) other
institutions believed capable of evaluating and bearing the risks of
investment in the transactions contemplated hereby, (B) directly or
indirectly offered any Certificates or any similar security for sale to, or
solicited any offer to acquire any of the same from, anyone other than the
Original Loan Participant and not more than five (5) other institutions
believed capable of evaluating and bearing the risks of investment in the
transactions contemplated hereby, or (C) taken any action which would
require the Certificates to be registered pursuant to the Securities Act of
1933, as amended or (D) filed or published, or caused to be filed or
published, any financing statement or similar statement or notice under the
Uniform Commercial Code in effect in any jurisdiction or any state or local
fraudulent conveyance or analogous statute or ordinance describing any
portion of the Trust Estate, other than filings referred to in Section
4(a)(vi) hereof and such other filings, notices or publications as shall
have been approved by counsel to the Owner Participant and the Original
Loan Participant prior to the filing or publication thereof;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement or any agreement contemplated hereby solely by reason of any
fact or circumstance peculiar to: (a) Lessee, (b) the nature of the
Aircraft, or (c) Lessee's proposed operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee in good faith and by
appropriate proceedings so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Aircraft;
(xv) the Aircraft has been duly certified by the FAA as to type
and airworthiness;
19
<PAGE> 23
[Participation Agreement (1994 737 B)]
(xvi) Owner Trustee, as lessor under the Lease, and the
Indenture Trustee, as assignee thereof, are entitled to the protection of
Section 1110 of the Bankruptcy Code in connection with its right to take
possession of the Airframe and Engines in the event of a case under Chapter
11 of the Bankruptcy Code in which Lessee is a debtor; and
(xvii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(b) General Tax Indemnity. (i) Indemnity. Lessee agrees that each
payment of Rent pursuant to the Lease shall be free of all withholding with
respect to Taxes of any nature whatsoever, and in the event that the Lessee
shall be required by applicable law to make any such withholding for any such
payment, (x) Rent payable shall be increased so that after making all required
withholdings the Indemnitee receives an amount equal to the Rent it would have
received had such withholdings not been made, (y) the Lessee shall make such
withholdings and (z) the Lessee shall pay the full amount withheld to the
relevant taxing authority in accordance with applicable law. If for any reason,
the Lessee is required to make any payment to a taxing authority or to any
Indemnitee as a result of the application of the preceding sentence or otherwise
that relates to or is a result of any Tax imposed on or with respect to any
Indemnitee which Tax (in whole or in part) is not the responsibility of the
Lessee under the terms of this Section 7(b), then such Indemnitee shall, within
30 days after receipt of notice of payment of the Tax and appropriate payment
documentation with respect thereto, reimburse the Lessee in accordance with
Section 7(b)(viii). Except as provided in Section 7(b)(ii) hereof, whether or
not any of the transactions contemplated herein are consummated, Lessee shall
pay when due and assume liability for, and protect, save and shall indemnify and
hold harmless each Indemnitee (except that for purposes of this Section 7(b) an
Indemnitee shall not include any Holder other than any Original Loan Participant
and any Person who has purchased a participation in a Certificate held by any
Original Loan Participant) from and against (x) any and all Taxes howsoever
imposed against any Indemnitee, Lessee or all or any part of the Aircraft, the
Airframe, the Engines, the Parts or any part thereof or otherwise by any
federal, state or local government or other taxing authority in the United
States or by any foreign government or any political subdivision or taxing
authority thereof or by any territory or possession of the United States or by
any international authority upon or in connection with, relating to, or measured
by (A) the assembly, manufacture, construction, substitution, improvement,
location, conditioning, installation, financing, refinancing, purchase,
acquisition, acceptance, delivery, nondelivery, transport, ownership,
registration, reregistration, possession, repossession, control, operation, use,
maintenance, repair, replacement, insuring, sale, return, abandonment, storage,
redelivery, leasing, subleasing, modification, rebuilding of, transfer of title
to, transfer of registration of, rejection, importation, mortgaging, exportation
or disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any
20
<PAGE> 24
[Participation Agreement (1994 737 B)]
amount paid or payable pursuant to any Operative Documents or any document
related thereto or the property or the income or other proceeds with respect to
any of the property held in the Trust Estate or the Indenture Estate, (D) the
Aircraft, the Airframe, the Engines, the Parts or any part thereof or any
contract relating to the manufacture, construction, acquisition or delivery
thereof, (E) any or all of the Operative Documents, or the issuance of the
Certificates (or the refinancing thereof) and any other documents contemplated
hereby or thereby and amendments and supplements hereto and thereto which have
been approved by Lessee or the execution, delivery, recording or performance of
any thereof or the issuance, acquisition, holding or subsequent transfer
thereof, (F) the payment of the Original Amount of, or interest, Break Amount
on, or other amounts payable with respect to, the Certificates, (G) otherwise
with respect to or in connection with the transactions contemplated by the
Operative Documents, or (H) any change in the Owner Trustee or the situs of the
Trust Estate made pursuant to Sections 8(e) or 14 hereof; and (y) any reasonable
out-of-pocket costs and expenses fairly attributed to any of the foregoing
incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority
other than (I) with respect to any jurisdiction in which such
Indemnitee is not otherwise doing business or maintaining an office,
any Income Taxes imposed as a result of the operation of the Aircraft
to or in such jurisdiction or the transactions contemplated by the
Operative Documents, or (II) with respect to any jurisdiction in which
such Indemnitee is otherwise doing business or maintaining an office,
any Income Taxes to the extent such Income Taxes exceed the Income
Taxes which would have been due had the Aircraft not been operated to
or in such jurisdiction;
(2) in the case of an Indemnitee which is a Holder or any
successor, assign, or Affiliate thereof, to Income Taxes or transfer
taxes relating to any payments of principal, interest, or Break
Amount, if any, on the Certificates, or to a Holder, imposed by any
government or taxing authority;
(3) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such
21
<PAGE> 25
[Participation Agreement (1994 737 B)]
Indemnitee including, without limitation, the revocation of the trust
created by the Trust Agreement or an involuntary transfer or
disposition relating to bankruptcy or similar proceedings of all or
any portion of its respective equitable or legal ownership interest in
the Aircraft, the Airframe, the Engines, the Parts or any part
thereof, the Trust Estate or the Operative Documents, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under the Lease at the time of transfer or
disposition and such transfer is as a result of such Event of Default,
or (B) in connection with the termination of the Lease or action or
direction of the Lessee pursuant to Sections 7, 8, 9, 10 or 19
thereof;
(4) to any Tax imposed on any Indemnitee which is a Holder,
the Indenture Trustee or the Indenture Estate or any successor, assign
or Affiliate of any thereof, as a result of a voluntary or involuntary
transfer or other disposition of all or any portion of its respective
equitable or legal interests in the Trust Estate or the Indenture
Estate or the Operative Documents unless, in each case, such transfer
or disposition shall occur (A) during a period when a Default or an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Default or Event of Default, or (B) in connection with
the termination of the Lease or action or direction of the Lessee
pursuant to Sections 7, 8, 9, 10 or 19 thereof;
(5) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) to the extent imposed on the Owner Participant
or Trust Estate, the Owner Participant or (ii) to the extent imposed
on the Owner Trustee, the Owner Trustee;
(6) to any Tax imposed on an Indemnitee which is a Holder,
the Indenture Trustee or the Indenture Estate which results from the
willful misconduct or gross negligence of such Indemnitee;
(7) to any Tax based on or measured by any fees received by
the Owner Trustee or the Indenture Trustee in connection with any
transaction contemplated by the Operative Documents;
(8) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Airframe and Engines in accordance with
Section 5 of the Lease, (B) the earlier discharge in full of Lessee's
obligation to pay the Stipulated Loss Value or the
22
<PAGE> 26
[Participation Agreement (1994 737 B)]
Termination Value and all other amounts due under the Lease or (C)
placement in storage or parking of the Aircraft pursuant to Section
5(d) of the Lease; provided, however, that this Section 7(b)(ii)(8)
shall not apply to any Tax (x) relating to events or conditions
occurring or matters arising upon or prior to such expiration,
discharge, storage or parking, or (y) imposed on or with respect to
any payments of Tax indemnified hereunder which are due after such
expiration, discharge, storage or parking until after such payments
have been made;
(9) in the case of an Indemnitee which is the Indenture
Estate or any Holder, or any successor, assign or Affiliate of either
thereof, to any Tax in the nature of an intangible or similar tax upon
or with respect to the value of the interest of the Indenture Estate
or such Holder, as the case may be, in any of the Certificates imposed
by any government or taxing authority;
(10) to any Tax imposed on or with respect to a transferee
(or subsequent transferee) of an original Indemnitee (A) if such Tax
would not have been required or imposed on or with respect to such
original Indemnitee, or (B) to the extent such Tax exceeds the amount
of Tax that would have been imposed on the original Indemnitee,
provided, however, that the exception in this Section 7(b)(ii)(10)
shall not apply to any transferee (or subsequent transferee) where
such transfer shall have occurred as a result of any Event of Default;
(11) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(12) to any Tax which Lessee is contesting in good faith
under the provisions of Section 7(b)(iv) until the conclusion of such
contest;
(13) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent imposed
by any jurisdiction for and with respect to any activities of such
Indemnitee in such jurisdiction which activities are unrelated to the
transactions contemplated by the Operative Documents; and
(14) to any Tax which has been included in the Lessor's
Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to this Section 7(b) or Section 7(c) hereof or
pursuant to the Tax Indemnity Agreement; provided, however, that this
clause shall not result in any duplication of any amounts of
23
<PAGE> 27
[Participation Agreement (1994 737 B)]
any gross-up payable under Section 7(b)(iii) or Section 7(c) hereof or the
Tax Indemnity Agreement.
(iii) Calculation of General Tax Indemnity Payments. Any payment
which Lessee shall be required to make to or for the account of any
Indemnitee with respect to any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant to (I) above would exceed (x)
the amount of all prior payments (determined without regard to any amount
paid in respect of Taxes required to be paid by such Indemnitee in respect
of the receipt or accrual of such amounts received by such Indemnitee) from
Lessee pursuant to this Section 7(b), less (y) the portion of all prior
payments computed pursuant to (I) above by such Indemnitee to Lessee
hereunder.
For purposes of this Section 7(b)(iii) items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which
24
<PAGE> 28
[Participation Agreement (1994 737 B)]
such Indemnitee has made in full the payment to Lessee required hereby (or
as to which such Indemnitee would have made its payment but for Section
7(b)(vii) hereof), in a taxable year subsequent to the utilization by such
Indemnitee (including the expiration of any tax credit carryovers or
carrybacks of such Indemnitee that would not otherwise have expired) shall
be treated as a Tax for which Lessee is obligated to indemnify such
Indemnitee pursuant to the provisions of this Section 7(b) without regard
to the provisions of Section 7(b)(ii), 7(b)(iv) or the third paragraph of
this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and shall provide Lessee
such information regarding such claim as Lessee may reasonably request, but
the failure to give such notice or to provide such information shall not
diminish Lessee's obligation hereunder unless such failure materially and
adversely affects Lessee's ability to (A) require such Indemnitee to
contest the Tax or (B) contest the Tax itself (in a case where Lessee
cannot require the Indemnitee to contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, shall be entitled to withhold payment
during pendency of such contest or (B) if an Event of Default shall have
occurred and be continuing, unless the Lessee shall have, at the option of
the Owner Participant, either (i) provided security for its obligations
hereunder reasonably satisfactory to the Owner Participant by placing in
escrow sufficient funds to cover any such contested Tax or (ii) paid such
Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with
25
<PAGE> 29
[Participation Agreement (1994 737 B)]
respect to a Tax for which Lessee is obligated to indemnify pursuant to
this Section 7(b) which is not described in the previous paragraph
exclusive of the proviso thereto, such Indemnitee shall in good faith at
Lessee's expense contest the imposition of any such Tax. After consulting
with Lessee and Lessee's counsel concerning the forum in which the
adjustment is most likely to be favorably resolved, such Indemnitee shall,
in its sole discretion, select the forum for such contest and determine
whether any such contest shall be by (A) resisting payment of such Tax, (B)
paying such Tax under protest or (C) paying such Tax and seeking a refund
or other repayment thereof. In no event shall such Indemnitee be requested
or required to contest the imposition of any Tax for which Lessee is liable
under this Section 7(b) unless (I) in Lessee's request to the Indemnitee to
contest such Tax, Lessee shall have agreed to pay such Indemnitee on demand
all reasonable costs and expenses that such Indemnitee actually incurs in
connection with contesting such claim (including, without limitation, all
costs, expenses, losses, reasonable legal and accounting fees,
disbursements, penalties, interest and additions to tax), (II) such action
to be taken will not result in the risk of an imposition of criminal
penalties or the material risk of any sale, forfeiture or loss of the
Aircraft, or the creation of any Lien other than Liens for Taxes of Lessee
(x) either not yet due or being contested in good faith by appropriate
proceedings so long as such proceedings do not involve the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft and (y) for the payment of which such
reserves, if any, as are required to be provided under generally accepted
accounting principles have been provided by Lessee, (III) if such contest
shall be conducted in a manner requiring the payment of the claim, Lessee
shall have paid the amount required directly to the appropriate authority
or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee against any
additional net after-tax cost to such Indemnitee with respect to such
advance, (IV) with regard to an Income Tax on an Indemnitee which is the
Owner Participant, the Owner Trustee, the Original Loan Participant, or a
successor, assign or Affiliate of such Indemnitee, independent tax counsel
selected by such Indemnitee and reasonably satisfactory to the Lessee shall
furnish an opinion, prepared at the Lessee's expense, to the effect that
there is a reasonable basis to contest such claim, (V) in the case of an
Indemnitee which is the Owner Participant or the Owner Trustee, the
Original Loan Participant, or a successor, assign or Affiliate of such
Indemnitee, prior to the commencement of an administrative appeal Lessee
shall have delivered to such Indemnitee a written acknowledgment of
Lessee's obligation to indemnify fully such Indemnitee to the extent that
the contest is not successful; provided, however, that Lessee will not be
bound by its acknowledgment of liability if and to the extent that the
contest results in a determination which clearly and unambiguously
demonstrates that Lessee is not otherwise liable under this Section 7(b)
with respect to such Tax, and (VI) if an Event of Default shall have
occurred and be continuing, the Lessee shall have, at the option of such
Indemnitee, either (i) provided security for its obligations hereunder
reasonably satisfactory to such Indemnitee by placing in escrow sufficient
funds to cover any such contested Tax or (ii) paid such Tax.
26
<PAGE> 30
[Participation Agreement (1994 737 B)]
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund received and (II) any tax benefit realized by
such Indemnitee as a result of any payment by such Indemnitee made pursuant
to this sentence; provided, however, that such amount attributable to (I)
above shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee) plus interest received, if any,
from the relevant taxing authority with respect to such Tax payment, it
being intended that such Indemnitee shall realize a net benefit pursuant to
this Section 7(b) only if Lessee shall first have been reimbursed for any
payments by it to such Indemnitee pursuant to this Section 7(b) arising
from the same Loss. If any Indemnitee shall have paid Lessee any refund of
all or part of any Tax paid by Lessee and it is subsequently determined
that such Indemnitee was not entitled to the refund, such determination
shall be treated as the imposition of a Tax for which Lessee is obligated
to indemnify such Indemnitee pursuant to the provisions of this Section
7(b) without regard to Section 7(b)(ii) or Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim.
(v) General Tax Indemnity -- Reports. Lessee will provide such
information as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing requirements with respect to
the transactions contemplated by the Operative Documents. In the event any
return, statement or report is required to be made or filed with respect to
any Tax imposed on or indemnified against by Lessee under this Section 7(b)
(other than with respect to Income Taxes), Lessee shall notify the
Indemnitee of such requirement and (i) to the extent permitted by law or
required by law, Lessee shall make and file in its own name, and pay the
tax shown due on such return, statement or report in such manner as will
show the ownership of the Aircraft in the Owner Trustee and furnish the
Indemnitee with a copy of such return, statement or report; provided,
however, that Lessee shall have no obligation under this clause (i) to the
extent such Indemnitee after receipt of Lessee's written request shall have
failed to furnish Lessee with such information as is peculiarly within such
Indemnitee's control and is necessary to file such returns, statements or
reports, (ii) in the case of a return, statement or report required to be
in the name of or filed by such Indemnitee, Lessee shall prepare and
furnish such return, statement or report for filing by such Indemnitee in
such manner as shall be reasonably satisfactory to such Indemnitee and send
the same to such Indemnitee for filing no later than 10 Business Days prior
to the
27
<PAGE> 31
[Participation Agreement (1994 737 B)]
due date; provided, however, that Lessee shall have no obligation under
this clause (ii) to the extent such Indemnitee after receipt of Lessee's
written request shall have failed to furnish Lessee with such information
as is peculiarly within such Indemnitee's control and is necessary to
prepare such return, statement or report, and (iii) in the case of a
return, statement or report required to reflect items in addition to Taxes
imposed on or indemnified against by the Lessee under this Section 7(b),
Lessee shall, upon the written request of such Indemnitee, provide such
Indemnitee with such information as is within Lessee's reasonable control.
Lessee shall hold each Indemnitee harmless from and against any
liabilities, including, but not limited to penalties, additions to tax,
fines and interest, arising out of any insufficiency or inaccuracy in any
such return, statement, report or information if such insufficiency or
inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
Section 7(b)(iv) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an Indemnitee
shall specify in reasonable detail, the payment and the facts upon which
the right to payment is based. Each Indemnitee shall promptly forward to
Lessee any notice, bill or advice received by it concerning any Tax
indemnified against hereunder. As soon as practicable after each payment by
Lessee of any Tax indemnified against hereunder, Lessee shall furnish the
appropriate Indemnitee the original or a certified copy of a receipt for
Lessee's payment of such Tax or such other evidence of payment of such Tax
as is acceptable to such Indemnitee. Lessee shall also furnish promptly
upon request such data as any Indemnitee may reasonably require to enable
such Indemnitee to comply with the requirements of any taxing jurisdiction.
(vii) Application of Payments During Existence of Event of
Default or Default. Any amount payable to Lessee pursuant to the terms of
this Section 7(b) shall not be paid to or retained by Lessee if at the time
of such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease or any amounts required to be
paid by Lessee hereunder are due and have not been paid. At such time as
there shall not be continuing any such Default or Event of Default, such
amount shall be paid to the Lessee to the extent not previously applied
against Lessee's obligations hereunder as and when due after the Owner
Trustee shall have declared the Lease in default pursuant to Section 15
thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in
28
<PAGE> 32
[Participation Agreement (1994 737 B)]
respect of the transactions contemplated by the Operative Documents or on
the Aircraft, the Airframe, the Engines, the Parts or any part thereof,
which Taxes are not the responsibility of Lessee under this Section 7(b),
then such Indemnitee shall pay to Lessee an amount which equals the amount
paid by Lessee with respect to such Taxes plus interest thereon, computed
from the date of payment by Lessee, at the Base Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
time to time, at the Lessee's request and expense, such duly executed and
properly completed forms as may be necessary or appropriate in order to
claim any reduction of or exemption from any withholding tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents, which reduction or exemption
may be available to such Indemnitee.
(x) Non-Parties. If an Indemnitee is not a party to this
Agreement, Lessee may require the Indemnitee to agree to the terms of this
Section 7(b) prior to making any payment to such Indemnitee under this
Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
the term "Owner Participant" shall mean and include MS Financing Inc. (and
its permitted successors and assigns) and where appropriate the affiliated
group of corporations (and each member thereof) making a consolidated or
combined return of which MS Financing Inc. (and its permitted successors
and assigns) is a member.
(xii) Income Tax. For purposes of this Section 7, the term Income
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, and
taxes on tax preference items) or net receipts and taxes imposed on gross
income or gross receipts which are expressly in lieu of a net income tax
(provided, however, that sales, use, value added, rental, license, ad
valorem or property Taxes shall not constitute an Income Tax) and Taxes
which are capital, doing business, franchise, excess profits, net worth
taxes and interest, additions to tax, penalties, or other charges in
respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents are consummated), any and all
Expenses imposed on, incurred by or asserted against any Indemnitee, in any way
relating to or arising out of or which would not have occurred but for (A) the
Operative Documents, the negotiation and the consummation of the transactions
contemplated thereby (including any misrepresentations or breach of warranty of
Lessee contained herein or in any document or certificate delivered pursuant
hereto and the breach by Lessee of any covenant or agreement contained in any
Operative Document) or any sublease under the Lease Agreement or the enforcement
of any of the terms of any thereof; (B) the
29
<PAGE> 33
[Participation Agreement (1994 737 B)]
manufacture, design, purchase, resale, acceptance or rejection of the Airframe
or any Engine or Parts; (C) the Aircraft (or any portion thereof) or any Engine
whether or not installed on the Airframe or any airframe on which an Engine is
installed whether or not arising out of the finance, refinance, ownership,
delivery, nondelivery, storage, lease, sublease, possession, use, non-use,
operation, maintenance, modification, alteration, condition, sale, replacement,
substitution, return or other disposition, registration, reregistration or
airworthiness of the Aircraft including, without limitation, latent or other
defects, whether or not discoverable, strict tort liability and any damage to
property or the environment, death or injury to any person and any claim for
patent, trademark or copyright infringement; (D) the offer, sale, holding,
transfer or delivery of the Certificates, whether before or after the Delivery
Date (the indemnity in this clause (D) to extend also to any person who controls
an Indemnitee, its successors, assigns, employees, directors, officers, servants
and agents within the meaning of Section 15 of the Securities Act of 1933, as
amended); (E) the offer, holding, transfer or sale of any interest in the Trust
Estate or the Trust Agreement or any similar interest (i) on or prior to the
Delivery Date, or (ii) subsequent to the Delivery Date during the continuation
of an Event of Default under the Lease or in connection with the exercise by
Lessee of its purchase options under the Lease or in connection with a
refinancing pursuant to Section 17 or 20 hereof or in connection with the
termination of the Lease or action or direction of Lessee pursuant to Section 7,
8, 9, 10 or 19 thereof; or (F) the application of Parts 4 and 5 of Subtitle B of
Title I of ERISA to the transactions contemplated hereby or by any other
Operative Document; provided, that the foregoing indemnity shall not extend to
any Expense resulting from or arising out of or which would not have occurred
but for one or more of the following: (1) any representation or warranty by such
Indemnitee in the Operative Documents being incorrect, or (2) the failure by
such Indemnitee to perform or observe any agreement, covenant or condition in
any of the Operative Documents including, without limitation, the creation or
existence of a Lessor Lien (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens), or (3) the
willful misconduct or the gross negligence of such Indemnitee (other than gross
negligence imputed to such Indemnitee solely by reason of its interest in the
Aircraft), or (4) (A) in the case of such Indemnitee a disposition (voluntary or
involuntary) of all or any part of its interest in the Airframe or any Engine,
(B) in the case of a Holder a disposition (voluntary or involuntary) by such
Holder of all or any part of its interest in any Certificate or (C) in the case
of any Indemnitee a disposition by such Indemnitee of all or any part of such
Indemnitee's interest in the Operative Documents other than in each of (A), (B)
and (C) during the continuance of an Event of Default under the Lease or
pursuant to the exercise by Lessee of its purchase options or in connection with
a refinancing pursuant to Section 17 or 20 hereof or in connection with the
termination of the Lease or action or direction of Lessee pursuant to Section 7,
8, 9, 10 or 19 thereof, or (5) other than to the extent provided in the
succeeding paragraph, any Tax (as defined in Section 7(b) hereof) whether or not
Lessee is required to indemnify for such Tax pursuant to Section 7(b) hereof (it
being understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes); provided, however, such exception
shall not apply to the
30
<PAGE> 34
[Participation Agreement (1994 737 B)]
application of Parts 4 or 5 of Subpart B of Title I of ERISA or Section 502(i)
or (1) of ERISA to the execution and delivery by Lessee of the Operative
Documents to which Lessee, Owner Participant or Original Loan Participant is or
will be a party or the consummation of the transactions contemplated thereby
including the sale, resale or transfer of the Certificates, or (6) the offer or
sale by the Owner Participant after the Delivery Date of any interest in the
Trust Estate or the Trust Agreement or any similar interest, unless such offer
or sale shall occur (A) during a period when an Event of Default has occurred
and is continuing under the Lease at the time of such offer or sale; or (B) in
connection with the exercise by Lessee of its purchase options under the Lease
or in connection with a refinancing pursuant to Section 17 or 20 hereof or in
connection with the termination of the Lease or action or direction of Lessee
pursuant to Section 7, 8, 9, 10 or 19 thereof, or (7) a failure on the part of
the Owner Trustee to distribute in accordance with the Trust Agreement any
amounts received and distributable by it thereunder or a failure on the part of
the Indenture Trustee to distribute in accordance with the Trust Indenture any
amounts received and distributable by it thereunder, or (8) other than during
the continuation of a Default under Section 14(f) or (g) of the Lease or an
Event of Default under the Lease the authorization or giving or withholding of
any future amendments, supplements, waivers or consents with respect to any of
the Operative Documents unless such amendments, supplements, waivers or consents
(a) are requested by Lessee or (b) are required or permitted pursuant to the
terms of the Operative Documents (unless such requirement results from the
actions of an Indemnitee) (provided if Lessee is not responsible for the Expense
associated with such amendment, supplement, waiver or consent, the party
requesting the execution of the same shall be responsible for such expense) or
(9) other than to the extent provided in the succeeding paragraph any loss of
tax benefits or increase in tax liability under any tax law whether or not
Lessee is required to indemnify therefor pursuant to this Agreement or the Tax
Indemnity Agreement (it being understood that Section 7(b) hereof and the Tax
Indemnity Agreement and provisions requiring payments to be made on an after-tax
basis or expressly providing for additional indemnification by Lessee
exclusively provide for Lessee's liability with respect to Taxes); provided,
however, such exception shall not apply to the application of Parts 4 or 5 of
Subpart B of Title I of ERISA or Section 502(i) or (1) of ERISA to the execution
and delivery by Lessee of the Operative Documents to which Lessee, Owner
Participant or Original Loan Participant is or will be a party or the
consummation of the transactions contemplated thereby including the sale, resale
or transfer of the Certificates, or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Lessor
shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Lessor shall have furnished the notice
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Lessor on such day or (IV) the payment by Lessee of all amounts
required to be paid under the Lease following an Event of Loss (but excluding
from the terms of this Subsection (IV) an Event of Loss followed by the
replacement of the Aircraft).
31
<PAGE> 35
[Participation Agreement (1994 737 B)]
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing authority or governmental subdivision of
a foreign country, or any territory or possession of the United States or any
international authority, shall be equal to the excess, if any, of (A) the amount
of such Expense over (B) the current net reduction in Taxes actually required to
be paid by such recipient resulting from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Certificates or of the residual value of
the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. Lessee shall be entitled, at its sole cost and
expense, acting through counsel reasonably acceptable to the respective
Indemnitee, (A) in any judicial or administrative proceeding that involves
solely a claim for one or more Expenses, to assume responsibility for and
control thereof, (B) in any judicial or administrative proceeding involving a
claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use its
reasonable best efforts to obtain such severance), and (C) in any other case, to
be consulted by such Indemnitee with respect to judicial proceedings subject to
the control of such Indemnitee and to be allowed, at Lessee's sole expense, to
participate therein. Notwithstanding any of the foregoing to the contrary,
Lessee shall not be entitled to assume responsibility for and control of any
such judicial or administrative proceedings if (i) any Default under Section
14(a), (b), (f) or (g) of the Lease or an Event of Default under the Lease shall
have occurred and be continuing, (ii) if such proceedings will involve a
material risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than a Permitted Lien) on, the Aircraft, the Indenture Estate or the
Trust Estate or any part thereof unless Lessee shall have posted a bond or other
security reasonably satisfactory to the relevant Indemnitees in respect to such
risk or (iii) if such proceedings could, in the good faith opinion of the
Indemnitee entail, any material risk of criminal liability or any material risk
of civil liability to any Indemnitee (unless Lessee has agreed to indemnify
against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee
32
<PAGE> 36
[Participation Agreement (1994 737 B)]
pursuant to the preceding provisions, provided, however, that if (i) in the
written opinion of counsel to such Indemnitee (which counsel and opinion shall
be reasonably acceptable to Lessee) an actual or potential material conflict of
interest exists where it is advisable for such Indemnitee to be represented by
separate counsel or (ii) such Indemnitee has been indicted or otherwise charged
in a criminal complaint in connection with a claim not excluded by Section 7(b)
or (c) hereof, and such Indemnitee informs the Lessee in writing that such
Indemnitee desires to be represented by separate counsel, the reasonable fees
and expenses of such separate counsel shall be borne by Lessee, provided, that
Lessee shall not be responsible for the fees and expenses of more than one
separate counsel for each group of affiliated Indemnitees.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify without the prior written consent of Lessee (except
during the continuance of an Event of Default when such consent shall not be
required if such Indemnitee gives 30 days' prior written notice to Lessee
describing the proposed settlement or compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnitee waives its right to be
indemnified with respect to such Expense under this Section 7(c).
Lessee shall supply the Indemnitee with such information reasonably
requested by the Indemnitee as is necessary or advisable for the Indemnitee to
control or participate in any proceeding to the extent permitted by this Section
7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 5.03 or 7.01 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement and other than claims
against such Indemnitee's insurers under policies maintained at its own expense
in accordance with Section 11(e) of the Lease. The Indemnitee agrees to give
such further assurances or agreements and to cooperate with Lessee to permit
Lessee to pursue such claims, if any, to the extent reasonably requested by
Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee subsequently shall be
reimbursed in respect of such indemnified amount from any other person, such
Indemnitee shall, unless a Default under Section 14(a), (b), (d) (solely with
respect to Lessee's obligations under Section 7(a) or (b)(viii) of the Lease or
Section 8 of the Lease), (f) or (g) of the Lease or an Event of Default shall
have occurred and be continuing, promptly pay Lessee but not before Lessee shall
have made all payments then due to such Indemnitee pursuant to this Section 7(c)
and any other payments then due under any of the Operative Documents, an amount
equal to the sum of (I) the amount of such reimbursement, including interest
received attributable thereto, net of taxes required to be paid
33
<PAGE> 37
[Participation Agreement (1994 737 B)]
by such Indemnitee as a result of any reimbursement including interest received
attributable thereto and (II) any tax benefit actually realized by such
Indemnitee as a result of any payment by such Indemnitee made pursuant to this
sentence; provided, however, that in the case of any Indemnitee such amount
attributable to (I) above shall not be in excess of the amount of such Expense
payment net of any amount paid in respect of Taxes required to be paid by such
Indemnitee in respect of the receipt or accrual of such payment or advance made
by Lessee to such Indemnitee plus interest received, if any, from the relevant
taxing authority with respect to any such Expense payment, it being intended
that such Indemnitee shall realize a net benefit pursuant to this Section 7(c)
only if Lessee shall first have been reimbursed for any payments by it to such
Indemnitee pursuant to this Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including the reasonable fees and expenses of its
counsel) and, as provided in Section 6.07 of the Trust Agreement, the Owner
Trustee (including, but not limited to, the reasonable fees and expenses of its
counsel), without cost, on a net after-tax basis, to the Owner Participant, for
acting as such, other than such fees and expenses which constitute Transaction
Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
34
<PAGE> 38
[Participation Agreement (1994 737 B)]
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
Trustee and the relevant Holder in writing that interest on its Certificates is
subject to United States withholding tax, then the Owner Trustee shall instruct
the Indenture Trustee to, and Indenture Trustee shall, withhold as provided in
Section 2.04(b) of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf has directly or
indirectly offered any interest in the Trust Estate or any Certificates or any
similar securities for sale to, or solicited any offer to acquire any of the
same from, anyone in a manner which would result in a violation of the
Securities Act of 1933, as amended, or the securities laws, rules and
regulations of any state.
(b) Each of the Owner Participant and First Security Bank of Utah,
National Association, in its individual capacity, represents and warrants to the
other parties to this Agreement that it is, and on the Delivery Date will be, a
"citizen of the United States" as defined in Section 40102(a)(15) of the
Transportation Code. The Owner Participant agrees, solely for the benefit of
Lessee and the Holders, that if during such time as the Aircraft is registered
in the United States (or if Lessee desires to register the Aircraft in the
United States) (i) it shall not be a "citizen of the United States" within the
meaning of Section 40102(a)(15) of the Transportation Code and (ii) the Aircraft
shall be, or would therefore become, ineligible for registration in the name of
the Owner Trustee under the Transportation Code and regulations then applicable
thereunder, then the Owner Participant shall (at its own expense and without any
reimbursement or indemnification from Lessee) as soon as is reasonably
practicable but in any event within 30 days after obtaining Actual Knowledge of
such ineligibility and of such loss of citizenship (A) effect voting trust or
other similar arrangements or take any other action as may be necessary to
prevent any deregistration or to maintain the United States registration of the
Aircraft, or (B) transfer its beneficial interest in the Trust Estate in
accordance with Section 8(l) hereof. It is understood that: (1) the Owner
Participant shall be liable to any of the other parties hereto for any damages
suffered by any such other party as the result of the representation and
warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Holder for any damages which
may be incurred by Lessee, any Sublessee or such Holder as a result of the Owner
Participant's failure to immediately comply with its obligations pursuant to the
second sentence of this Section 8(b) unless, in the case of liability to any
such individual party, such failure is a result of the relevant party's breach
of its obligations to cooperate set forth in the following sentence (including
for damages suffered by any such party (other than damages suffered by Lessee
which Lessee could have mitigated by taking reasonable steps) at any time more
than 5 Business Days after the Owner Participant obtains Actual Knowledge of
such ineligibility and of such loss of citizenship). Each party hereto agrees,
upon the request and at
35
<PAGE> 39
[Participation Agreement (1994 737 B)]
the sole expense of the Owner Participant, to cooperate with the Owner
Participant in complying with its obligations under the provisions of the second
sentence of this Section 8(b) and such request shall not be subject to the
indemnity contained in Section 7(c) hereof. First Security Bank of Utah,
National Association, in its individual capacity, agrees that if at any time a
responsible officer of First Security Bank of Utah, National Association, shall
obtain Actual Knowledge that First Security Bank of Utah, National Association
has ceased to be a "citizen of the United States" within the meaning of Section
40102(a)(15) of the Transportation Code, it will promptly resign as Owner
Trustee (if and so long as such citizenship is necessary under the
Transportation Code as in effect at such time or, if it is not necessary, if and
so long as the Owner Trustee's citizenship would have any adverse effect on a
Holder, Lessee or the Owner Participant), effective upon the appointment of a
successor Owner Trustee in accordance with Section 9.01 of the Trust Agreement.
If the Owner Participant or First Security Bank of Utah, National Association,
in its individual capacity, does not comply with the requirements of this
Section 8(b), the Owner Trustee, the Indenture Trustee, the Owner Participant
and the Holders hereby agree that a Default or an Event of Default shall not
have occurred and be continuing under the Lease due to noncompliance by Lessee
with the registration requirements in the Lease.
(c) First Security Bank of Utah, National Association, in its
individual capacity represents and warrants that both the principal place of
business of the Owner Trustee and the place where its records concerning the
Aircraft and all of its interest in, to and under the Operative Documents to
which it is a party are or will be kept is Salt Lake City, Utah (other than such
as may be maintained or held by the Indenture Trustee pursuant to the Trust
Indenture) and has its chief executive office (as such term is used in Article 9
of the Uniform Commercial Code) in Salt Lake City, Utah. First Security Bank of
Utah, National Association in its individual capacity agrees that it will not
change the location of such office to a location outside of Salt Lake City,
Utah, without prior written notice to Lessee, Indenture Trustee and the Owner
Participant.
(d) The Original Loan Participant represents and warrants and, by
acceptance of its Certificates, each other Holder shall be deemed to have
represented and warranted that neither it nor anyone acting on its behalf has
offered any Certificates or any similar securities relating to the Aircraft for
sale to, or solicited any offer to buy any Certificates or any similar
securities relating to the Aircraft from, any person or entity other than in a
manner required by the Securities Act of 1933, as amended, and the rules and
regulations thereunder and the securities laws, rules and regulations of any
state.
(e) Each of the Owner Participant and so long as the Original Loan
Participant is a Holder, the Original Loan Participant, agree that, if, at any
time after the close of the calendar year in which occurs the seventh
anniversary of the Delivery Date and so long as no Section 14(a), (b), (f) or
(g) Default or any Event of Default under the Lease shall have occurred or be
continuing, Lessee has requested its consent to the registration of the
Aircraft, in the name of the Owner Trustee (or, if appropriate, in the name of
Lessee or a Sublessee as a "lessee" or a
36
<PAGE> 40
[Participation Agreement (1994 737 B)]
"sublessee"), at Lessee's expense, (i) upon 45 days' prior written notice in a
country listed on Exhibit G to the Lease, with which the United States maintains
diplomatic relations at the time of such request, or (ii) upon 45 days' prior
written notice in any other country with which United States maintains
diplomatic relations at the time of such request and the Owner Participant and
the Original Loan Participant (but in regard to the Original Loan Participant,
only so long as the Original Loan Participant is a Holder) have not determined,
acting reasonably, that such other country would not provide substantially
equivalent protection for the rights of owner participants, lessors or lenders
in similar transactions as provided under United States law, the Owner
Participant and the Original Loan Participant (but in regard to the Original
Loan Participant, only so long as the Original Loan Participant is a Holder)
will not, in the case of either clause (i) or (ii), unreasonably withhold its
consent to such change of registration. Each of the Owner Participant and the
Original Loan Participant (but in regard to the Original Loan Participant, only
so long as the Original Loan Participant is a Holder) further agrees that the
inability of Lessee to deliver an opinion (reasonably satisfactory in form and
substance to the Owner Participant and the Indenture Trustee) of counsel
reasonably acceptable to the Owner Participant and the Indenture Trustee in such
country listed on Exhibit G to the Lease to the effect that the courts of such
country would give effect to the Owner Trustee's title to the Aircraft, to the
registry of the Aircraft in the name of the Owner Trustee (or, if appropriate,
in the name of Lessee or a Sublessee as a "lessee" or a "sublessee"), and to the
priority of the Lien under the Trust Indenture substantially to the same extent
as provided under United States law, shall constitute the sole reasonable
grounds to withhold such consent in regard to a country listed in Exhibit G to
the Lease, and if said opinion is delivered, the Owner Participant and the
Original Loan Participant (but in regard to the Original Loan Participant, only
so long as the Original Loan Participant is a Holder) will instruct, the Owner
Trustee and the Indenture Trustee, respectively, to make such change of
registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and
the Indenture Trustee shall have received:
(i) assurances reasonably satisfactory to them (A) to the effect
that the insurance or self-insurance provisions of the Lease have been
complied with after giving effect to such change of registry, (B) of the
payment by Lessee of any expenses of the Owner Participant, the Owner
Trustee, the Indenture Trustee and the Original Loan Participant (but in
regard to the Original Loan Participant, only so long as the Original Loan
Participant is a Holder) in connection with such change of registry, (C) to
the effect that the original indemnities (and any additional indemnities
for which Lessee is then willing to enter into a binding agreement to
indemnify) in favor of the Owner Participant, the Owner Trustee (in its
individual capacity and as trustee under the Trust Agreement), the
Indenture Trustee and the Original Loan Participant (but in regard to the
Original Loan Participant, only so long as the Original Loan Participant is
a Holder), under this Agreement, the Trust Indenture and the Tax Indemnity
Agreement, afford each such
37
<PAGE> 41
[Participation Agreement (1994 737 B)]
party substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Original Loan Participant (but in regard to the Original
Loan Participant, only so long as the Original Loan Participant is a
Holder), or any successor, assign or affiliate of any thereof, or the Trust
Estate pursuant to Section 7(b) hereof; and (F) that such new country of
registry imposes aircraft maintenance standards not materially less
stringent than those of the FAA, the Civil Aviation Authority of the United
Kingdom, the Director Generale de l'Aviation Civil of the French Republic
or the Luftfahrt Bundesamt of Germany; and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee in its individual capacity, to the Owner Participant and
to the Indenture Trustee (so long as the Original Loan Participant is a
Holder)) in the new jurisdiction of registry to the effect (A) that the
terms (including, without limitation, the governing-law, service-of-process
and jurisdictional- submission provisions thereof) of the Lease and the
Trust Indenture are legal, valid, binding and enforceable in such
jurisdiction, (B) that it is not necessary for the Owner Participant, the
Owner Trustee, the Original Loan Participant (but in regard to the Original
Loan Participant, only so long as the Original Loan Participant is a
Holder), or the Indenture Trustee to register or qualify to do business in
such jurisdiction, (C) that there is no tort liability of the owner of an
aircraft not in possession thereof under the laws of such jurisdiction
other than tort liability which might have been imposed on such owner under
the laws of the United States or any state thereof (it being understood
that, in the event such latter opinion cannot be given in a form
satisfactory to the Owner Participant and the Owner Trustee, in its
individual capacity, such opinion shall be waived if insurance reasonably
satisfactory to Owner Participant and the Owner Trustee, in its individual
capacity, is provided, at Lessee's expense, to cover such risk), (D)
(unless Lessee shall have agreed to provide insurance covering the risk of
requisition of use of the Aircraft by the government of such jurisdiction
so long as the Aircraft is registered under the laws of such jurisdiction)
that the laws of such jurisdiction require fair compensation by the
government of such jurisdiction payable in currency freely convertible into
Dollars for the loss of use of the Aircraft in the event of the requisition
by such government of such use, and (E) to such further effect with respect
to such other matters as the Owner Trustee in its individual capacity, the
Indenture Trustee (so long as the Original Loan Participant is a Holder) or
the Owner Participant may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of the foregoing opinion of counsel, Exhibit F and Exhibit G to the Lease
shall be amended to add such country.
38
<PAGE> 42
[Participation Agreement (1994 737 B)]
If, at any time, (X) the Owner Participant or the Original Loan
Participant (so long as the Original Loan Participant is a Holder) delivers
an opinion from a law firm (such opinion and counsel to be reasonably
satisfactory to Lessee) in a country then listed on Exhibit F or G to the
Lease (for the avoidance of doubt, including any Added Country (as defined
below)) to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in Clauses (A) through (D) of
paragraph (ii) above (provided that in regard to (C) or (D), Lessee is not
willing to provide the insurance required by such subsection (C) or (D)) (a
"Delisting Opinion") or (Y) the Original Loan Participant (so long as the
Original Loan Participant is a Holder) delivers a Delisting Opinion in a
country added to Exhibits F and G to the Lease after the Delivery Date in
accordance with the terms of this Section 8(e) (an "Added Country") or
presents Lessee with evidence reasonably satisfactory to Lessee that one or
more of the assurances specified in (A) through (F) of paragraph (i) above
are no longer applicable to an Added Country (and, in regard to clause (C)
or (E) of such paragraph, Lessee is not willing to agree to provide the
additional indemnities permitted by such clauses), then Exhibits F and G to
the Lease shall be amended to delete such country or Added Country, as the
case may be; provided that no such deletion shall affect the registration
of the Aircraft then in effect. Lessee shall pay the reasonable costs of
the Owner Participant or the Original Loan Participant in obtaining such
Delisting Opinion or in consulting with such counsel if no opinion is
delivered, up to an aggregate of $3,000 per instance of amendment, if such
opinion is obtained or such consultation takes place in connection with
Lessee's request to change the registry of the Aircraft to, or to sublease
the Aircraft in, a country listed on Exhibit F or G to the Lease.
Except as otherwise provided in the immediately preceding paragraph,
Lessee shall pay all expenses of the Owner Participant, the Owner Trustee, the
Indenture Trustee and, so long as the Original Loan Participant is a Holder, the
Original Loan Participant in connection with any change of registry of the
Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval not already obtained of stockholders of the Owner
Participant or any approval or consent not already obtained of any trustee
or holders of any indebtedness or
39
<PAGE> 43
[Participation Agreement (1994 737 B)]
obligations of the Owner Participant, and have been duly executed and
delivered by the Owner Participant, and, subject to and in reliance upon
the representations made by the Original Loan Participant and the Lessee in
Section 8(o) hereof and compliance with Sections 8(y) and 8(z) hereof,
neither the execution and delivery thereof by the Owner Participant, nor
the consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the terms
and provisions thereof will contravene any United States federal or state
law, judgment, governmental rule, regulation or order applicable to or
binding on the Owner Participant (it being understood that no
representation or warranty is made with respect to laws, rules or
regulations relating to aviation or to the nature of the equipment owned by
the Owner Trustee, other than such laws, rules or regulations relating to
the citizenship requirements of the Owner Participant under applicable
aviation law) or contravene or result in any breach of or constitute any
default under, or result in the creation of any Lien (other than Liens
provided for or otherwise permitted in the Operative Documents) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement, corporate
charter, by-law or other agreement or instrument to which the Owner
Participant is a party or by which it or its properties may be bound or
affected;
(iii) each of the Owner Participant Documents constitutes a
legal, valid and binding obligation of the Owner Participant enforceable
against the Owner Participant in accordance with the terms thereof, and the
trust intended to be formed by the Trust Agreement has been duly and
validly formed;
(iv) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which, if determined
adversely to the Owner Participant, would materially adversely affect the
financial condition of the Owner Participant or the ability of the Owner
Participant to perform its obligations under the Owner Participant
Documents; and
(v) on the Delivery Date, there will be no Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of First Security Bank of Utah, National Association, in its
individual capacity and the Owner Participant severally covenants and agrees (i)
that it shall not cause or permit to exist any Lessor Liens attributable to it
with respect to the Aircraft or any other portion of the Trust Estate, (ii) that
it will promptly, at its own expense, take such action as may be necessary duly
to discharge such Lessor Liens attributable to it and (iii) to make restitution
to the Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it. The Owner Participant
agrees to make restitution to
40
<PAGE> 44
[Participation Agreement (1994 737 B)]
the Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from any Taxes or Expenses (as such terms are defined in Section 7
hereof) imposed on the Trust Estate against which Lessee is not required to
indemnify the Trust Estate pursuant to Section 7 hereof and which the Owner
Participant is expressly required to pay by the terms of the Operative
Documents, but excluding Taxes or Expenses referred to in Section 7(b)(ii)(5)
and 7(b)(ii)(7) and excluding any diminution of the Trust Estate by any Lessor
Liens attributable to or caused by First Security Bank of Utah, National
Association, in its individual capacity; provided that if the Owner Participant
shall make restitution to the Trust Estate on account of any Lessor Lien
attributable to or caused by First Security Bank of Utah, National Association,
in its individual capacity, then First Security Bank of Utah, National
Association, in its individual capacity, shall reimburse the Owner Participant
for such amount together with interest thereon at the Past Due Rate.
(h) State Street Bank and Trust Company in its individual capacity,
covenants and agrees that it shall not cause or permit to exist any Lien,
arising as a result of (i) claims against the Indenture Trustee not related to
its interest in the Aircraft or the administration of the Trust Estate pursuant
to the Trust Indenture, (ii) acts of the Indenture Trustee not permitted by, or
failure of the Indenture Trustee to take any action required by, the Operative
Documents to the extent such acts arise or such failure arises from or
constitutes gross negligence or willful misconduct, (iii) claims against the
Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Indenture Estate or the Operative Documents other than (A) a transfer of the
Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article IV or V of the
Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) The Original Loan Participant represents, warrants and covenants
that:
(i) it is a bank duly organized and validly existing in good
standing under the laws of its jurisdiction of organization and has full
power, authority and legal right to execute, deliver and carry out the
terms of this Agreement;
(ii) this Agreement has been duly authorized, executed and
delivered by it and constitutes the legal, valid and binding obligation of
the Original Loan Participant enforceable against it in accordance with its
terms; and
(iii) the Certificates to be issued to it pursuant to the Trust
Indenture are being acquired by it with no present intent to make any
resale or distribution thereof which would require registration under the
Securities Act of 1933, as amended, and it will not
41
<PAGE> 45
[Participation Agreement (1994 737 B)]
offer or sell any Certificates in violation of the Securities Act of 1933,
provided that the disposition of its property shall at all times be and
remain within its control.
(j) The Indenture Trustee and the Original Loan Participant each
hereby waives, and each subsequent Holder by its acceptance of a Certificate
shall be deemed to have waived, to the fullest extent permitted by law the
benefit of the provisions of Section 1111(b) of Title 11 of the United States
Code with respect to recourse against the Owner Trustee (in its individual
capacity) and the Owner Participant on account of any amount payable as
principal of, Break Amount, if any, and interest on the Certificates. If (i) all
or any part of the Trust Estate becomes the property of, or the Owner
Participant becomes, a debtor subject to the reorganization provisions of the
Bankruptcy Code or any successor provision, (ii) pursuant to such reorganization
provisions the Owner Trustee (in its individual capacity) or the Owner
Participant is required, by reason of the Owner Trustee (in its individual
capacity) or the Owner Participant being held to have recourse liability to the
Original Loan Participant, to any other Holder or to the Indenture Trustee,
directly or indirectly (other than the recourse liability of the Owner
Participant under this Participation Agreement), to make payment on account of
any amount payable as principal, Break Amount, if any, or interest on the
Certificates and (iii) the Original Loan Participant, any other Holder or the
Indenture Trustee actually receives any Excess Payment (as hereinafter defined)
which reflects any payment by the Owner Trustee (in its individual capacity) or
the Owner Participant on account of (ii) above, then the Original Loan
Participant, such other Holder or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Trustee or the Owner Participant (whichever
shall have made such payment) such Excess Payment. For purposes of this Section
8(j), "Excess Payment" means the amount by which such payment exceeds the amount
which would have been received by the Original Loan Participant, any other
Holder or the Indenture Trustee if the Owner Trustee (in its individual
capacity) or the Owner Participant had not become subject to the recourse
liability referred to in clause (ii) above. Nothing contained in this Section
8(j) shall prevent the Original Loan Participant, any other Holder or the
Indenture Trustee from enforcing any personal recourse obligation (and retaining
the proceeds thereof) of the Owner Trustee (in its individual capacity) or the
Owner Participant under this Participation Agreement or the Owner Trustee (in
its individual capacity) under the Trust Indenture (and any exhibits or annexes
thereto).
(k) The Indenture Trustee represents, in its individual capacity, as
follows:
(i) it is a "citizen of the United States" as defined in Section
40102(a)(15) of the Transportation Code, that it will notify promptly all
parties to this agreement if in its reasonable opinion its status as a
"citizen of the United States" is likely to change and that it will resign
as Indenture Trustee as provided in Section 8.02 of the Trust Indenture if
it should cease to be a "citizen of the United States";
(ii) it is a trust company organized under the laws of the
Commonwealth of Massachusetts and has the corporate power and authority to
enter into and perform its
42
<PAGE> 46
[Participation Agreement (1994 737 B)]
obligations under the Trust Indenture and this Agreement and to
authenticate the Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Certificates have been duly authorized by all necessary corporate
action on its part, and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will violate any
federal or Massachusetts law or regulation relating to its trust powers or
contravene or result in any breach of, or constitute any default under its
charter or by-laws or the provisions of any indenture, mortgage, contract
or other agreement to which it is a party or by which it or its properties
may be bound or affected; and
(iv) each of the Indenture Trustee Documents has been duly
executed and delivered by it and, assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, is the
legal, valid and binding obligation of the Indenture Trustee, enforceable
against it in accordance with its terms.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Certificates are outstanding, the Owner Participant will not
sell, assign, convey or otherwise transfer any of its right, title or interest
in and to this Agreement, the Trust Estate or the Trust Agreement to any person
or entity, unless (i) the proposed transferee is a "Transferee" (as defined
below) and (ii) the Owner Participant shall have delivered to the Owner Trustee,
Lessee and the Indenture Trustee an opinion (in form, scope and substance
reasonably satisfactory to the Indenture Trustee and Lessee) of counsel
reasonably satisfactory to the Indenture Trustee and Lessee to the effect that
the agreement referred to in clause (O) below and any guaranty required by
clause (B) or (C) below, if any, are the legal, valid, binding and enforceable
obligations of the Transferee and the guarantor, as the case may be (subject to
the normal bankruptcy and equitable remedies exceptions contained in an opinion
on such matters and any other applicable exemptions contained in the opinions
relating to the Owner Participant delivered pursuant to Section 4(a)(xiv)
hereof), and (iii) each of Lessee, the Indenture Trustee and the Original Loan
Participant shall have (1) received an opinion (in form and substance reasonably
satisfactory to Lessee and the Original Loan Participant) of counsel to the
Owner Participant (who shall be reasonably satisfactory to Lessee) to the effect
that there are no Taxes that will be imposed on Lessee, the Indenture Estate,
the Indenture Trustee or the Original Loan Participant or required to be
indemnified against by Lessee, imposed on such transfer or (2) received from the
Owner Participant so seeking to transfer such right, title or interest,
indemnification, pursuant to an agreement reasonably satisfactory to Lessee and
the Original Loan Participant, for Taxes described in clause (1). A "Transferee"
shall mean either (A) a bank or other financial institution with a combined
capital, surplus and undivided profits of at least $50,000,000 (so long as the
Original Loan Participant holds any Certificates, $75,000,000) or a corporation
whose net worth is at least $50,000,000 (so long as the Original Loan
Participant holds any Certificates, $75,000,000), (B) any subsidiary of such a
bank, financial institution or
43
<PAGE> 47
[Participation Agreement (1994 737 B)]
corporation, provided that such bank, financial institution or corporation
furnishes to the Owner Trustee, the Indenture Trustee and Lessee a guaranty
satisfactory to them with respect to the Owner Participant's obligations, in the
case of the Owner Trustee, under the Trust Agreement and, in the case of the
Indenture Trustee and Lessee, the Owner Participant's obligations hereunder, or
(C) any other entity, provided such obligations are guaranteed by the transferor
Owner Participant; provided, however, that unless otherwise consented to by
Lessee any Transferee shall not be an airline, a commercial air carrier, an air
freight forwarder, an entity engaged in the business of parcel transport by air
or other similar person or a corporation or other entity controlling, controlled
by or under common control with such an airline, a commercial air carrier, an
air freight forwarder, an entity engaged in the business of parcel transport by
air or other similar person. Each such transfer to a Transferee shall be subject
to the conditions that (M) upon giving effect to such transfer, the Transferee
is a "citizen of the United States" within the meaning of Section 40102(a)(15)
of the Transportation Code or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of the voting trust), shall have
entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Transportation Code in the name of the
Owner Trustee, (N) the Transferee has the full power and authority to enter into
and carry out the transactions contemplated hereby, (O) the Transferee enters
into an agreement or agreements, in form and substance reasonably satisfactory
to the Owner Trustee, Lessee and the Indenture Trustee, whereby the Transferee
confirms that it shall be deemed a party to this Agreement and a party to the
Trust Agreement and agrees to be bound by all the terms of, and to undertake all
of the obligations of the transferor Owner Participant contained in the Owner
Participant's Documents (to the extent of the participation so transferred to
it) and makes the representation made in Section 8(f)(ii) which shall be based
on the representations, warranties, and covenants of the other parties (or their
successors) to the Operative Agreements, (P) such transfer does not violate any
applicable law including, without limitation, the Transportation Code, or any
rules or regulations promulgated thereunder, the Securities Act of 1933 or the
Trust Indenture Act of 1939, assuming the continuing truth of the representation
of the Lessee and the Original Loan Participant in Section 8(o) and compliance
with Sections 8(y) and 8(z), (Q) the transferor Owner Participant assumes the
risk of any loss of Interest Deductions, MACRS Deductions or any Inclusion Event
(each as defined in the Tax Indemnity Agreement) resulting from such transfer,
(R) after giving effect to such transfer, there shall be no more than two Owner
Participants of record at that time and (S) such transfer will not give rise to
a Default or Event of Default under the Trust Indenture; and Lessee may request
such Transferee to provide an opinion of counsel (who shall be reasonably
satisfactory to Lessee) in form and substance reasonably satisfactory to Lessee
as to any matter set forth in clauses (N) or (P) (in the case of clause (P),
such opinion
44
<PAGE> 48
[Participation Agreement (1994 737 B)]
being to the effect that the interest being transferred does not require
registration under the Securities Act of 1933, and as to such other matters
referred to in clause (P) as are comparable in substance (including exceptions
and qualifications) to the opinions relating to the Owner Participant delivered
pursuant to Section 4(a)(xiv) hereof) (it being understood that counsel may
assume those facts pertaining to Lessee, Indenture Trustee or the Holders). Upon
any such transfer by the Owner Participant as above provided, the Transferee
shall be deemed the Owner Participant for all purposes hereof and of the other
Operative Documents and each reference herein to the transferor Owner
Participant shall thereafter be deemed for all purposes to be to the Transferee
and the transferor Owner Participant shall be relieved of all obligations of the
transferring Owner Participant under the Owner Participant Documents arising
after the date of such transfer except to the extent fairly attributable to acts
or events occurring prior thereto and not assumed by the transferee Owner
Participant (in each case, to the extent of the participation so transferred).
If the Owner Participant intends to transfer any of its interests hereunder, (i)
it shall give prior written notice thereof as soon as practicable, but in no
event less than 10 days prior thereto, to the Indenture Trustee, the Owner
Trustee and Lessee, specifying the name and address of the proposed Transferee
and (ii) the parties hereto shall, upon the written request of the Owner
Participant, reasonably cooperate in connection with such transfer, including
providing acknowledgements of their respective consent to such transfer. The
Owner Participant shall pay all of the reasonable costs of the other parties
hereto, on a net after-tax basis, of any such transfer. For purposes of this
paragraph, "net worth" shall mean the excess of total tangible assets over total
liabilities, each to be determined in accordance with generally accepted
accounting principles consistently applied.
(m) [Intentionally Omitted.]
(n) First Security Bank of Utah, National Association, both and State
Street Bank and Trust Company, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of ERISA (an "ERISA
Plan"). The Original Loan Participant represents and warrants that no part of
the funds used by it to acquire the Certificates or any interest therein
(including any participation in such certificates) constitutes assets of an
ERISA Plan. Lessee represents and warrants that the execution and delivery of
this Agreement and the other Operative Documents and the consummation of the
transactions contemplated hereby and thereby will not involve any prohibited
transaction within the meaning of Section 406 of ERISA
45
<PAGE> 49
[Participation Agreement (1994 737 B)]
or Section 4975 of the Code (such representation being made solely in reliance
upon and subject to the accuracy of the representations contained in the
preceding sentences of this subsection).
(p) First Security Bank of Utah, National Association, both in its
individual capacity and as Owner Trustee represents and warrants that:
(i) the Trust Agreement and, assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, each of the
other Owner Trustee Documents has been duly executed and delivered by one
of its officers who is duly authorized to execute and deliver such
instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to First Security Bank of Utah, National Association, in its
individual capacity, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
First Security Bank of Utah, National Association, in its individual
capacity arising out of any event or condition not related to the
ownership, leasing, use or operation of the Aircraft or to any other
transaction contemplated by this Agreement or any of the other Operative
Documents, including any Lien resulting from the nonpayment by First
Security Bank of Utah, National Association, in its individual capacity of
any Taxes imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to First Security Bank of
Utah, National Association, in its individual capacity and which is
presently continuing;
(iv) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States and
(assuming due authorization, execution and delivery of the Trust Agreement
by the Owner Participant) has the corporate power and authority to enter
into and perform its obligations under the Trust Agreement, and (assuming
due authorization, execution and delivery of the Trust Agreement by the
Owner Participant) has full right, power and authority to enter into and
perform its obligations as Owner Trustee pursuant to the Trust Agreement
under each of the other Owner Trustee Documents;
(v) each of the Owner Trustee Documents has been duly authorized
by all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to its
banking or trust powers or contravene or result in any breach of, or
constitute any default under, its charter or by-laws or the provisions of
46
<PAGE> 50
[Participation Agreement (1994 737 B)]
any indenture, mortgage, contract or other agreement to which it is a party
or by which it or its properties may be bound or affected;
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it and, each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of First Security Bank of Utah, National Association, in its
individual capacity and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any offer
to acquire the same from, anyone, and no responsible officer or responsible
employee of First Security Bank of Utah, National Association, has
knowledge of any such offer or solicitation, except as set forth in Section
7(a)(xi); and
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms and the trust intended to
be formed by the Trust Agreement has been duly and validly formed;
(x) there are no proceedings pending or, to the best knowledge of
First Security Bank of Utah, National Association, threatened, against
First Security Bank of Utah, National Association, in any court or before
any governmental authority or arbitration board or tribunal which, if
adversely determined, would materially and adversely affect the right,
power and authority of First Security Bank of Utah, National Association,
to enter into or perform its obligations under the Owner Trustee Documents;
and
(xi) neither the due execution and delivery of the Owner Trustee
Documents by First Security Bank of Utah, National Association, in its
individual capacity or as Owner Trustee under the Trust Agreement, as the
case may be, nor the consummation by it of any of the transactions
contemplated thereby require the consent or approval of, the giving of
notice to, or the registration with, any federal or Utah governmental
authority or agency pursuant to any federal or Utah law governing the
banking or trust powers of First Security Bank of Utah, National
Association.
47
<PAGE> 51
[Participation Agreement (1994 737 B)]
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Owner Trustee pursuant to Sections 3(f), 5(d), 5(e) and
12 of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents and provided that the Original Loan Participant shall no
longer be a Holder, each of the Owner Trustee, the Indenture Trustee and the
Owner Participant covenants and agrees that, at Lessee's expense on a net
after-tax basis (including, without limitation, reasonable attorney's fees and
expenses of each of such parties), (i) Lessee may elect to terminate the Lease
and to purchase the Aircraft pursuant to Section 19(b) of the Lease and that
each of such parties will execute and deliver appropriate documentation
transferring all right, title and interest in the Aircraft to Lessee (without
recourse or warranty except as to Lessor Liens (including for this purpose Liens
that would be Lessor Liens but for the proviso to the definition of Lessor
Liens) with respect to the Owner Participant) (including without limitation,
such bills of sale and other instruments and documents as Lessee shall
reasonably request to evidence (on the public record or otherwise) such transfer
and the vesting of all right, title and interest in and to the Aircraft in
Lessee), and (ii) Lessee, in connection with such purchase, may assume (and
receive a credit in an amount equal to the principal amount of the debt assumed,
against the purchase price payable by Lessee pursuant to Section 19(b)) the
obligations of the Owner Trustee pursuant to Section 2.15 of the Trust Indenture
and the Certificates (and the Lease, to the extent that the Owner Trustee's
obligations thereunder are incorporated into the Trust Indenture or the
Certificates), and Lessee shall confirm that its obligations under the Lease
shall be direct obligations to the Indenture Trustee as if set forth in the
Trust Indenture, and that each of the parties shall execute and deliver
appropriate documentation in form and substance reasonably satisfactory to such
parties under which Lessee will assume such obligations on the basis of full
recourse to Lessee, maintaining the security interest in the Aircraft created by
the Trust Indenture, releasing the Owner Participant and the Owner Trustee from
all future obligations in respect of the Certificates, the Trust Indenture and
all other Operative Documents and all such other actions (including the
furnishing of legal opinions reasonably requested by any party) as are
reasonably necessary to permit such assumption by Lessee.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
"citizen of the United States" as defined in Section 40102(a)(15) of the
Transportation Code and shall be a United States certificated air carrier;
48
<PAGE> 52
[Participation Agreement (1994 737 B)]
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee and the
Owner Participant a duly authorized, valid, binding and enforceable
agreement in form and substance reasonably satisfactory to the Indenture
Trustee and the Owner Participant containing an assumption by such
successor corporation or Person of the due and punctual performance and
observance of each covenant and condition of the Operative Documents to be
performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee and the Owner Participant a certificate signed by the
President or any Vice President and by the Secretary or an Assistant
Secretary of Lessee, and an opinion of counsel (which may be Lessee's
General Counsel) reasonably satisfactory to the Indenture Trustee and the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Transportation Code, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement with the same
effect as if such successor corporation or Person had been named as Lessee
herein. No such conveyance, transfer or lease of substantially all of the assets
of Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have become such in the
manner prescribed in this Section 8(s) from its liability in respect of any
Operative Document to which it is a party.
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement
49
<PAGE> 53
[Participation Agreement (1994 737 B)]
and any financing statements or other instruments as are necessary to maintain,
so long as the Trust Indenture or the Lease is in effect, the perfection of the
security interests created by the Trust Indenture and any security interest that
may be claimed to have been created by the Lease and the ownership interest of
the Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Interim Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages and the EBO Percentage, and the Owner Participant
hereby agrees to make such recalculations as and when contemplated by the Lease
and subject to all the terms and conditions of the Lease and promptly to take
such further actions as may be necessary or desirable to give effect to and to
cause the Owner Trustee to give effect to the provisions of Section 3 of the
Lease.
(v) The Owner Participant hereby agrees not to terminate or revoke the
Trust Agreement or the trusts created thereunder without the prior written
consent of (i) the Lessee so long as the Lease shall remain in effect and no
Event of Default under the Lease shall have occurred and be continuing and (ii)
the Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be an "air carrier" within the meaning of the Transportation Code operating
under certificates issued pursuant to Section 41102 of such Code.
(x) The Original Loan Participant represents, and each subsequent
Holder by its acceptance of such Certificate shall be deemed to represent, that
it is exempt from United States withholding taxes, and each Holder covenants
that, if required to obtain or renew such exemption, it will, upon request and
to the extent it remains lawfully able to do so, properly prepare and promptly
furnish to each of the Owner Trustee, the Indenture Trustee and the Lessee
Internal Revenue Service Form 1001, Form 4224 (with respect to each tax year) or
Form W-8, whichever is applicable. The Original Loan Participant represents,
warrants and covenants that it will promptly notify the Owner Trustee, the
Indenture Trustee and Lessee if it transfers any interest in the Certificates to
any Person.
Each Holder shall indemnify (on an after-tax basis) and hold harmless
the Indenture Trustee, the Owner Trustee, Lessee and the Owner Participant
against any United States withholding taxes (and related interest and penalties)
which the Indenture Trustee fails to withhold on payments to it as a result of
its failure to provide the required certificate or form or the invalidity of any
certificate or form provided by it pursuant to this Section 8(x). Any amount
payable hereunder shall be paid within 30 days after receipt by such Holder of a
written demand therefor.
50
<PAGE> 54
[Participation Agreement (1994 737 B)]
(y) The Original Loan Participant represents, warrants and covenants
and, by acceptance of its Certificate, each subsequent Holder shall be deemed to
have represented, warranted and covenanted that it will not sell, assign, grant
participations in or otherwise transfer its Certificate or Certificates to any
other Person unless such Person represents and warrants, in writing, to the
Original Loan Participant or such Holder, for the benefit of the Original Loan
Participant or such Holder, Owner Participant and Lessee that at least one of
the following statements is an accurate representation as to such Person and/or
the source of funds to be used by such Person to acquire the Certificate or
Certificates or participation therein:
(i) no part of such funds directly or indirectly constitutes
or may be deemed under the Code, ERISA or any applicable state law or
any rulings or regulations thereunder to be assets of an ERISA Plan;
or
(ii) such Person is an insurance company and such funds
constitute assets allocated to a separate account maintained by it
which is a "pooled separate account" (within the meaning of Section
3(17) of ERISA and Prohibited Transaction Class Exemption 90-1 issued
by the Department of Labor ("PTE 90-1")) in which an ERISA Plan has an
interest and the acquisition and holding of Certificates is entitled
to a prohibited transaction exemption granted by PTE 90-1; or
(iii) such Person is a bank and such funds constitute assets
allocated to a bank collective investment vehicle maintained by it as
a "collective investment fund" (as defined in Prohibited Transaction
Class Exemption 91-38 issued by the Department of Labor ("PTE 91-38"))
in which an ERISA Plan has an interest and the acquisition and holding
of Certificates is entitled to a prohibited transaction exemption
granted by PTE 91-38; or
(iv) such funds constitute assets of an "investment fund" in
which an ERISA Plan has an interest and which is managed by a
"qualified professional asset manager" or "QPAM" (as such terms are
defined in Part V of Prohibited Transaction Class Exemption 84-14
issued by the Department of Labor ("PTE 84-14") and the acquisition
and holding of the Certificates is entitled to a prohibited
transaction exemption granted by PTE 84-14; or
(v) such funds constitute assets of one or more ERISA Plans,
each of which is a "governmental plan" (as such term is defined in
Section 3(32) of ERISA and in Section 414(d) of the Code) or a "church
plan" (as such term is defined in Section 3(33) of ERISA and in
Section 414(e) of the Code) and the acquisition and holding of the
Certificates shall not constitute a prohibited transaction under
ERISA, the Code or any applicable state law;
51
<PAGE> 55
[Participation Agreement (1994 737 B)]
provided, that the Original Loan Participant and any such subsequent Holder
may grant participations in any Certificates held by it only in accordance
with Section 8(z) hereof. Any such Person shall also represent and warrant
that it will require any transferee of its interest in any Certificates to
make the representations and warranties set forth in the preceding sentence
of this Section 8(y) and this sentence in writing, to such Person for the
benefit of such Person, the Owner Participant and Lessee.
(z) The Original Loan Participant covenants that it will not grant
participations in its Certificates to any Person unless such Person represents
and warrants, in writing, to the Original Loan Participant and for the benefit
of the Original Loan Participant, the Owner Participant and Lessee that no part
of the funds used by it to acquire its interest in the Certificates constitutes
assets of an ERISA Plan. Any such Person shall require any transferee of its
interest in the Certificates to make the representation in the preceding
sentence, in writing, to such Person for its benefit and the benefit of the
Original Loan Participant, the Owner Participant and Lessee.
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner Participant
and the Owner Trustee hereby (A) agrees with Lessee and the Indenture Trustee to
comply with all of the terms of the Trust Agreement (as the same may hereafter
be amended or supplemented from time to time in accordance with the terms
thereof) applicable to it, to the extent such non-compliance would be adverse to
such party; and (B) agrees with Lessee and the Indenture Trustee not to amend,
supplement or otherwise modify any provision of the Trust Agreement in a manner
adversely affecting such party without the prior written consent of such party.
Notwithstanding the foregoing, unless an Event of Default shall have occurred
and be continuing and so long as the Lease has not been terminated, the
Indenture Trustee and the Owner Participant hereby agree for the benefit of
Lessee that without the consent of Lessee they will not (and the Owner
Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree to
promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
The Original Loan Participant agrees and, by acceptance of its Certificate, each
subsequent Holder shall be deemed to have agreed that it will not take any
action in respect of the Indenture Estate except through the Indenture Trustee
pursuant to the Trust Indenture or as otherwise permitted by the Trust
Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
with the Owner Participant, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
52
<PAGE> 56
[Participation Agreement (1994 737 B)]
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name of the Owner Trustee, except as
otherwise required or permitted hereunder or under the Lease, under the
Transportation Code or under the applicable law of another permitted
government of registry, or shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make
application for such registration (at the expense of Lessee, including,
without limitation, reasonable attorney's fees and expenses), and shall
promptly furnish to the Owner Trustee such information as may be required
to enable the Owner Trustee to timely file any reports required to be filed
by it as the lessor under the Lease or as the owner of the Aircraft with
any governmental authority (including tax authorities).
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Transportation Code, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft, the Trust Supplement covering the
Aircraft, the Trust Agreement, the Lease and the Trust Indenture, such
documents shall be filed for recording with the Federal Aviation
Administration in the following order of priority: first, the Owner
Trustee's FAA Bill of Sale, second, the FAA registration application,
third, the Trust Indenture, with the Trust Agreement and the Trust
Supplement attached, and fourth, the Lease, with the Lease Supplement
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner Trustee
and the Indenture Trustee with copies of the foregoing documents with
recording data as promptly as practicable following the issuance of same by
the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
demands, instructions and other communications required or permitted to be given
to or made upon any
53
<PAGE> 57
[Participation Agreement (1994 737 B)]
party hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by prepaid telex, TWX or
telegram (with messenger delivery specified in the case of a telegram), or by
telecopier, or by prepaid courier service, and shall be deemed to be given for
purposes of this Agreement on the day that such writing is delivered or if given
by certified mail, three Business Days after being deposited in the mails, in
accordance with the provisions of this Section 13(a). Unless otherwise specified
in a notice sent or delivered in accordance with the foregoing provisions of
this Section 13(a), notices, demands, instructions and other communications in
writing shall be given to or made upon the respective parties hereto at their
respective addresses (or to their respective telex, TWX or telecopier numbers)
as follows: (A) if to Lessee, the Owner Trustee, the Original Loan Participant,
the Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto, (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Certificate Register.
(b) Each party to this Agreement and, by acceptance of its
Certificate, each subsequent Holder (individually a "Party" and collectively
"Parties") irrevocably agrees that any legal suit, action or proceeding brought
by any other Party, which arises solely out of or relates solely to the
Operative Documents or any of the transactions contemplated hereby or thereby or
any document referred to herein or therein, may be instituted in the Circuit
Court of the State of Illinois, Cook County or the United States District Court
for the Northern District of Illinois and that they hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a Party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
Parties in the same or different jurisdictions. The agreement set forth in this
Section 13(b) is given solely for the benefit of the Parties and such agreement
is not intended to and shall not inure to the benefit of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee should request that the situs of the trust be moved to another
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Indenture Estate shall not be adversely affected by such
action, and the Lessee
54
<PAGE> 58
[Participation Agreement (1994 737 B)]
shall execute and deliver such documents as may be requested by the Indenture
Trustee to continue the perfection of the Lien on the Indenture Estate, (D) the
Owner Participant shall have received an opinion or opinions of counsel
(reasonably satisfactory to the Owner Participant) in scope, form and substance
reasonably satisfactory to the Owner Participant to the effect that (I) the
trust, as thus removed, shall remain a validly established trust, (II) any
amendments to the Trust Agreement necessitated by such removal shall have been
duly authorized, executed and delivered by the parties thereto and shall
constitute the valid and binding obligations of such parties, enforceable in
accordance with their terms, (III) such removal will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is not
required to indemnify the Owner Participant, the Owner Trustee or the Trust
Estate pursuant to Section 7(b) hereof (taking into account any additional
indemnification provided by Lessee pursuant to clause (A) of this sentence),
(IV) such removal will not, in the Owner Participant's reasonable judgment,
result in any Loss of MACRS Deductions, Interest Deductions or an Inclusion
Event (as defined in the Tax Indemnity Agreement) with respect to which Lessee
is not required to indemnify the Owner Participant pursuant to Section 5 of the
Tax Indemnity Agreement (taking into account any additional indemnification
provided by Lessee pursuant to clause (A) of this sentence), and (V) covering
such other matters as the Owner Participant may reasonably request, (E) if such
removal involves the replacement of the Owner Trustee, the Owner Participant
shall have received an opinion of counsel to such successor Owner Trustee in
form and substance reasonably satisfactory to the Owner Participant covering the
matters described in Section 4(a)(xiii) hereof and (F) Lessee shall indemnify
and hold harmless the Owner Participant on a net after-tax basis against any and
all reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
SECTION 15. Miscellaneous. (a) Each of the Owner Participant, the
Original Loan Participant and, by acceptance of its Certificate, each subsequent
Holder covenants and agrees that it shall not unreasonably withhold its consent
to any consent requested of the Owner Trustee, as Lessor, or the Indenture
Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Owner Participant and the
Original Loan Participant provided for in this Agreement, and Lessee's, the
Owner Trustee's, Indenture Trustee's, Original Loan Participant's and the Owner
Participant's obligations under any and all thereof, shall survive the making
available of the respective Commitments by the Participants, the delivery or
return of the Aircraft, the transfer of any interest of the Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer of any interest
by any Holder in any Certificate or the Indenture Estate and the expiration or
other termination of this Agreement or any other Operative Document.
55
<PAGE> 59
[Participation Agreement (1994 737 B)]
(c) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee and the Owner Trustee. THIS AGREEMENT
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF
ILLINOIS.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed to limit the exercise
and enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this Agreement
and the other Operative Documents.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated
56
<PAGE> 60
[Participation Agreement (1994 737 B)]
herein, whether or not such action or inaction is caused by the willful
misconduct or gross negligence of the Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Certificate
issued and delivered pursuant to this Agreement or the Trust Indenture whether
or not an express assignment to such holder of rights and obligations under this
Agreement has been made.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
copies of invoices of the Transaction Expenses as they are received. The Owner
Participant agrees to transfer to the Owner Trustee from time to time promptly
upon receipt of invoices of Transaction Expenses such amount as shall be
necessary in order to enable the Owner Trustee to pay such Transaction Expenses
or to pay such amounts directly. To the extent of funds received by it, the
Owner Trustee agrees to pay all invoices of Transaction Expenses that have been
so approved promptly upon receipt thereof. Notwithstanding the foregoing, in the
event that the transactions contemplated hereby shall not be consummated, Lessee
shall pay all Transaction Expenses, except that (i) the fees, expenses and
disbursements of the Owner Participant (including those relating to its counsel)
and the fees and expenses of any appraisal shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
fault or the breach by the Owner Participant of its obligations hereunder and
(ii) the fees, expenses and disbursements of the Original Loan Participant
(including those relating to its counsel) shall be borne by the Original Loan
Participant if such failure to consummate the transactions results from the
fault of the Original Loan Participant. To the extent Transaction Expenses
exceed 0.5% of Lessor's Cost, Lessee may, in lieu of electing an optimization
pursuant to Section 18 hereof, pay all or a portion of the Transaction Expenses
described in clause (i)(5) of the definition of Transaction Expenses.
SECTION 17. Optional Prepayment of Certificates. (a) Subject to
subparagraph (d) below, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary prepayment of all of the
outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
57
<PAGE> 61
[Participation Agreement (1994 737 B)]
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Certificates will be prepaid, describing the new debt to be issued and the
other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Interim Rent, Excess Amount, debt amortization, Stipulated Loss
Value percentages, Termination Value percentages and EBO Percentage. Within
ten Business Days of its receipt of the Refinancing Certificate, Lessee may
demand a verification pursuant to Exhibit E to the Lease of the information
set forth in the Refinancing Certificate. Upon the acceptance by Lessee of
the accuracy of the information set forth in the Refinancing Certificate or
the determination pursuant to such verification procedures of the revised
Basic Rent, Interim Rent, Excess Amount, debt amortization, Stipulated Loss
Value percentages, Termination Value percentages and EBO Percentage and the
Debt/Equity Ratio (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate principal amount
specified in the Refinancing Information, which amount shall be at least
equal to the aggregate principal amount of all Certificates outstanding on
the Refinancing Date (such debt securities, the "New Debt") and (ii) the
application of the proceeds of the sale of the New Debt to the redemption
of all such Certificates on the Refinancing Date and (B) pursuant to which
the parties to the refinancing transaction (including the Owner Participant
and Lessee but excluding any public holders of debt) make such
representations, warranties and covenants as the Owner Participant or
Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) the Basic Rent, Interim Rent, Excess Amount and EBO Percentage in
respect of the period from and after the Refinancing Date shall be as
provided in the Refinancing Information and (ii) amounts payable in respect
of Stipulated Loss Value and Termination Value from and after the
Refinancing Date shall be as provided in the Refinancing Information;
58
<PAGE> 62
[Participation Agreement (1994 737 B)]
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Certificates
and will enter into such amendments and supplements to the Trust Indenture
(or such new indenture or other security agreement) as may be necessary to
effect such refunding or refinancing;
(5) unless otherwise agreed or required by the Owner Participant
(except with respect to Lessee's obligation to pay the fees and expenses of
the other parties' counsel), and whether or not such refunding or
refinancing transaction is consummated, Lessee shall pay all of the
reasonable Expenses of all parties to such refunding or refinancing,
including without limitation, the reasonable fees and expenses of such
parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Holder of a Certificate being refinanced
or refunded will transfer to the Owner Trustee the Certificates held by it
immediately prior to such refunding or refinancing for cancellation (and
the Owner Trustee shall cancel the same), against receipt by such Holder of
the then outstanding principal amount of such Certificates, accrued and
unpaid interest thereon, plus Break Amount, if any, together with payment
in full of all other amounts then payable to such Holder and the Indenture
Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. Subject
to the other terms and conditions of this Section 17 (including, without
limitation, Section 17(d)(i) hereof) any public offering of the New Debt shall
not, except as requested by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent thereto if, in
its good faith judgment, such refunding or refinancing (A) increases its, any of
its Affiliates (other than any Affiliate which is acting as an underwriter) or
the Owner Trustee's exposure to (i) liabilities under federal or state
securities laws, (ii) regulation under state or federal securities laws, (iii)
the need to publicly disclose information that is not generally available to the
public, or (iv) being adversely affected in its respective ability to engage in
any other financing transaction, in each case to a level unacceptable to it in
its reasonable, good faith, judgment, or (B) requires the name of the Owner
Participant to be identified in any offering materials. Lessee shall have the
right to purchase such debt securities and apply such securities as a credit
against its obligations to pay Rent, provided that (x) in connection with such
refunding or refinancing Lessee shall have agreed to indemnify the Owner
Participant with respect to such right in a manner reasonably satisfactory to
the Owner Participant, and (y) Lessee may not, at any one time hold in the
aggregate any such debt securities having a face value in excess of that portion
of the two next succeeding
59
<PAGE> 63
[Participation Agreement (1994 737 B)]
installments of Basic Rent which is required to be paid to the holders of such
debt securities on account of principal and interest. Lessee shall have the
right to refund or refinance through a public offering of the New Debt
denominated in a currency other than Dollars subject to the restrictions hereof.
Any trustee of public debt 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 or Boston, Massachusetts and having a
combined capital and surplus of at least $100,000,000(or, if less, then its
obligations shall be guaranteed by an 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 trustee upon reasonable or
customary terms.
(c) Lessee shall give the Indenture Trustee at least thirty days
revocable written notice of the proposed date of the optional prepayment. Such
notice shall become irrevocable fifteen Business Days prior to the proposed date
of the optional prepayment.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any refunding or refinancing transaction as
contemplated by this Section 17:
(i) if in the Owner Participant's reasonable, good faith judgment,
such transaction would have an adverse impact (including, without
limitation, the risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and Owner
Participant by agreement in form and substance reasonably satisfactory to
each of them, for any liability, obligation (other than the obligation to
pay principal and interest and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
(iv) unless (x) provision is made for eliminating any foreign
currency exposure of Owner Participant and Owner Trustee, and (y) Lessee
shall indemnify the Owner Participant for any income tax withholding
consequences and other adverse tax consequences relating to such non-U.S.
denominated New Debt; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
60
<PAGE> 64
[Participation Agreement (1994 737 B)]
(e) There shall be no more than two optional prepayments under this
Section 17.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery Date
occurs other than on September 28, 1994, (ii) Transaction Expenses paid by
Lessor are determined to be other than 0.5% of Lessor's Cost, or (iii) the
Excess Amount is increased or decreased pursuant to the operation of the proviso
in the definition thereof, Lessee may, pursuant to this Section 18 and in
accordance with the requirements of Section 3(c) of the Lease, optimize the
Basic Rent, Interim Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages and EBO Percentage subject to the proviso set
forth in Section 3(c)(i) of the Lease. The Owner Participant shall deliver to
Lessee and the Indenture Trustee a certificate of an authorized representative
of the Owner Participant (the "Optimization Certificate") setting forth the
proposed revised schedules of Basic Rent, Interim Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Owner Trustee to execute
an amendment to the Lease setting forth the optimized Basic Rent, Interim Rent,
Excess Amount, Stipulated Loss Value percentages, Termination Value percentages
and EBO Percentage, and the Lessee will execute such amended Lease and the
Indenture Trustee will execute any amendments to the Trust Indenture necessary
to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Interim
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage pursuant to this Section 18 and Section 3(c) of
the Lease, (M) the Holders will agree to changes in the amortization schedule of
the Certificates, and (N) each Holder will exchange the Certificates held by it
immediately prior to such optimization for new Certificates containing optimized
amortization schedules; provided, that such changes do not (W) increase or
decrease the principal amount of the Certificates outstanding as of the time of
such exchange, (X) change the final maturity date of any Certificate, (Y)
increase or decrease by more than six months the original weighted average life
to maturity (determined as of the Delivery Date) of the Certificates or (Z)
change the principal amount of the Certificates to be repaid in accordance with
the amortization schedule for the Certificates on any Payment Date during the
first two years after the Delivery Date.
(c) There shall be no adverse impact to the Owner Participant by
reason of such optimization.
61
<PAGE> 65
[Participation Agreement (1994 737 B)]
(d) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. [Intentionally Omitted].
SECTION 20. Interim Debt. (a) The parties hereto acknowledge and agree
that the Certificates issued to the Original Loan Participant on the Delivery
Date represent interim debt financing and that it is intended that such
Certificates be refinanced by Certificates issued to new Holders. In connection
therewith, in the event that at any time Lessee shall have given written notice
to the Owner Trustee, the Indenture Trustee, the Owner Participant and the
Original Loan Participant that Lessee is requesting a voluntary prepayment of
the Certificates held by the Original Loan Participant (in compliance with the
provisions of 2.11 of the Trust Indenture) by the Owner Trustee as part of a
refunding or refinancing transaction, the Owner Participant agrees to negotiate
promptly in good faith with Lessee in connection therewith (including the terms
of any debt to be issued in connection with such refunding or refinancing
transaction, the documentation to be executed in connection therewith and with
respect to such amendments to the Operative Documents as may be necessary in
order to facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Section 20
Refinancing Certificate") setting forth (i) the proposed date on which the
outstanding Certificates will be prepaid, describing the new debt to be
issued and the other aspects of such refunding or refinancing transaction
to be consummated (such date, the "Section 20 Refinancing Date") and (ii)
the following information: (A) the principal amount of debt to be issued by
the Owner Trustee on the Section 20 Refinancing Date (such refinancing not
to increase or decrease the Owner Participant's Commitment), and (B) the
proposed revised schedules of Excess Amount, Basic Rent, Interim Rent, debt
amortization, Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage. Within five Business Days of its receipt of
the Section 20 Refinancing Certificate, Lessee may demand a verification
pursuant to Exhibit E to the Lease of the information set forth in the
Section 20 Refinancing Certificate. Upon the acceptance by Lessee of the
accuracy of the information set forth in the Section 20 Refinancing
Certificate or the determination pursuant to such verification procedures
of the revised Excess Amount, Basic Rent, Interim Rent, debt amortization,
Stipulated Loss Value percentages, Termination Value percentages and EBO
Percentage (such information, the "Section 20 Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (12) below;
62
<PAGE> 66
[Participation Agreement (1994 737 B)]
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Lessee, the
Owner Participant and the Owner Trustee (which, subject to subsection (d)
below, may involve a public offering of such debt or the purchase of such
debt by a publicly funded entity (or entities)) with the institution or
institutions to be named therein providing for (i) the issuance and sale by
the Owner Trustee to such institution or institutions on the Section 20
Refinancing Date of Certificates in an aggregate principal amount specified
in the Section 20 Refinancing Information (such debt securities, the
"Section 20 New Debt") and (ii) the application of the proceeds of the sale
of the Section 20 New Debt to the prepayment of the Certificates
outstanding on the Section 20 Refinancing Date;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) the Basic Rent, Interim Rent, Excess Amount and EBO Percentage
payable in respect of the period from and after the Section 20 Refinancing
Date shall be as provided in the Section 20 Refinancing Information and
(ii) amounts payable in respect of Stipulated Loss Value and Termination
Value from and after the Section 20 Refinancing Date shall be as provided
in the Section 20 Refinancing Information;
(4) the Owner Trustee will enter into an agreement, if requested
by the Indenture Trustee, to provide for the securing thereunder of the
Section 20 New Debt in like manner as the outstanding Certificates and will
enter into such amendments and supplements to the Trust Indenture (or such
new indenture or other security agreement) as may be necessary to effect
such refunding or refinancing;
(5) upon the closing of such refunding or refinancing (and as
indemnification for the loss resulting therefrom), Lessee shall pay to the
Original Loan Participant as Supplemental Rent the Break Amount, if any
(without duplication of other amounts, if any, payable pursuant to any
other provision of the Operative Documents);
(6) the Owner Trustee shall pay all the costs of such refunding
or refinancing, such costs shall be considered as Transaction Expenses and
such Transaction Expenses shall be appropriately considered in calculating
the proposed revised schedules of Excess Amount, Basic Rent, Interim Rent,
debt amortization, Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage;
(7) the Original Loan Participant will deliver to the Owner
Trustee the Certificates held by it concurrently with such refunding or
refinancing for cancellation (and the Owner Trustee shall cancel the same),
against simultaneous receipt by the Original Loan Participant of the then
outstanding principal amount of such Certificates, accrued and unpaid
interest thereon (which amount shall be paid by the Owner Participant as a
prepayment of Excess Amount if such refinancing or refinancing occurs prior
to the Commencement Date), plus Break Amount, if any, together with payment
in
63
<PAGE> 67
[Participation Agreement (1994 737 B)]
full of all other amounts then payable to the Original Loan Participant
hereunder or under the Certificates or the Trust Indenture;
(8) the appropriate parties will amend such of the Operative
Documents in such respects as shall be necessary to reflect any amendments
agreed upon by the parties thereto;
(9) if such refunding or refinancing involves a public offering,
no offering materials or prospectus shall identify the Owner Participant
(unless an Affiliate of the Owner Participant is also an underwriter of the
securities issued in such refunding or refinancing) or include financial
information in regard to the Owner Participant;
(10) the appropriate parties will execute and deliver appropriate
closing documents, execute and deliver appropriate closing certificates and
deliver appropriate opinions of counsel;
(11) the Owner Participant shall not be obligated to proceed with
any refinancing under this Section 20 if such refinancing would result in
any unindemnified adverse tax consequences determined by the Owner
Participant in its reasonable judgment (any such indemnity to be reasonably
satisfactory to the Owner Participant); and
(12) the parties hereto agree that, immediately prior to the
closing of such refunding or refinancing, all accrued and unpaid interest
on the Certificates shall be paid (i) by the Owner Participant on behalf of
the Owner Trustee (which payment shall be treated as a prepayment of the
Excess Amount) and by Lessee (in regard to that portion of Basic Rent, if
any, payable by Lessee on the Commencement Date), if such refunding or
refinancing is to close on or prior to the Commencement Date and (ii) by
Lessee on behalf of the Owner Trustee (which payment will be treated as a
prepayment of the next payment of Basic Rent due under the Lease), if such
refunding or refinancing is to close after the Commencement Date; and upon
the closing of such refunding or refinancing (and as indemnification for
the loss resulting therefrom), Lessee, on behalf of the Owner Trustee,
shall pay, on an after-tax basis to the Owner Participant, to the Original
Loan Participant the Break Amount, if any (without duplication of other
amounts, if any, payable pursuant to any other provision of the Operative
Documents).
(b) Only one optional refinancing or refunding pursuant to this
Section 20 shall be permitted during the Term.
64
<PAGE> 68
[Participation Agreement (1994 737 B)]
(c) Any refinancing or refunding pursuant to this Section 20 shall be
of all Certificates then outstanding.
(d) Any public refinancing pursuant to this Section 20 shall comply
with all the restrictions, limitations and conditions applicable in the case of
a public refinancing pursuant to Section 17(b) hereof.
SECTION 21. Payment of Additional Amounts. Lessee shall pay as
Supplemental Rent to Lessor such additional amounts as may be due pursuant to
Section 2.17 of the Trust Indenture in respect of the Certificates held by the
Original Loan Participant.
* * *
65
<PAGE> 69
[Participation Agreement (1994 737 B)]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
UNITED AIR LINES, INC.,
Lessee
By:
----------------------------------
Senior Vice President and
Chief Financial Officer
MS FINANCING INC.,
Owner Participant
By:
----------------------------------
Title:
-------------------------------
STATE STREET BANK AND TRUST
COMPANY,
Indenture Trustee
By:
----------------------------------
Title:
-------------------------------
FIRST SECURITY BANK OF
UTAH, NATIONAL ASSOCIATION,
not in its individual
capacity, except as
expressly provided herein,
but solely as Owner Trustee,
Owner Trustee
By:
----------------------------------
Title:
-------------------------------
66
<PAGE> 70
[Participation Agreement (1994 737 B)]
THE MITSUBISHI TRUST AND BANKING
CORPORATION, NEW YORK BRANCH,
Original Loan Participant
By:
----------------------------------
Title:
-------------------------------
67
<PAGE> 71
[Participation Agreement (1994 737 B)]
SCHEDULE I
Names and Addresses
Lessee:
U.S. Mail Overnight Delivery Service
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Attn: Vice President and
Treasurer Treasurer
Telecopy: (708) 952-7117
Owner Participant: Payment Address
MS Financing Inc. Citibank, N.A.
1251 Avenue of the Americas Delaware
New York, NY 10020 Account #: 338833374
Attn: General Counsel
Telecopy: (212) 703-6476
Original Loan Participant:
The Mitsubishi Trust and Banking Instructions for the Account
Corporation, New York Branch of The Mitsubishi Trust and
520 Madison Avenue, 25th Floor Banking Corporation, New York
New York, New York 10022 Branch:
Bankers Trust Company
Attn: Scott J. Paige Account No. 04201547
Telecopy: (212) 755-2349 Reference: United Air Lines,
Telex: 425078 Inc.
Telephone No.: (212) 838-7700 Attn: Scott J. Paige
<PAGE> 72
[Participation Agreement (1994 737 B)]
Indenture Trustee:
Address for Notices by Regular Mail/Telecopy:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Corporate Trust Department
Telecopy: (617) 664-5371
Address for Notices by Overnight Courier:
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Department
Owner Trustee:
First Security Bank of Utah,
National Association
79 S. Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
I-2
<PAGE> 73
[Participation Agreement (1994 737 B)]
SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant Lessor's Cost Dollar Amount
- ---------------- ------------- -------------
<S> <C> <C>
THE MITSUBISHI TRUST 80.0% $19,760,000.00
AND BANKING CORPORATION,
New York Branch
Branch
Owner Participant:
MS FINANCING INC. 20.0% $ 4,940,000.00
Total Commitments: 100.0% $24,700,000.00
================= ====== ==============
</TABLE>
II-3
<PAGE> 1
EXHIBIT 4.17
*
Doc. No. 1.01
Aircraft N398UA
________________________________________________________________
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
(1994 737 B)
Dated January 26, 1996
Among
UNITED AIR LINES, INC.,
Lessee,
MS FINANCING INC.,
Owner Participant,
THE MITSUBISHI TRUST AND BANKING CORPORATION,
acting through its New York Branch
and
NATIONAL WESTMINSTER BANK PLC, acting through
its New York or Nassau Branch,
Original Loan Participants,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
STATE STREET BANK AND TRUST COMPANY,
In its Individual Capacity and as Indenture Trustee
___________________________
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
_____________________________
_________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
(1994 737 B)
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (1994 737 B)
dated January 26, 1996 (this "Amendment") by and among (i) UNITED AIR LINES,
INC., a Delaware corporation (the "Lessee"), (ii) MS FINANCING INC., a Delaware
corporation (the "Owner Participant"), (iii) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, except as expressly provided herein, but solely as Owner Trustee
under the Trust Agreement (the "Owner Trustee"), (iv) THE MITSUBISHI TRUST AND
BANKING CORPORATION, acting through its New York Branch, and NATIONAL
WESTMINSTER BANK PLC, acting through its New York or Nassau Branch (each, an
"Original Loan Participant" and, collectively, the "Original Loan
Participants"), and (v) STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, in its individual capacity and as Indenture Trustee under the
Trust Indenture (the "Indenture Trustee"), amends that certain Participation
Agreement (1994 737 B) dated as of September 1, 1994 by and among Lessee, the
Owner Participant, the Owner Trustee, the Existing Original Loan Participants
(as defined below) and the Indenture Trustee (the "Participation Agreement").
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment,
capitalized terms used herein shall have the meanings attributed thereto in the
Participation Agreement;
WHEREAS, as contemplated by Section 20 of the Participation
Agreement, the outstanding Certificates held by The Mitsubishi Trust and
Banking Corporation, New York Branch and Compagnie Financiere de CIC et de
L'Union Europeenne (the "Existing Original Loan Participants") are being
refinanced by (i) the issuance to the Original Loan Participants of new
Certificates in the aggregate principal amount of $9,759,596.02 to The
Mitsubishi Trust and Banking Corporation and $9,759,596.01 to National
Westminster Bank plc, the proceeds of which are, concurrently with the
execution and delivery of this Amendment, being applied to the payment to the
Existing Original Loan Participants of the outstanding principal amount of the
outstanding Certificates, and (ii) the payment by the Lessee of all accrued and
unpaid interest on the outstanding Certificates to the Existing Original Loan
Participants in an amount equal to $88,507.27 (as a prepayment of the next
payment of Basic Rent under the Lease);
WHEREAS, concurrently herewith the Lessee and the Owner
Trustee are entering into that certain First Amendment to Lease
<PAGE> 3
[First Amendment to
Participation Agreement (1994 737 B)]
Agreement (1994 737 B) dated the date hereof (the "First Amendment to Lease
Agreement") and that certain Second Amendment to Lease Agreement (1994 737 B)
dated the date hereof (the "Second Amendment to Lease Agreement");
WHEREAS, concurrently herewith the Owner Trustee and the
Indenture Trustee are entering into that certain Third Amendment to Trust
Indenture and Security Agreement (1994 737 B) dated the date hereof (the "Third
Amendment to Trust Indenture");
WHEREAS, in connection with the refinancing of the outstanding
Certificates, the parties hereto desire to amend the Participation Agreement in
certain respects;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Amendments to Section 7 of the Participation
Agreement. Section 7 of the Participation Agreement is hereby amended as
follows:
(a) Section 7(b)(ii)(14) is hereby amended by deleting
the period at the end thereof and inserting "; and" in lieu thereof.
(b) A new subsection (15) is hereby added, immediately
after Section 7(b)(ii)(14), which Section 7(b)(ii)(15) shall be and read in its
entirety as follows:
"(15) to any Tax imposed on any Indemnitee as a
result of a "prohibited transaction" as defined in Section 406
of ERISA or Section 4975(c)(1) of the Code to the extent such
Tax arises from or is attributable to the incorrectness of a
representation or warranty made by such Indemnitee."
SECTION 2. Amendments to Section 8 of the Participation
Agreement. Section 8 of the Participation Agreement is hereby amended as
follows:
(a) Section 8(o) is hereby amended by inserting,
immediately after the reference to "Section 3(3) of ERISA", the following
phrase:
", or any plan subject to the provisions of Section
4975 of the Code"
2
<PAGE> 4
[First Amendment to
Participation Agreement (1994 737 B)]
(b) Section 8(r) is hereby amended to be and to read in
its entirety as follows:
"(r) Subject to compliance by Lessee with all of
its obligations under the Lessee Documents, each of the Owner
Trustee, the Indenture Trustee, each Holder and the Owner
Participant covenants and agrees that, at Lessee's expense on
a net after-tax basis (including, without limitation,
reasonable attorney's fees and expenses of each of such
parties), (i) Lessee may elect to terminate the Lease and to
purchase the Aircraft pursuant to Section 19(b) of the Lease
and that each of such parties will execute and deliver
appropriate documentation transferring all right, title and
interest in the Aircraft to Lessee (without recourse or
warranty except as to Lessor Liens (including for this purpose
Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) with respect to the Owner
Participant) (including without limitation, such bills of sale
and other instruments and documents as Lessee shall reasonably
request to evidence (on the public record or otherwise) such
transfer and the vesting of all right, title and interest in
and to the Aircraft in Lessee), and (ii) Lessee, in connection
with such purchase and subject to the provisions of the second
paragraph of this Section 8(r), may assume (and receive a
credit in an amount equal to the principal amount of the debt
assumed against the purchase price payable by Lessee pursuant
to Section 19(b) of the Lease) the obligations of the Owner
Trustee pursuant to Section 2.15 of the Trust Indenture and
the Certificates (and the Lease, to the extent that the Owner
Trustee's obligations thereunder are incorporated into the
Trust Indenture or the Certificates), and Lessee shall confirm
that its obligations under the Lease shall be direct
obligations to the Indenture Trustee as if set forth in the
Trust Indenture, and that each of the parties shall execute
and deliver appropriate documentation in form and substance
reasonably satisfactory to such parties under which Lessee
will assume such obligations on the basis of full recourse to
Lessee, maintaining the security interest in the Aircraft
created by the Trust
3
<PAGE> 5
[First Amendment to
Participation Agreement (1994 737 B)]
Indenture, releasing the Owner Participant and the Owner
Trustee from all future obligations in respect of the
Certificates, the Trust Indenture and all other Operative
Documents and all such other actions (including the furnishing
of legal opinions reasonably requested by any party) as are
reasonably necessary to permit such assumption by Lessee.
If Lessee elects to assume the rights and obligations
of the Owner Trustee in accordance with Section 2.15 of the
Trust Indenture in connection with the purchase by the Lessee
of the Aircraft pursuant to Section 19(b) of the Lease and to
pay the EBO Percentage in installments as permitted thereby,
then:
(A) in addition to the provisions contemplated
above, the Trust Indenture shall be amended (1) to provide for
an additional series of loan certificates (the "EBO
Certificates") to be issued to the Owner Participant on the
EBO Date to evidence the payment of the EBO Price in
installments on the dates specified in Exhibit H to the Lease
(taking into account the credit provided for above), (2) to
provide that the Indenture Trustee will make no distributions
to the Owner Participant or the Owner Trustee or otherwise in
respect of the EBO Certificates prior to the payment in full
of all amounts of principal and interest then due and payable
to the other Holders or, if and so long as an "Event of
Default" under the Trust Indenture with respect to payments
thereunder shall have occurred and be continuing, prior
(unless such Certificates shall have been purchased by the
Owner Participant) to the payment in full of the principal
amount of, and interest accrued on, the Certificates other
than the EBO Certificates, (3) to include the failure to pay
any installments of the EBO Certificates within 10 calendar
days of when due as an Event of Default, (4) to include a
right so long as the EBO Certificates shall be outstanding for
the Owner Participant to purchase the other Certificates under
circumstances similar to, and on the same terms as provided
in, Section 2.14 of the Trust Indenture (it being understood
that upon
4
<PAGE> 6
[First Amendment to
Participation Agreement (1994 737 B)]
any assumption pursuant to Section 2.15 of the Trust
Indenture, the provisions of the Trust Indenture intended for
the benefit of the Owner Participant (other than provisions
concerning, but only to the extent applicable to, Excluded
Payments), including, without limitation, Sections 4.03
(excluding the first sentence thereof) and 4.04(a) of the
Trust Indenture providing the Owner Trustee or the Owner
Participant with certain rights, shall be of no further force
and effect), (5) to provide that the Owner Participant and the
Owner Trustee shall have no voting or consent rights under the
Trust Indenture by reason of being the holder of the EBO
Certificates until all other Certificates have either been
paid in full or been purchased by the Owner Participant
(pursuant to the provisions contemplated by clause (A)(4) of
this Section 8(r) by the reference therein to Section 2.14 of
the Trust Indenture), except that without the consent of the
Owner Participant the Trust Indenture could not be amended,
modified or supplemented to reduce the amount or extend the
time of payment of any amount owing or payable under the EBO
Certificates, (6) to confirm that, although the Owner
Participant cannot participate in the exercise of remedies
under the Trust Indenture, it shall not be precluded form
demanding, collecting, suing for or otherwise receiving and
enforcing payment of the EBO Certificates by demand upon
Lessee and (7) to insure that the holders of the EBO
Certificates are entitled to the rights described in clause
(iii) of the proviso in Section 3.01 of the Trust Indenture;
and
(B) upon Lessee's payment in full of all amounts
due on or prior to the EBO Date in accordance with Section
19(b) of the Lease and compliance with all of the conditions
to such assumption in accordance with this Section 8(r) and
Section 2.15 of the Trust Indenture, (1) the Owner Trustee
shall assign the right to the remaining installments of the
EBO Price to the Owner Participant, (2) the EBO Certificates
shall be issued to the Owner Participant in aggregate amount
of such remaining installments of the EBO Price and (3) the
Owner Trustee (AA) shall
5
<PAGE> 7
[First Amendment to
Participation Agreement (1994 737 B)]
transfer to Lessee, without recourse or warranty (except as to
the absence of Lessor Liens) and on an "as is" basis, all
right, title and interest of the Owner Trustee in and to the
Aircraft and (BB) shall furnish to or at the direction of
Lessee one or more bills of sale in form and substance
reasonably satisfactory to Lessee evidencing such transfer."
(c) Section 8(y) is hereby amended by deleting the phrase
"that at least one" which appears therein and inserting in lieu thereof the
following phrase:
"both that the acquisition and holding of the Certificates
will not constitute a "prohibited transaction" within the
meaning of Section 406(b) of ERISA or Code Section
4975(c)(1)(E) or (F), and that at least one"
(d) Section 8(y)(ii) is hereby amended to be and to read
in its entirety as follows:
"(ii) such Person is an insurance company and (A)
such funds constitute assets allocated to a separate account
maintained by it which is a "pooled separate account" (within
the meaning of Section 3(17) of ERISA and Prohibited
Transaction Class Exemption 90-1 issued by the Department of
Labor ("PTE 90-1")) in which an ERISA Plan has an interest and
the acquisition and holding of Certificates is entitled to a
prohibited transaction exemption granted by PTE 90-1 or (B)
such funds are assets of an insurance company general account,
as such term is used in Prohibited Transaction Class Exemption
95-60 issued by the Department of Labor ("PTE 95-60"), that
are deemed to be assets of an ERISA Plan, and the acquisition
and holding of the Certificates is entitled to a prohibited
transaction exemption granted by PTE 95-60; or"
SECTION 3. Amendment to Section 15 of the Participation
Agreement. The second sentence of Section 15(c) of the Participation Agreement
is hereby amended by inserting the phrase ", the Owner Participant" immediately
following the words "the Indenture Trustee" therein.
SECTION 4. Amendment to Section 16 of the Participation
Agreement. Section 16 of the Participation
6
<PAGE> 8
[First Amendment to
Participation Agreement (1994 737 B)]
Agreement is hereby amended by deleting the words "0.5% of Lessor's Cost" which
appear therein and inserting the words "1.3433597% of Lessor's Cost" in lieu
thereof.
SECTION 5. Amendments to Section 18 of the Participation
Agreement. Section 18 of the Participation Agreement is hereby amended as
follows:
(a) Section 18(a) is hereby amended by deleting the words
"0.5% of Lessor's Cost" which appear therein and inserting the words
"1.3433597% of Lessor's Cost" in lieu thereof.
(b) Section 18(b) is hereby amended to be and read in its
entirety as follows:
"(b) In connection with optimization adjustments of
Basic Rent, Interim Rent, Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages and EBO percentage
pursuant to this Section 18 and Section 3(c) of the Lease, (M)
the Holders will agree to changes in the amortization schedule
of the Certificates, and (N) each Holder will exchange the
Certificates held by it immediately prior to such optimization
for new Certificates containing optimized amortization
schedules; provided, that such changes do not (W) increase or
decrease the principal amount of the Certificates outstanding
as of the time of such exchange, (X) change the final maturity
date of any Certificate, or (Y) increase or decrease by more
than six months the original weighted average life to maturity
(determined as of the 1996 Refinancing Date) of the
Certificates."
SECTION 6. Amendments to Section 20 of the Participation
Agreement. The first sentence of Section 20(a) of the Participation Agreement
is hereby amended to be and read in its entirety as follows:
"The parties hereto acknowledge and agree that the
Certificates issued to the Existing Original Loan Participants
(as defined in the First Amendment to Participation Agreement)
have been refinanced by Certificates issued to the Original
Loan Participants (as defined in the First Amendment to
Participation Agreement) pursuant to the terms of this Section
20 on the 1996 Refinancing Date."
7
<PAGE> 9
[First Amendment to
Participation Agreement (1994 737 B)]
SECTION 7. Ratification; References to Participation Agreement.
Except as amended hereby, the Participation Agreement continues and shall
remain in full force and effect in all respects. From and after the date of
this Amendment, each and every reference in the Participation Agreement, as
amended hereby, to "this Agreement", "herein", "hereof" or similar words and
phrases referring to the Participation Agreement or any word or phrase
referring to a section or provision of the Participation Agreement is deemed
for all purposes to be a reference to the Participation Agreement or such
section or provision as amended pursuant to this Amendment.
SECTION 8. Miscellaneous. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument. Neither this Amendment nor any of
the terms hereof may be terminated, amended, supplemented, waived or modified,
except by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to the Lessee, the Indenture Trustee, the Owner Participant and the
Owner Trustee. The terms of this Amendment shall be binding upon, and inure to
the benefit of and shall be enforceable by the parties hereto and their
respective permitted assignees, successors and transferees. THIS AMENDMENT
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF
ILLINOIS.
SECTION 9. Authorization to Execute Amendments. By execution of this
Amendment, the Owner Participant hereby authorizes, directs and instructs the
Owner Trustee to execute and deliver this Amendment, the First Amendment to
Lease Agreement, the Second Amendment to Lease Agreement, the Third Amendment
to Trust Indenture and any and all other amendments, agreements and
certificates as may be necessary or appropriate in connection with the
refinancing consummated concurrently herewith. By execution and delivery of
this Amendment, the Original Loan Participants hereby authorize, direct and
instruct the Indenture Trustee to execute and deliver this Amendment, the Third
Amendment to Trust Indenture and any and all other amendments, agreements and
certificates as may be necessary or appropriate in connection with the
refinancing consummated concurrently herewith. By execution and delivery of
this Amendment, (i) the Lessee hereby consents to the Third Amendment to Trust
Indenture and (ii) Indenture Trustee hereby consents to the First Amendment to
Lease Agreement and the Second Amendment to Lease Agreement.
SECTION 10. Representations. Each Original Loan Participant, by
execution and delivery of this Amendment and acceptance of its Certificate,
hereby makes as of the date hereof the representations and warranties of the
"Original Loan Participant" set forth in Sections 8(d), 8(i), 8(o), 8(x), 8(y)
and 8(z) of the Participation Agreement (after giving effect to the amendments
contained herein) and agrees to be bound by all the terms and conditions of the
Operative Documents applicable to the Original Loan Participant or a Holder of
the Certificate.
* * *
8
<PAGE> 10
[First Amendment to
Participation Agreement (1994 737 B)]
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly executed by their respective
officers thereunto duly authorized on the day and year first above written.
UNITED AIR LINES, INC.,
as Lessee
By:
--------------------------------
Vice President and Treasurer
MS FINANCING INC.,
Owner Participant
By:
--------------------------------
THE MITSUBISHI TRUST AND BANKING
CORPORATION, acting through its New
York Branch, an Original Loan
Participant
By:
--------------------------------
NATIONAL WESTMINSTER BANK PLC,
acting through its New York or
Nassau Branch, an Original Loan
Participant
By:
--------------------------------
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, not in its individual
capacity, except as expressly
provided herein, but solely as Owner
Trustee, Owner Trustee
By:
--------------------------------
STATE STREET BANK AND TRUST COMPANY,
Indenture Trustee
By:
--------------------------------
<PAGE> 1
EXHIBIT 4.18
*
Aircraft N398UA
- --------------------------------------------------------------------------------
SECOND AMENDMENT TO PARTICIPATION AGREEMENT
(1994 737 B)
Dated as of December 23, 1997
Among
UNITED AIR LINES, INC.,
Lessee,
MS FINANCING INC.,
Owner Participant,
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity,
except as expressly provided herein,
but solely as Owner Trustee,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its individual capacity and as Indenture Trustee
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under
each of the four separate Pass Through Trust Agreements
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent
------------------------------
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SECOND AMENDMENT TO PARTICIPATION AGREEMENT
(1994 737 B)
THIS SECOND AMENDMENT TO PARTICIPATION AGREEMENT (1994 737 B) dated as
of December 23, 1997 (this "Amendment") among (i) UNITED AIR LINES, INC., a
Delaware corporation (the "Lessee"), (ii) MS FINANCING INC., a Delaware
corporation (the "Owner Participant"), (iii) STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (as
assignee of the Original Owner Trustee (as defined below)), not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement (the "Owner Trustee"), (iv) FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association (as assignee of the
Original Indenture Trustee (as defined below)), in its individual capacity and
as Indenture Trustee under the Trust Indenture (the "Indenture Trustee"), (v)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, in
its capacity as Pass Through Trustee (the "Pass Through Trustee") under each of
the four separate Pass Through Trust Agreements and (vi) FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, as Subordination Agent
acting on behalf of the Pass Through Trustees (the "Subordination Agent"),
amends that certain Participation Agreement (1994 737 B) dated as of September
1, 1994 (the "Original Participation Agreement") among Lessee, the Owner
Participant, the Original Loan Participants referred to therein, First Security
Bank, National Association (formerly known as First Security Bank of Utah,
National Association), not in its individual capacity except as expressly
provided therein but solely as owner trustee under the Trust Agreement (the
"Original Owner Trustee") and State Street Bank and Trust Company, as Indenture
Trustee (the "Original Indenture Trustee"), as amended by that certain First
Amendment to Participation Agreement (1994 737 B) dated January 26, 1996 (the
"First Amendment") among Lessee, the Owner Participant, the Original Owner
Trustee, the Original Loan Participants referred to therein and the Original
Indenture Trustee (the Original Participation Agreement, as amended by the First
Amendment, being referred to herein collectively as the "Participation
Agreement").
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
(1994 737 B) dated as of December 11, 1997, between the Owner Trustee and the
Original Owner Trustee, the Original Owner Trustee assigned to the Owner
Trustee, and the Owner Trustee assumed, all of the obligations of the Original
Owner Trustee under the Trust Agreement, which obligations are guaranteed by the
Owner Trustee Parent pursuant to the terms of the Owner Trustee Parent Guaranty
(as such terms are defined in the Lease); and
<PAGE> 3
[Second Amendment to Participation Agreement (1994 737 B)]
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
(1994 737 B) dated as of December 11, 1997 between the Indenture Trustee and the
Original Indenture Trustee, the Original Indenture Trustee assigned to the
Indenture Trustee, and the Indenture Trustee assumed from the Original Indenture
Trustee, all of the rights and interests of the Original Indenture Trustee under
the Trust Indenture and the other Operative Documents; and
WHEREAS, concurrently with the execution of this Amendment, the
Certificates held by the Original Loan Participants are being refinanced by the
issuance of new Equipment Notes issued to the Subordination Agent on behalf of
the Pass Through Trustees under each of the four separate Pass Through Trust
Agreements; and
WHEREAS, in connection with the refinancing of the outstanding
Certificates the parties hereto desire to amend the Participation Agreement in
certain respects.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Amendment to Schedule I. Schedule I to the Participation
Agreement is hereby deleted in its entirety and replaced with Schedule I to this
Amendment.
SECTION 2. Amendment to Section 5. The first sentence of Section 5 of
the Participation Agreement is hereby amended to be and read in its entirety as
follows:
"Lessor, the Participants, the Pass Through Trustees and the
Indenture Trustee shall keep the Purchase Agreement confidential and
shall not disclose or cause to be disclosed the same to any Person,
except (A) to prospective and permitted transferees of Lessor's, the
Original Loan Participant's, the Owner Participant's, a Pass Through
Trustee's or the Indenture Trustee's interest who agree to hold such
information confidential, (B) to the aforementioned prospective and
permitted transferees', Lessor's, the Original Loan Participant's, the
Owner Participant's, a Pass Through Trustee's or the Indenture
Trustee's counsel or special counsel, independent insurance brokers or
other agents who agree to hold such information confidential, (C) as
may be required by any statute, court or administrative order or
decree (including in connection with discovery proceedings) or
governmental ruling or regulation, including Federal or state banking
examiners or tax auditors or (D) as may be necessary or desirable for
purposes of protecting the interest of any such Person or for
enforcement of the Lease by Lessor, the Participants, any Pass Through
Trustee or the Indenture Trustee; provided, however, that any and all
disclosures of all or any part of the Purchase Agreement which are
permitted by clause (C) or (D) above shall be made only to the extent
necessary to meet
2
<PAGE> 4
[Second Amendment to Participation Agreement (1994 737 B)]
the specific requirements or needs of the Persons to whom such
disclosures are hereby permitted."
SECTION 3. Amendment to Section 6. Section 6 of the Participation
Agreement is hereby amended to be and read in its entirety as follows:
"SECTION 6. Extent of Interest of Noteholders. No Noteholder shall
have any further interest in, or other right with respect to, the mortgage
and security interests created by the Trust Indenture when and if the
principal amount of, Break Amount, if any, Make-Whole Amount, if any, and
interest on all Equipment Notes held by such Noteholder and all other
Secured Obligations payable to such Noteholder or the Indenture Trustee
hereunder, under the Trust Indenture, under such Equipment Notes and under
the other Operative Documents shall have been paid in full. Each Noteholder
by its acceptance of an Equipment Note, agrees that it will look solely to
the income and proceeds from the Indenture Estate to the extent available
for distribution to such Noteholder as provided in Section 2.09 of the
Trust Indenture and that neither the Owner Participant nor the Owner
Trustee shall be personally liable to any Noteholder for any amounts
payable under the Equipment Notes, the Trust Indenture, hereunder, or under
any other Operative Documents (including, without limitation, amounts
payable as Break Amount, if any and Make-Whole Amount, if any), except as
expressly provided in this Agreement or, in the case of the Owner Trustee,
in the Trust Indenture."
SECTION 4. Amendments to Section 7. Section 7 of the Participation
Agreement is hereby amended in the following manner:
(a) Section 7(b) is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Documents" is used, such phrase is hereby amended to
be and read in its entirety as follows:
"Operative Documents and/or the other Fundamental
Documents"
(ii) Clause (C) of the third sentence of Section 7(b)(i) is
hereby amended to be and read in its entirety as follows:
"(C) any amount paid or payable pursuant to any
Operative Documents and/or the other Fundamental Documents, or
any document related thereto or the property or the income or
other proceeds with respect to any of the property held in the
Trust Estate or the Indenture
3
<PAGE> 5
[Second Amendment to Participation Agreement (1994 737 B)]
Estate or the property held by each Pass Through Trustee under
the respective Pass Through Trust Agreement,"
(iii) Clause (E) of the third sentence of Section 7(b)(i) is
hereby amended to be and read in its entirety as follows:
"(E) any or all of the Operative Documents and/or the
other Fundamental Documents, or the issuance of the Equipment
Notes or the Pass Through Certificates (or the refinancing
thereof) and any other documents contemplated hereby or
thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery,
recording or performance of any thereof or the issuance,
acquisition, holding or subsequent transfer thereof,"
(iv) Clause (F) of the third sentence of Section 7(b)(i) is
hereby amended to be and read in its entirety as follows:
"(F) the payment of the principal amount of, or interest
or Break Amount or Make-Whole Amount on, or other amounts
payable with respect to, the Equipment Notes or the payment of
principal of, interest or Break Amount or Make-Whole Amount on
or any other amounts payable with respect to the Pass Through
Certificates,"
(v) Clause (3) of Section 7(b)(ii) is hereby amended to be and
read in its entirety as follows:
"(3) to any Tax imposed on an Indemnitee which is the
Owner Participant, the Owner Trustee, or the Trust Estate, or
any successor, assign or Affiliate of any thereof, as a result
of a voluntary transfer or disposition by such Indemnitee
including, without limitation, the revocation of the trust
created by the Trust Agreement or an involuntary transfer or
disposition relating to bankruptcy or similar proceedings of
all or any portion of its respective equitable or legal
ownership interest in the Aircraft, the Airframe, the Engines,
the Parts or any part thereof, the Trust Estate or the
Operative Documents, unless such transfer or disposition,
whether or not voluntary or involuntary, shall occur, (A)
during a period when an Event of Default has occurred and is
continuing under the Lease at the time of transfer or
disposition and such transfer is as a result of such Event of
Default, (B) in connection with the termination of the Lease
or action or direction of the Lessee pursuant to Sections 7,
8, 9, 10 or 19 thereof or (C) in connection with a
substitution of the Owner Trustee at the request of the Lessee
with
4
<PAGE> 6
[Second Amendment to Participation Agreement (1994 737 B)]
respect to any refinancing described in Section 17 hereof,
including such request made in connection with the refinancing
contemplated by the Second Amendment to Participation
Agreement;"
(vi) Clause (6) of Section 7(b)(ii) is hereby amended to be
and read in its entirety as follows:
"(6) to any Tax imposed on an Indemnitee other than the
Owner Participant, Owner Participant Guarantor, Trust Estate
or Owner Trustee which results from the willful misconduct or
gross negligence of such Indemnitee;"
(vii) Clause (7) of Section 7(b)(ii) is hereby amended to be
and read in its entirety as follows:
"(7) to any Tax based on or measured by any fees
received by the Owner Trustee, the Indenture Trustee, the Pass
Through Trustee or any Liquidity Provider in connection with
any transaction contemplated by the Operative Documents and/or
the other Fundamental Documents;"
(viii) Clause (15) of Section 7(b)(ii) is hereby amended to be
and read in its entirety as follows:
"(15) to any Tax imposed on any Indemnitee as a result
of a "prohibited transaction" as defined in Section 406 of
ERISA or Section 4975 (c) (1) of the Code; provided, however,
that this exception shall not apply to Lessee's obligation
under Section 7(b)(i) to indemnify an Indemnitee (other than
any Noteholder or any holder of Pass Through Certificates or
any Related Indemnitee of any of them), for any Tax (except to
the extent such Tax arises from or is attributable to the
incorrectness of a representation or warranty made by such
Indemnitee) incurred by or asserted against such Indemnitee as
a result of a "prohibited transaction", within the meaning of
Section 406 of ERISA or Section 4975 (c) (1) of the Code, in
any way relating to, resulting from, or arising out of or in
connection with, directly or indirectly, a refinancing
transaction pursuant to Section 17 or 20, the offer, sale,
resale, purchase, delivery or holding of any Pass Through
Certificate, any loan certificate issued under the Original
Indenture or Equipment Note (whether issued pursuant to the
Original Indenture or the Trust Indenture and whether issued
on the Delivery Date or in connection with the refinancing
transaction or otherwise), or any other transaction
contemplated under any Operative Documents and/or the other
5
<PAGE> 7
[Second Amendment to Participation Agreement (1994 737 B)]
Fundamental Documents whether such prohibited transaction
occurs before, on or after the Delivery Date."
(b) Section 7(c) of the Participation Agreement shall be amended in the
following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Documents" is used, such phrase is hereby amended to
be and read in its entirety as follows:
"Operative Documents and/or the other Fundamental
Documents"
(ii) Clause (D) of the first paragraph of Section 7(c) is
hereby amended to be and read in its entirety as follows:
"(D) the offer, sale, holding, transfer or delivery of
the Equipment Notes or the Pass Through Certificates, whether
before, on or after the Delivery Date (the indemnity in this
clause (D) to extend also to any person who controls an
Indemnitee, its successors, assigns, employees, directors,
officers, servants and agents within the meaning of Section 15
of the Securities Act of 1933, as amended);"
(iii) The first proviso following clause (F) in the first
paragraph of Section 7(c) is hereby amended by adding the phrase ",
with respect to each Indemnitee," immediately following the phrase ";
provided, that" which appears therein,
(iv) Clauses (1) and (2) of the first proviso following clause
(F) in the first paragraph of Section 7(c) hereby are amended to be and
read in their entirety as follows:
"(1) any representation or warranty by such Indemnitee
in the Operative Documents or in the other Fundamental
Documents being incorrect, or (2) the failure by such
Indemnitee to perform or observe any agreement, covenant or
condition in any of the Operative Documents or any other
Fundamental Documents required to be performed or observed by
such Indemnitee, including, without limitation, any Expense
resulting from the creation or existence of a Lessor Lien
(including for this purpose Liens that would be Lessor Liens
but for the proviso to the definition of Lessor Liens) in
violation of any provision in the Operative Documents or any
other Fundamental Documents, or"
6
<PAGE> 8
[Second Amendment to Participation Agreement (1994 737 B)]
(v) Clause (4) of the proviso to the first paragraph of
Section 7(c) is hereby amended to be and read in its entirety as
follows:
"(4) (A) in the case of such Indemnitee a disposition
(voluntary or involuntary) of all or any part of its interest
in the Airframe or any Engine, (B) in the case of a Noteholder
a disposition (voluntary or involuntary) by such Noteholder of
all or any part of its interest in any Certificate or (C) in
the case of any Indemnitee a disposition by such Indemnitee of
all or any part of such Indemnitee's interest in the Operative
Documents other than in each of (A), (B) and (C) during the
continuance of an Event of Default under the Lease or in
connection with the exercise of remedies under any Fundamental
Document in connection with such an Event of Default or
pursuant to the exercise by Lessee of its purchase options or
in connection with a refinancing pursuant to Section 17 or 20
hereof, in connection with the termination of the Lease or
action or direction of Lessee pursuant to Section 7, 8, 9, 10
or 19 thereof or in connection with a substitution of the
Owner Trustee at the request of the Lessee, or"
(vi) Clause (5) of the proviso to the first paragraph of
Section 7(c) is hereby amended to be and read in its entirety as
follows:
"(5) other than to the extent provided in the succeeding
paragraph, any Tax (as defined in Section 7(b) hereof) whether
or not Lessee is required to indemnify for such Tax pursuant
to Section 7(b) hereof (it being understood that Section 7(b)
hereof and the Tax Indemnity Agreement and provisions
requiring payments to be made on an after-tax basis or
expressly providing for additional indemnification by Lessee
exclusively provide for Lessee's liability with respect to
Taxes); provided, however, such exception shall not apply to
the application of Parts 4 or 5 of Subpart B of Title I of
ERISA or Section 502(i) or (1) of ERISA to the execution and
delivery by Lessee of the Operative Documents or other
Fundamental Documents to which Lessee, Owner Participant or
Original Loan Participant is or will be a party or the
consummation of the transactions contemplated thereby
including the sale, resale, holding or transfer of the
Equipment Notes, the loan certificates issued under the
Original Indenture or Pass Through Certificates, or"
(vii) Clause (6) of the proviso to the first paragraph of
Section 7(c) is hereby amended by adding the phrase "in the case of
Expenses incurred by the
7
<PAGE> 9
[Second Amendment to Participation Agreement (1994 737 B)]
Owner Participant or any director, officer, employee, agent, servant or
Affiliate thereof," at the beginning of such clause.
(viii) Clause (7) of the proviso to the first paragraph of
Section 7(c) is hereby amended to be and read in its entirety as
follows:
"(7) (A) in the case of the Owner Trustee, the Owner
Participant or any Related Indemnitee thereof, a failure on
the part of the Owner Trustee to distribute in accordance with
the Trust Agreement any amounts received and distributable by
it thereunder, (B) in the case of the Indenture Trustee in its
individual capacity, a failure on the part of the Indenture
Trustee to distribute in accordance with the Trust Indenture
any amounts received and distributable by it thereunder, (C)
in the case of the Pass Through Trustee in its individual
capacity, a failure on the part of a Pass Through Trustee to
distribute in accordance with the applicable Pass Through
Trust Agreement any amounts received and distributable by such
Pass Through Trustee under such Pass Through Trust Agreement,
or (D) in the case of the Subordination Agent in its
individual capacity, a failure on the part of the
Subordination Agent to distribute funds received and
distributable by it in accordance with the Intercreditor
Agreement, or"
(ix) The proviso to Clause (9) of the proviso to the first
paragraph of Section 7(c) is hereby amended to be and read in its
entirety as follows:
"provided, however, such exception shall not apply to
the application of Parts 4 or 5 of Subpart B of Title I of
ERISA or Section 502(i) or (1) of ERISA to the execution and
delivery by Lessee of the Operative Documents or other
Fundamental Documents to which Lessee, Owner Participant or
Original Loan Participant is or will be a party or the
consummation of the transactions contemplated thereby
including the sale, resale, holding or transfer of the
Equipment Notes, the loan certificates issued under the
Original Indenture or Pass Through Certificates; or"
(x) A new clause (11) is hereby added to the proviso to the
first paragraph of Section 7(c), which clause shall be and read in its
entirety as follows:
", or (11) to any Expense imposed on any Indemnitee as a
result of a "prohibited transaction" as defined in Section 406
of ERISA or Section 4975 (c) (1) of the Code; provided,
however, that this exception
8
<PAGE> 10
[Second Amendment to Participation Agreement (1994 737 B)]
shall not apply to Lessee's obligation under this Section 7(c)
to indemnify an Indemnitee (other than any Noteholder or any
holder of Pass Through Certificates, or any Related Indemnitee
of any of them), for any Expense (except to the extent such
Tax arises from or is attributable to the incorrectness of a
representation or warranty made by such Indemnitee) incurred
by or asserted against such Indemnitee as a result of a
"prohibited transaction", within the meaning of Section 406 of
ERISA or Section 4975 (c) (1) of the Code, in any way relating
to, resulting from, or arising out of or in connection with,
directly or indirectly, a financing transaction pursuant to
Section 17 or 20, the offer, sale, resale, purchase, delivery
or holding of any Pass Through Certificate, any Loan
Certificate held by any Original Loan Participant or Equipment
Note (whether issued pursuant to the Original Indenture or the
Trust Indenture and whether issued on the Delivery Date or in
connection with the refinancing transaction or otherwise), or
any other transaction contemplated under any Operative
Documents or other Fundamental Documents whether such
prohibited transaction occurs before, on or after the Delivery
Date."
(xi) The ninth paragraph of Section 7(c) is hereby amended to
be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees
and expenses of the Indenture Trustee (including the
reasonable fees and expenses of its counsel) and each Pass
Through Trustee (including the reasonable fees and expenses of
its counsel), Subordination Agent (including the reasonable
fees and expenses of its counsel), Liquidity Provider
(including the reasonable fees and expenses of its counsel)
and, as provided in Section 6.07 of the Trust Agreement, the
Owner Trustee (including, but not limited to, the reasonable
fees and expenses of its counsel), without cost, on a net
after-tax basis, to the Owner Participant, for acting as such,
other than such fees and expenses which constitute Transaction
Expenses."
(c) Section 7(d) is hereby amended by deleting the reference to
"Section 2.04(b)" contained therein and inserting a reference to "Section
2.12" in lieu thereof.
9
<PAGE> 11
[Second Amendment to Participation Agreement (1994 737 B)]
SECTION 5. Amendment to Section 8. Section 8 of the Participation
Agreement is hereby amended in the following manner:
(a) Section 8(c) is hereby amended to be and read in its entirety as
follows:
"(c) State Street Bank and Trust Company of Connecticut, National
Association, in its individual capacity represents and warrants that
both the principal place of business of the Owner Trustee and the
place where its records concerning the Aircraft and all of its
interest in, to and under the Operative Documents to which it is a
party are or will be kept in Hartford, Connecticut (other than such as
may be maintained or held by the Indenture Trustee pursuant to the
Trust Indenture) and has its chief executive office (as such term is
used in Article 9 of the Uniform Commercial Code) in Hartford,
Connecticut. State Street Bank and Trust Company of Connecticut,
National Association in its individual capacity agrees that it will
not change the location of such office to a location outside of
Hartford, Connecticut, without prior written notice to Lessee,
Indenture Trustee and the Owner Participant."
(b) Section 8(d) is hereby amended to be and read in its entirety as
follows:
"(d) The Pass Through Trustee (and the Subordination Agent acting
on its behalf) represents and warrants and, by acceptance of its
Equipment Notes, each other Noteholder shall be deemed to have
represented and warranted that neither it nor anyone acting on its
behalf has offered any Equipment Notes or any similar securities
relating to the Aircraft for sale to, or solicited any offer to buy
any Equipment Notes or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the
Securities Act of 1933, as amended, and the rules and regulations
thereunder and the securities laws, rules and regulations of any
state."
(c) Section 8(e) is hereby amended to be and read in its entirety as
follows:
"(e) The Owner Participant agrees that, if, at any time after the
close of the calendar year in which occurs the seventh anniversary of
the Delivery Date and so long as no Section 14(a), (b), (f) or (g)
Default or any Event of Default under the Lease shall have occurred or
be continuing, Lessee has requested its consent to the registration of
the Aircraft, in the name of the Owner Trustee (or, if appropriate, in
the name of Lessee or a Sublessee as a "lessee" or a "sublessee"), at
Lessee's expense, (i) upon 45 days' prior written notice in a country
listed on Exhibit G to the Lease, with which the United States
10
<PAGE> 12
[Second Amendment to Participation Agreement (1994 737 B)]
maintains diplomatic relations at the time of such request, or (ii)
upon 45 days' prior written notice in any other country with which the
United States maintains diplomatic relations at the time of such
request and the Owner Participant has not determined, acting
reasonably, that such other country would not provide substantially
equivalent protection for the rights of owner participants, lessors or
lenders in similar transactions as provided under United States law,
the Owner Participant will not, in the case of either clause (i) or
(ii), unreasonably withhold its consent to such change of
registration. The Owner Participant further agrees that the inability
of Lessee to deliver an opinion (reasonably satisfactory in form and
substance to the Owner Participant) of counsel reasonably acceptable
to the Owner Participant in such country listed on Exhibit G to the
Lease and addressed to the Owner Participant, the Owner Trustee and
the Indenture Trustee to the effect that the courts of such country
would give effect to the Owner Trustee's title to the Aircraft, to the
registry of the Aircraft in the name of the Owner Trustee (or, if
appropriate, in the name of Lessee or a Sublessee as a "lessee" or a
"sublessee"), and to the priority of the Lien under the Trust
Indenture substantially to the same extent as provided under United
States law, shall constitute the sole reasonable grounds to withhold
such consent in regard to a country listed in Exhibit G to the Lease,
and if said opinion is delivered and, so long as the Lien of the Trust
Indenture shall not have been discharged in accordance with its terms,
the Indenture Trustee provides the consent to the change of
registration contemplated by the first paragraph of Section 7.02 of
the Trust Indenture, the Owner Participant will instruct the Owner
Trustee to make such change of registration.
It is further agreed, however, that prior to any such change in
the country of registry of the Aircraft to a country not listed on
Exhibit G to the Lease, the Owner Participant and the Owner Trustee in
its individual capacity shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect
that the insurance or self-insurance provisions of the Lease have been
complied with after giving effect to such change of registry, (B) of
the payment by Lessee of any expenses of the Owner Participant,
Indenture Trustee and the Owner Trustee in connection with such change
of registry, (C) to the effect that the original indemnities (and any
additional indemnities for which Lessee is then willing to enter into
a binding agreement to indemnify) in favor of the Owner Participant,
Indenture Trustee and the Owner Trustee (in its individual capacity
and as trustee under the Trust Agreement) under this Agreement, the
Trust Indenture and the Tax Indemnity Agreement, afford each such
party substantially the same protection as provided prior to such
change of registry, (D) that such change will not result in the
imposition of, or increase in the amount of, any
11
<PAGE> 13
[Second Amendment to Participation Agreement (1994 737 B)]
Tax for which Lessee is not required to indemnify, or is not then
willing to enter into a binding agreement to indemnify, the Owner
Participant, Indenture Trustee and the Owner Trustee (in its
individual capacity and as trustee under the Trust Agreement) or any
successor, assign or affiliate of any thereof, or the Trust Estate
pursuant to Section 7(b) hereof; and (E) that such new country of
registry imposes aircraft maintenance standards not materially less
stringent than those of the FAA, the Civil Aviation Authority of the
United Kingdom, the Director Generale de l'Aviation Civil of the
French Republic or the Luftfahrt Bundesamt of Germany; and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee in its individual capacity and to the Owner
Participant) in the new jurisdiction of registry addressed to the
Owner Participant, the Owner Trustee and the Indenture Trustee to the
effect (A) that the terms (including, without limitation, the
governing-law, service-of-process and jurisdictional-submission
provisions thereof) of the Lease and the Trust Indenture are legal,
valid, binding and enforceable in such jurisdiction, (B) that it is
not necessary for the Owner Participant, the Indenture Trustee or the
Owner Trustee to register or qualify to do business in such
jurisdiction, (C) that there is no tort liability of the owner of an
aircraft not in possession thereof under the laws of such jurisdiction
other than tort liability which might have been imposed on such owner
under the laws of the United States or any state thereof (it being
understood that, in the event such latter opinion cannot be given in a
form satisfactory to the Owner Participant and the Owner Trustee, in
its individual capacity, such opinion shall be waived if insurance
reasonably satisfactory to Owner Participant and the Owner Trustee, in
its individual capacity, is provided, at Lessee's expense, to cover
such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered
under the laws of such jurisdiction) that the laws of such
jurisdiction require fair compensation by the government of such
jurisdiction payable in currency freely convertible into Dollars for
the loss of use of the Aircraft in the event of the requisition by
such government of such use, and (E) to such further effect with
respect to such other matters as the Owner Trustee in its individual
capacity or the Owner Participant may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of the foregoing opinion of counsel, Exhibit F and Exhibit G to the
Lease shall be amended to add such country. Lessee agrees to cause a
copy of any opinion or other assurances delivered pursuant to the
provisions above to be delivered to the Indenture Trustee.
12
<PAGE> 14
[Second Amendment to Participation Agreement (1994 737 B)]
If, at any time, the Owner Participant delivers an opinion from a
law firm (such opinion and counsel to be reasonably satisfactory to
Lessee) in a country then listed on Exhibit F or G to the Lease
(including any country added to Exhibits F and G to the Lease after
the Delivery Date in accordance with the terms of this Section 8(e)
(an "Added Country")) to the effect that a reputable law firm located
in such jurisdiction would not as of the date of such opinion be able
to deliver an opinion of counsel as to the matters listed in Clauses
(A) through (D) of paragraph (ii) above (provided that in regard to
(C) or (D), Lessee is not willing to provide the insurance required by
such subsection (C) or (D)), then Exhibits F and G to the Lease shall
be amended to delete such country or Added Country, as the case may
be; provided that no such deletion shall affect the registration of
the Aircraft then in effect. Lessee shall pay the reasonable costs of
the Owner Participant in obtaining such opinion or in consulting with
such counsel if no opinion is delivered, up to an aggregate of $3,000
per instance of amendment, if such opinion is obtained or such
consultation takes place in connection with Lessee's request to change
the registry of the Aircraft to, or to sublease the Aircraft in, a
country listed on Exhibit F or G to the Lease.
In connection with any such re-registration, the Lessee shall, at
Lessee's cost and to the extent permitted by the laws of such country,
cause the interests of the Indenture Trustee in the Aircraft to be
duly registered or recorded under the laws of such country and at all
times thereafter to remain so duly registered or recorded unless and
until changed as provided herein, and shall cause to be done at all
times all other acts (including the filing, recording and delivery of
any document or instrument and the payment of any sum) necessary or,
by reference to prudent industry practice in such country, advisable
in order to establish the Indenture Trustee's interest in and to such
Aircraft as against the Owner Trustee, Lessee, any Permitted Sublessee
or any third parties in such jurisdiction.
The Indenture Trustee shall execute and deliver all such
documents as the Owner Trustee or Lessee may reasonably request and
otherwise cooperate with the Owner Trustee and Lessee for the purpose
of effecting, continuing or (as provided in this Section 6(a))
changing the registration of the Aircraft.
Lessee shall pay all expenses of the Owner Participant, the
Indenture Trustee and the Owner Trustee in connection with any change
of registry of the Aircraft."
(d) Clause (iv)(A) of Section 8(h) is hereby amended to be and read on
its entirety as follows:
13
<PAGE> 15
[Second Amendment to Participation Agreement (1994 737 B)]
"(A) a transfer of the Aircraft pursuant to Section 9, 10 or 19
of the Lease or Article 8 of the Trust Indenture,"
(e) Section 8(j) is hereby amended to be and read in its entirety as
follows:
"(j) The Indenture Trustee and, by its acceptance of a an
Equipment Note, each Noteholder thereof (and each Pass Through
Trustee, so long as the relevant Pass Through Trust Agreement is in
effect), hereby waives to the fullest extent permitted by law the
benefit of the provisions of Section 1111(b) of Title 11 of the United
States Code with respect to recourse against the Owner Trustee (in its
individual capacity) and the Owner Participant on account of any
amount payable as principal of, Break Amount, if any, Make-Whole
Amount, if any, and interest on the Equipment Notes. If (i) all or any
part of the Trust Estate becomes the property of, or the Owner
Participant becomes, a debtor subject to the reorganization provisions
of the Bankruptcy Code or any successor provision, (ii) pursuant to
such reorganization provisions the Owner Trustee (in its individual
capacity) or the Owner Participant is required, by reason of the Owner
Trustee (in its individual capacity) or the Owner Participant being
held to have recourse liability to a Noteholder or the Indenture
Trustee, directly or indirectly (other than the recourse liability of
the Owner Trustee (in its individual capacity) or the Owner
Participant under this Participation Agreement, the Trust Indenture or
by separate agreement), to make payment on account of any amount
payable as principal, Break Amount, if any, Make-Whole Amount, if any,
or interest on the Equipment Notes and (iii) such Noteholder or the
Indenture Trustee actually receives any Excess Payment (as hereinafter
defined) which reflects any payment by the Owner Trustee (in its
individual capacity) or the Owner Participant on account of clause
(ii) above, then such Noteholder or the Indenture Trustee shall
promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For
purposes of this Section 8(j), "Excess Payment" means the amount by
which such payment exceeds the amount which would have been received
by such Noteholder or the Indenture Trustee if the Owner Trustee (in
its individual capacity) or the Owner Participant had not become
subject to the recourse liability referred to in clause (ii) above.
Nothing contained in this Section 8(j) shall prevent any Noteholder or
the Indenture Trustee from enforcing any personal recourse obligation
(and retaining the proceeds thereof) of the Owner Trustee (in its
individual capacity) or the Owner Participant under this Participation
Agreement or the Owner Trustee (in its individual capacity) under the
Trust Indenture (and any exhibits or annexes thereto)."
14
<PAGE> 16
[Second Amendment to Participation Agreement (1994 737 B)]
(f) Section 8(k)(i) is hereby amended such that the reference to
"Section 8.02 of the Trust Indenture" is hereby deleted and a reference to
"Section 9.07 of the Trust Indenture" is inserted in lieu thereof.
(g) Section 8(l) is hereby amended to be and read in its entirety as
follows:
"(l) So long as the Aircraft shall be leased to Lessee under the
Lease and so long as the Certificates are outstanding, the Owner
Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust
Estate or the Trust Agreement to any person or entity, unless (i) the
proposed transferee is a "Transferee" (as defined below) and (ii) the
Owner Participant shall have delivered to the Owner Trustee, Lessee
and the Indenture Trustee an opinion (in form, scope and substance
reasonably satisfactory to Lessee) of counsel reasonably satisfactory
to Lessee to the effect that the agreement referred to in clause (O)
below and any guaranty required by clause (B) or (C) below, if any,
are the legal, valid, binding and enforceable obligations of the
Transferee and the guarantor, as the case may be (subject to the
normal bankruptcy and equitable remedies exceptions contained in an
opinion on such matters and any other applicable exemptions contained
in the opinions relating to the Owner Participant delivered pursuant
to Section 4(a)(xiv) hereof), and (iii) each of Lessee and the
Indenture Trustee shall have (1) received an opinion (in form and
substance reasonably satisfactory to Lessee) of counsel to the Owner
Participant (who shall be reasonably satisfactory to Lessee) to the
effect that there are no Taxes that will be imposed on Lessee, the
Indenture Estate, or the Indenture Trustee or required to be
indemnified against by Lessee, imposed on such transfer or (2)
received from the Owner Participant so seeking to transfer such right,
title or interest, indemnification, pursuant to an agreement
reasonably satisfactory to Lessee, for Taxes described in clause (1).
A "Transferee" shall mean either (A) a bank or other financial
institution with a combined capital, surplus and undivided profits of
at least $50,000,000 or a corporation whose net worth is at least
$50,000,000, (B) any subsidiary of such a bank, financial institution
or corporation, provided that such bank, financial institution or
corporation furnishes to the Owner Trustee, the Indenture Trustee and
Lessee a guaranty satisfactory to Lessee with respect to the Owner
Participant's obligations, in the case of the Owner Trustee, under the
Trust Agreement and, in the case of the Indenture Trustee and Lessee,
the Owner Participant's obligations hereunder, or (C) any other
entity, provided such obligations are guaranteed by the transferor
Owner Participant; provided, however, unless otherwise consented to by
Lessee, any Transferee shall not be an airline, a commercial air
carrier, an air freight forwarder, an entity engaged in the business
of parcel transport by air or other similar person or a corporation or
other entity controlling, controlled by or
15
<PAGE> 17
[Second Amendment to Participation Agreement (1994 737 B)]
under common control with such an airline, a commercial air carrier,
an air freight forwarder, an entity engaged in the business of parcel
transport by air or other similar person. Each such transfer to a
Transferee shall be subject to the conditions that (M) upon giving
effect to such transfer, the Transferee is a "citizen of the United
States" within the meaning of Section 40102(a)(15) of the
Transportation Code or the Transferee, at its sole cost and expense on
an after-tax basis (including any continuing costs of the voting
trust), shall have entered into a voting trust or similar arrangement
which permits the registration of the Aircraft under the
Transportation Code in the name of the Owner Trustee, (N) the
Transferee has the full power and authority to enter into and carry
out the transactions contemplated hereby, (O) the Transferee enters
into an agreement or agreements, in form and substance reasonably
satisfactory to Lessee, whereby from and after the transfer the
Transferee confirms that it shall be deemed a party to this Agreement
and a party to the Trust Agreement and agrees to be bound by all the
terms of, and to undertake all of the obligations of the transferor
Owner Participant contained in the Owner Participant Documents (to the
extent of the participation so transferred to it) and makes the
representation made in Section 8(f)(ii) (but not including ERISA)
which shall be based on the representations, warranties, and covenants
of the other parties (or their successors) to the Operative
Agreements, (P) such transfer does not violate any applicable law
including, without limitation, the Transportation Code, or any rules
or regulations promulgated thereunder, the Securities Act of 1933 or
the Trust Indenture Act of 1939 (but not including ERISA), assuming
the continuing truth of the representation of the Lessee and the
Original Loan Participant in Section 8(o) and compliance with Sections
8(y) and 8(z), (Q) the transferor Owner Participant assumes the risk
of any loss of Interest Deductions, MACRS Deductions or any Inclusion
Event (each as defined in the Tax Indemnity Agreement) resulting from
such transfer, (R) after giving effect to such transfer, there shall
be no more than two Owner Participants of record at that time and (S)
such transfer will not give rise to an Indenture Default or Indenture
Event of Default under the Trust Indenture; and Lessee may request
such Transferee to provide an opinion of counsel (who shall be
reasonably satisfactory to Lessee) in form and substance reasonably
satisfactory to Lessee as to any matter set forth in clauses (N) or
(P) (in the case of clause (P), such opinion being to the effect that
the interest being transferred does not require registration under the
Securities Act of 1933, and as to such other matters referred to in
clause (P) as are comparable in substance (including exceptions and
qualifications) to the opinions relating to the Owner Participant
delivered pursuant to Section 4(a)(xiv) hereof) (it being understood
that counsel may assume those facts pertaining to Lessee, Indenture
Trustee or the Holders). Upon any such transfer by the Owner
Participant as above provided, the Transferee shall be deemed the
Owner Participant for all purposes hereof and
16
<PAGE> 18
[Second Amendment to Participation Agreement (1994 737 B)]
of the other Operative Documents and each reference herein to the
transferor Owner Participant shall thereafter be deemed for all
purposes to be to the Transferee and the transferor Owner Participant
shall be relieved of all obligations of the transferring Owner
Participant under the Owner Participant Documents arising after the
date of such transfer except to the extent fairly attributable to acts
or events occurring prior thereto and not assumed by the transferee
Owner Participant (in each case, to the extent of the participation so
transferred). If the Owner Participant intends to transfer any of its
interests hereunder, (i) unless waived by Lessee, it shall give prior
written notice thereof as soon as practicable, but in no event less
than 10 days prior thereto, to the Indenture Trustee, the Owner
Trustee and Lessee, specifying the name and address of the proposed
Transferee and (ii) the parties hereto shall, upon the written request
of the Owner Participant, reasonably cooperate in connection with such
transfer, including providing acknowledgments of their respective
consent to such transfer. The Owner Participant shall pay all of the
reasonable costs of the other parties hereto, on a net after-tax
basis, of any such transfer. For purposes of this paragraph, "net
worth" shall mean the excess of total tangible assets over total
liabilities, each to be determined in accordance with generally
accepted accounting principles consistently applied."
(h) Section 8(r) is hereby amended such that any references to
"Section 2.15 of the Trust Indenture" are hereby deleted and a reference to
"Section 7.03 of the Trust Indenture" is inserted in lieu thereof and any
references to "Section 2.14 of the Trust Indenture" are hereby deleted and
a reference to "Section 8.03(e)(ii)" is inserted in lieu thereof.
(i) Section 8(s) is hereby amended in the following manner:
(i) Clause (ii) of Section 8(s) is hereby amended by adding the
words "and the Pass Through Trust Documents" immediately after the
words "Operative Documents" and before the words "to be performed"
which appear therein.
(ii) The last paragraph of Section 8(s) is hereby amended to be
and read in its entirety as follows:
"Upon any consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of Lessee as
an entirety in accordance with this Section 8(s), the successor
corporation or Person formed by such consolidation or into which
Lessee is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee
17
<PAGE> 19
[Second Amendment to Participation Agreement (1994 737 B)]
under this Agreement and under the Pass Through Trust Documents
with the same effect as if such successor corporation or Person
had been named as Lessee herein and therein. No such conveyance,
transfer or lease of substantially all of the assets of Lessee as
an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have
become such in the manner prescribed in this Section 8(s) from
its liability in respect of any Operative Document to which it is
a party or any Pass Through Trust Document."
(j) A new Section 8(aa) is hereby added to Section 8, which section
shall be and read in its entirety as follows:
"(aa) Notwithstanding anything to the contrary contained
herein, it is expressly agreed and understood that the provisions
of Sections 8(o), 8(y) and 8(z) shall not apply to (i) any
issuance of Equipment Notes by the Owner Trustee to the Pass
Through Trustees (as beneficial owners) and the Subordination
Agent (as record owner), (ii) any acquisition and holding of
Equipment Notes by the Pass Through Trustees (as beneficial
owners) and the Subordination Agent (as record owner), (iii) the
issuance by each Pass Through Trust of the Pass Through
Certificates, (iv) the acquisition, holding or transfer of Pass
Through Certificate(s) by a holder thereof or a prospective
transferee thereof, or (v) any sale, assignment, conveyance,
exchange or other transfer of any Equipment Note or any interest
in, or represented by, any Equipment Note from the Pass Through
Trustee to a subsequent Pass Through Trustee."
SECTION 6. Amendment to Section 10. The last sentence of Section 10
the Participation Agreement is hereby amended to be and read in its entirety as
follows:
"Each Noteholder shall be deemed to have agreed that it will not take
any action in respect of the Indenture Estate except through the Indenture
Trustee pursuant to the Trust Indenture or as otherwise permitted by the Trust
Indenture."
SECTION 7. Amendment to Section 13. Section 13 of the Participation
Agreement is hereby amended in the following manner:
(i) Clause (A) of the second sentence of Section 13(a) is hereby
amended by adding the phrase ", the Pass Through Trustees, the Subordination
Agent" immediately following the words "the Indenture Trustee" appearing
therein.
18
<PAGE> 20
[Second Amendment to Participation Agreement (1994 737 B)]
(ii) Clause (C) of the second sentence of Section 13(a) is hereby
amended to be and read in its entirety as follows:
"(C) if to any Noteholder, addressed to such Noteholder at its
address set forth in the Register maintained under Section 2.03 of the
Trust Indenture."
(iii) The first sentence of Section 13(b) is hereby amended by
deleting the phrase "and, by acceptance of its certificate, each subsequent
Holder" contained therein and inserting the phrase "by acceptance of its
Equipment Note, each Noteholder" in lieu thereof.
SECTION 8. Amendments to Section 15. Section 15 of the Participation
Agreement is hereby amended as follows:
(i) Section 15(a) is hereby amended to be and read in its entirety as
follows:
"(a) Each of the Owner Participant and each Noteholder covenants
and agrees that it shall not unreasonably withhold its consent to any
consent requested of the Owner Trustee, as Lessor, or the Indenture
Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the
Indenture Trustee."
(ii) Section 15(b) is hereby amended to be and read in its entirety as
follows:
"(b) The representations, warranties, indemnities and agreements
of Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through
Trustees, the Subordination Agent, the Owner Participant and any
Noteholder provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, any Pass Through Trustee's, the
Subordination Agent's, any Noteholder's and the Owner Participant's
obligations under any and all thereof, shall survive the making
available of the respective Commitments by the Participants, the
delivery or return of the Aircraft, the transfer of any interest of
the Owner Participant in the Trust Estate or the Aircraft or any
Engine or the transfer of any interest by any Noteholder in any
Equipment Note or the Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Document."
SECTION 9. Amendment to Section 17. Section 17 of the Participation
Agreement is hereby amended in the following manner:
19
<PAGE> 21
[Second Amendment to Participation Agreement (1994 737 B)]
(a) Section 17(c) is hereby amended to be and read in its entirety as
follows:
"(c) Lessee shall give the Indenture Trustee notice of any such
prepayment as is required pursuant to the terms of the Trust
Indenture."
(b) A new Section 17(f) is hereby added to Section 17, which Section
17(f) shall be and read in its entirety as follows:
"(f) So long as the Subordination Agent or any Pass Through
Trustee is the registered holder of any Equipment Notes, no refunding
or refinancing under this Section 17 shall occur prior to December 2,
2002."
SECTION 10. Amendment to Section 18. Section 18(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) In connection with optimization adjustments of Basic Rent,
Interim Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, the parties hereto agree
that no Amortization Schedule with respect to any Series of Equipment
Notes will be changed."
SECTION 11. Amendment to Section 21. Section 21 of the Participation
Agreement is hereby deleted in its entirety.
SECTION 12. Ratification; References to Participation Agreement;
Effective Date. Except as amended hereby, the Participation Agreement continues
and shall remain in full force and effect in all respects. From and after the
date of this Amendment, each and every reference in the Participation Agreement,
as amended hereby, to "this Agreement", "herein", "hereof" or similar words and
phrases referring to the Participation Agreement or any word or phrase referring
to a section or provision of the Participation Agreement is deemed for all
purposes to be a reference to the Participation Agreement or such section or
provision as amended pursuant to this Amendment. The amendments to the
Participation Agreement contemplated by this Amendment shall be effective from
and after the date the Third Amendment to Lease is filed for record with the
FAA.
SECTION 13. Miscellaneous. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument. Neither this Amendment nor any of
the terms hereof may be terminated, amended, supplemented, waived or modified,
except by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification is
sought; and no such termination, amendment, supplement, waiver or
20
<PAGE> 22
[Second Amendment to Participation Agreement (1994 737 B)]
modification shall be effective unless a signed copy thereof shall have been
delivered to the Lessee, the Indenture Trustee, the Owner Participant and the
Owner Trustee. The terms of this Amendment shall be binding upon, and inure to
the benefit of and shall be enforceable by, the Lessee, the Owner Participant,
the Indenture Trustee, the Pass Through Trustees, the Subordination Agent and
the Owner Trustee. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS AMENDMENT
IS BEING DELIVERED IN THE STATE OF ILLINOIS.
SECTION 14. Authorization to Execute Amendments. By execution of this
Amendment, the Owner Participant hereby authorizes, directs and instructs the
Owner Trustee to execute and deliver this Amendment, the First Amendment to
Trust Agreement (1994 737 B) dated as of December 23, 1997 (the "First Amendment
to Trust Agreement") between the Owner Participant and State Street Bank and
Trust Company of Connecticut, National Association, the Third Amendment to Lease
Agreement (1994 737 B) dated as of December 23, 1997 (the "Third Amendment to
Lease Agreement") between the Lessee and the Owner Trustee, the Note Purchase
Agreement, dated as of December 23, 1997 among the Lessee, the Owner Trustee,
the Indenture Trustee and certain other parties and any and all other
amendments, agreements and certificates as may be necessary in a result of the
refinancing contemplated hereby. By their execution of this Amendment, each of
the Lessee, the Pass Through Trustees and the Indenture Trustee hereby consent
to the execution and delivery of the First Amendment to Trust Agreement and the
Third Amendment to Lease Agreement.
SECTION 15. Additional Parties. Effective as of the date hereof, each
Pass Through Trustee and the Subordination Agent shall be a party to the
Participation Agreement, as amended hereby, and the Subordination Agent (acting
on behalf of the Pass Through Trustees pursuant to the Intercreditor Agreement)
shall have the rights and obligations of the Noteholders as set forth in the
Participation Agreement, as amended hereby.
SECTION 16. Owner Participant Representations. The Owner Participant
represents and warrants to the Indenture Trustee, the Owner Trustee, each Pass
Through Trustee, the Subordination Agent and the Lessee that:
(i) the Owner Participant is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware and has
the corporate power and authority to carry on its business as now
conducted, to own or hold under lease its properties and to enter into this
Agreement, the Participation Agreement, the First Amendment to
Participation Agreement, the Tax Indemnity Agreement, the First Amendment
to Tax Indemnity Agreement, the Trust Agreement and the First Amendment to
Trust Agreement (collectively, the "OP Documents") and
21
<PAGE> 23
[Second Amendment to Participation Agreement (1994 737 B)]
to perform its obligations under the Participation Agreement, the Tax
Indemnity Agreement and the Trust Agreement;
(ii) each of the OP Documents has been duly authorized by all
necessary corporate action on the part of the Owner Participant, does not
require any approval not already obtained of stockholders of the Owner
Participant or any approval or consent not already obtained of any trustee
or holders of any indebtedness or obligations of the Owner Participant, and
has been, or on the date hereof will have been, duly executed and delivered
by it, and none of the execution and delivery by the Owner Participant
thereof, the consummation by the Owner Participant of the transactions
contemplated by this Agreement, the Participation Agreement, the Tax
Indemnity Agreement and the Trust Agreement or compliance by it with the
terms and provisions hereof or thereof will contravene any United States
federal or state law, judgment, governmental rule, regulation or order
applicable to or binding on it (it being understood that no representation
or warranty is made with respect to laws, rules or regulations relating to
aviation or to the nature of the equipment owned by the Owner Trustee,
other than such laws, rules or regulations relating to the citizenship
requirements of the Owner Participant under applicable aviation law or,
except as set forth in clause (vii) of this Section 16, ERISA) or
contravenes or results or will contravene or result in any breach of or
constitute any default under, or result in the creation of any Lien (other
than Liens provided for or otherwise permitted in the Fundamental
Documents) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement, corporate charter, by-law or other agreement or instrument to
which it is a party or by which it or its properties may be bound or
affected;
(iii) each of the Participation Agreement, the Tax Indemnity Agreement
and the Trust Agreement, in each case as amended, will, as of the date
hereof, constitute the legal, valid and binding obligation of the Owner
Participant enforceable against the Owner Participant in accordance with
the terms thereof;
(iv) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under, any of the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement;
(v) there are no Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor
Liens) attributable to the Owner Participant;
22
<PAGE> 24
[Second Amendment to Participation Agreement (1994 737 B)]
(vi) it is a "citizen of the United States" as defined in Section
40102(a)(15) of the Transportation Code;
(vii) no part of the funds used by it to make its investment pursuant
to Section 1 of the Participation Agreement constituted "plan assets" of
any "employee benefit plan" within the meaning of ERISA or of any "plan"
within the meaning of Section 4975(e)(1) of the Code; and
(viii) neither the Owner Participant nor anyone authorized by it to
act on its behalf (other than for purposes of this paragraph, the Lessee,
Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Citicorp
Securities, Inc., Credit Suisse First Boston Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated) has directly or indirectly offered any
Equipment Notes or any interest in or any similar interest for sale to, or
solicited any offer to acquire any of the same from, any Person.
* * *
23
<PAGE> 25
[Second Amendment to Participation Agreement (1994 737 B)]
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Participation Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
UNITED AIR LINES, INC.,
Lessee
By:
---------------------------------------------
Vice President and Treasurer
MS FINANCING INC.,
Owner Participant
By:
---------------------------------------------
Title:
---------------------------------------
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity,
except as expressly provided herein, but solely
as Owner Trustee,
Owner Trustee
By:
---------------------------------------------
Title:
---------------------------------------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
Indenture Trustee
By:
---------------------------------------------
Title:
---------------------------------------
24
<PAGE> 26
[Second Amendment to Participation Agreement (1994 737 B)]
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
in its capacity as Pass Through Trustee under
each of the four separate Pass Through Trust
Agreements and as Noteholder
By:
---------------------------------------------
Title:
---------------------------------------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
Subordination Agent
By:
---------------------------------------------
Title:
---------------------------------------
25
<PAGE> 27
[Second Amendment to Participation Agreement (1994 737 B)]
SCHEDULE I
NAMES AND ADDRESSES
LESSEE:
Address for Notices:
U.S. Mail
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attn: Vice President and Treasurer
Telecopy: (847) 700-7117
Overnight Delivery Service
United Air Lines, Inc.
1200 Algonquin Road
Elk Grove Township, IL 60007
Attn: Vice President and Treasurer
OWNER PARTICIPANT:
Address for Notices:
MS Financing Inc.
1251 Avenue of the Americas
New York, NY 10020
Attn: General Counsel
Telecopy: (212) 703-6476
Address for Payments:
Citibank, N.A.
Delaware Account No.: 338833374
<PAGE> 28
[Second Amendment to Participation Agreement (1994 737 B)]
OWNER TRUSTEE:
Address for Notices:
State Street Bank and Trust Company
of Connecticut, National Association
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Corporate Trust Department
Telecopy: (617) 664-5371
Overnight Delivery Service
State Street Bank and Trust Company of Connecticut,
National Association
c/o State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Department
Address for Payments:
State Street Bank and Trust Company
Boston, MA
ABA# 011-000-028
Acct# 9900-3147
Re: United Air Lines, Inc. 1994 737 B
INDENTURE TRUSTEE:
Address for Notices:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
I-2
<PAGE> 29
[Second Amendment to Participation Agreement (1994 737 B)]
Address for Payments:
First Security Bank, National Association
ABA# 124-0000-12
Acct# 051-0922115
Attn: Corporate Trust Department
Ref: Indenture Trust - 1994 737 B
PASS THROUGH TRUSTEE AND SUBORDINATION AGENT:
Address for Notices:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Address for Payments:
First Security Bank, National Association
ABA# 124-0000-12
Acct# 051-0922115
Attn: Corporate Trust Department
Ref: Pass Through Trust A/B/C/D
I-3
<PAGE> 1
EXHIBIT 4.19
Doc. No. 1.02
Aircraft N398UA
------------------------------------
LEASE AGREEMENT
(1994 737 B)
Dated as of September 1, 1994
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly
provided herein, but solely as
Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
------------------------------------
- ------------------------------
As set forth in Section 20 hereof, Lessor has assigned to the
Indenture Trustee (as defined herein) certain of its right, title and interest
in and to this Lease. To the extent, if any, that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction) no security interest in this Lease may
be created through the transfer or possession of any counterpart other than the
original executed counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by the Indenture Trustee on the
signature page thereof.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Acceptance and Lease . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Interim Term and Basic Term . . . . . . . . . . . . . . . . 18
(b) Interim Rent and Basic Rent . . . . . . . . . . . . . . . . 18
(c) Adjustments to Basic Rent, Interim Rent, Excess Amount,
Stipulated Loss Values, Termination Values and the
EBO Percentage . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Supplemental Rent . . . . . . . . . . . . . . . . . . . . . 21
(e) Payments in General . . . . . . . . . . . . . . . . . . . . 22
(f) Prepayments of Certain Rent Payments . . . . . . . . . . . . 23
SECTION 4. Lessor's Representations and Warranties . . . . . . . . . . . . 24
SECTION 5. Return of the Aircraft . . . . . . . . . . . . . . . . . . . . 25
(a) Condition Upon Return . . . . . . . . . . . . . . . . . . . 25
(b) Return of Other Engines . . . . . . . . . . . . . . . . . . 29
(c) Fuel and Manuals . . . . . . . . . . . . . . . . . . . . . . 29
(d) Storage Upon Return . . . . . . . . . . . . . . . . . . . . 30
(e) Severable Parts . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7. Registration, Maintenance and Operation; Possession and Subleases;
Insignia . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) (1) Registration and Maintenance . . . . . . . . . . . . 31
(2) Operation . . . . . . . . . . . . . . . . . . . . . . 32
(3) Reregistration . . . . . . . . . . . . . . . . . . . 33
(b) Possession and Subleases . . . . . . . . . . . . . . . . . . 34
(c) Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions . . . . . . . . . . . . . . . . . 39
(a) Replacement of Parts . . . . . . . . . . . . . . . . . . . . 39
(b) Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . 40
(c) Alterations, Modifications and Additions . . . . . . . . . . 40
SECTION 9. Early Termination . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(a) (Intentionally Omitted) . . . . . . . . . . . . . . . . . . 42
(b) Termination for Obsolescence/Surplus . . . . . . . . . . . . 42
(c) Sale of the Aircraft . . . . . . . . . . . . . . . . . . . . 43
(d) Termination as to Engines . . . . . . . . . . . . . . . . . 45
SECTION 10. Loss, Destruction, Requisition, etc. . . . . . . . . . . . . . 45
(a) Event of Loss with Respect to the Aircraft . . . . . . . . . 45
(b) Event of Loss with Respect to an Engine . . . . . . . . . . 49
(c) Application of Payments from
Governmental Authorities for Requisition of
Title, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft . . . . 51
(e) Requisition for Use of an Engine by the
United States Government or the
Government of Registry of the Aircraft . . . . . . . . . . . 52
(f) Application of Payments During Existence
of Events of Default. . . . . . . . . . . . . . . . . . . . . 52
SECTION 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) Public Liability and Property Damage Insurance . . . . . . . 53
(b) Insurance Against Loss or Damage to the Aircraft . . . . . . 54
(c) Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . 56
(d) Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . 57
(e) Additional Insurance by Lessor and Lessee . . . . . . . . . 58
(f) Indemnification by Government in Lieu of Insurance . . . . . 58
(g) Application of Payments During Existence
of an Event of Default . . . . . . . . . . . . . . . . . . . . 58
(h) Terms of Insurance Policies . . . . . . . . . . . . . . . . 58
SECTION 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 16. Lessee's Cooperation Concerning Certain Matters . . . . . . . 67
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc. . . . . . . . . . . 70
SECTION 19. Renewal Options; Purchase Options; Valuation . . . . . . . . . 72
(a) Renewal Options . . . . . . . . . . . . . . . . . . . . . . 72
(1) Fixed Renewal Term . . . . . . . . . . . . . . . . . 72
(2) Fair Market Renewal Term . . . . . . . . . . . . . . 73
(3) Waiver . . . . . . . . . . . . . . . . . . . . . . . 74
(4) Conditions Precedent, Payment of Basic Rent . . . . . 74
(5) Termination Value; Stipulated Loss Value . . . . . . 74
(b) Purchase Options . . . . . . . . . . . . . . . . . . . . . . 74
(c) Valuation . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 20. Security for Lessor's Obligation to Holders of Certificates . 76
SECTION 21. Lessor's Right to Perform for Lessee . . . . . . . . . . . . . 77
SECTION 22. Investment of Security Funds; Liability of Lessor Limited . . 77
(a) Investment of Security Funds . . . . . . . . . . . . . . . . 77
(b) Liability of Lessor Limited . . . . . . . . . . . . . . . . 78
SECTION 23. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 24. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 25. Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent, Interim Rent and Excess Amount Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Termination Value Schedule
EXHIBIT E Rent Recalculation and Indemnification Verification
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
EXHIBIT F Schedule of Countries Authorized for Domicile of Permitted
Sublessees
EXHIBIT G Schedule of Countries Authorized for Aircraft Registration
EXHIBIT H Lessor's Cost, Special Purchase Option Dates, EBO Date and EBO
Percentage
</TABLE>
iv
<PAGE> 6
LEASE AGREEMENT (1994 737 B)
This LEASE AGREEMENT (1994 737 B), dated as of September 1, 1994,
between FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee under the Trust Agreement (as defined in
Section 1 hereof) (in such capacity, "Lessor"), and UNITED AIR LINES, INC., a
corporation organized and existing pursuant to the laws of the State of
Delaware ("Lessee").
WITNESSETH:
SECTION 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease Agreement and shall be equally applicable to both the singular and the
plural forms of the terms herein defined:
"Acceptable Alternate Engine" means a CFM International, Inc.
Model CFM-C56-3B1 or CFM-C56-3C1 engine or an engine of the same or another
manufacturer of equivalent or greater value and utility, and suitable for
installation and use on the Airframe; provided that such engine (i) shall be of
the same (it being agreed that for the purposes of this clause (i) a Model CFM-
C56-3B1 engine and a Model CFM-C56-3C1 engine is deemed to be the same model
engine) make, model and manufacturer as the other engine installed on the
Airframe and (ii) shall be an engine of a type then being utilized by Lessee on
other Boeing 737-322 aircraft operated by Lessee and shall have been
maintained, serviced, repaired and overhauled in substantially the same manner
as Lessee maintains, services, repairs and overhauls similar engines utilized
by Lessee and without in any way discriminating against such engine; and
provided further that at the time of the return of the Aircraft pursuant to
Section 5 hereof, notwithstanding the parenthetical agreement in clause (i) of
the preceding proviso, at least one of such engines shall be a CFM
International, Inc. Model CFM-C56-3C1 engine or an engine of the same or
another manufacturer of equivalent or greater value and utility, and suitable
for installation and use on the Airframe, which otherwise meets the
requirements of clauses (i) and (ii) of the preceding proviso.
"Actual Knowledge" means, (i) as it applies to the Owner Trustee
or Indenture Trustee, as the case may be, actual knowledge of a responsible
officer in the Trust Office or the Corporate Trust Department, as the case may
be, and (ii) as it applies to the Owner Participant, actual knowledge of a Vice
President or more senior officer of the Owner Participant or other officer of
the Owner Participant in each case having responsibility for the transactions
contemplated by the Operative Documents; provided that each of the Owner
Trustee, and the Indenture Trustee and the Owner Participant shall be deemed to
have "Actual Knowledge" of any matter as to which it has been given notice by
any of Lessee, the Owner Participant, any
<PAGE> 7
[Lease Agreement (1994 737 B)]
Holder, the Owner Trustee or the Indenture Trustee, such notice having been
given pursuant to and in accordance with Section 13(a) of the Participation
Agreement.
"Additional Insured" means Lessor, in its individual capacity and
as owner of the Aircraft, the Indenture Trustee, the Owner Participant, Lessee
in its capacity as sublessor under any Sublease, and the Original Loan
Participant (so long as it holds any Certificate), and each of their respective
Affiliates, successors and permitted assigns, and the respective directors,
officers and employees of each of the foregoing.
"Affiliate" means a Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under a
common control with, another Person, (ii) which beneficially owns or holds 10%
or more (by number of votes) of any class of voting securities of such other
Person or (iii) 10% or more (by number of votes) of the voting securities (or
in the case of a Person which is not a corporation, 10% or more of the equity
interest) of which is beneficially owned or held by such other Person or a
Subsidiary. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aircraft" means the Airframe together with the two Engines
whether or not such Engines are installed on the Airframe or any other
airframe.
"Airframe" means: (i) The Boeing Company Model 737-322 aircraft
(excluding Engines or engines from time to time installed thereon) specified by
United States Registration Number and Manufacturer's serial number in the Lease
Supplement; (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but
where title to which remains vested in Lessor in accordance herewith; and (iii)
any replacement airframe which may from time to time be substituted pursuant to
Section 10(a)(ii) hereof.
"Assumed Interest Rate" has the meaning set forth in Section 3(b)
hereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended from time to time.
"Base Rate" means the rate of interest announced from time to
time by The Mitsubishi Trust and Banking Corporation at its New York Branch as
its "prime or base rate" (or its equivalent successor rate if the "prime or
base rate" is no longer used).
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(b) hereof, as increased or decreased, as the
case may be, by the Rent Differential
2
<PAGE> 8
[Lease Agreement (1994 737 B)]
Amount (as defined in Section 3(b) hereof), and as adjusted as provided in
Section 3(c) hereof and, for a Renewal Term, Basic Rent determined pursuant to
Section 19 hereof.
"Basic Term" means the term for which the Aircraft is leased
hereunder pursuant to Section 3(a) hereof beginning on the Commencement Date
and ending on the Basic Term Expiry Date, or such earlier date as this Lease
may be terminated in accordance with the terms hereof.
"Basic Term Expiry Date" means March 28, 2016.
"Break Amount" has the meaning set forth in the Trust Indenture.
"Business Day" means any day other than a Saturday or Sunday or a
day on which commercial banks are required or authorized to close in the City
of Chicago, Illinois; New York City, New York; the city and state in which the
principal place of business of the Owner Trustee is located; and, so long as
any Certificate is outstanding, the city and state in which the Indenture
Trustee has its principal place of business and the city and state in which the
Indenture Trustee receives and disburses funds; provided, however, so long as
the Original Loan Participant holds any Certificate such day must also
constitute a Eurodollar Business Day (as defined in the Trust Indenture) in
order to be deemed a Business Day hereunder.
"Certificate" has the meaning set forth in the Trust Indenture.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air
Fleet Program administered by the United States Government pursuant to
Executive Order No. 11490, as amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended
through the Delivery Date.
"Commencement Date" means July 1, 1995.
"Commitment" means the commitment of the Original Loan
Participant or of the Owner Participant, as the case may be, to finance the
Owner Trustee's payment of Lessor's Cost for the Aircraft.
"Consent and Agreement" means the Consent and Agreement (1994 737
B) dated as of the date hereof executed by the Manufacturer, as the same may be
amended, modified or supplemented from time to time in accordance with the
applicable provisions thereof.
"Corporate Trust Department" means the principal office of the
Indenture Trustee located at 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Corporate Trust
3
<PAGE> 9
[Lease Agreement (1994 737 B)]
Department, or such other office at which the Indenture Trustee's corporate
trust business shall be administered which the Indenture Trustee shall have
specified by notice in writing to Lessee, the Owner Participant, the Owner
Trustee and each Holder.
"Debt Rate" means, at any time, the interest rate borne by the
Certificates then outstanding.
"Default" means any event which with the giving of notice or the
lapse of time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement
for the Aircraft, which date shall be the date the Aircraft is sold by Lessee
to Lessor and leased by Lessor to Lessee and accepted by Lessee hereunder.
"Dollars" and "$" mean the lawful currency of the United States
of America.
"EBO Date" means the date therefor specified in Exhibit H hereto.
"EBO Percentage" means the amount determined by multiplying
Lessor's Cost by the percentage specified in Exhibit H or, if Lessee elects to
pay the EBO Percentage in installments, the amounts determined by multiplying
Lessor's Cost by the percentage set forth opposite such installment payment
dates specified in Exhibit H (as such Exhibit H may be adjusted from time to
time as provided in Section 3(c) hereof).
"Engine" means (i) each of the two CFM International, Inc. Model
CFM-C56-3B1 or CFM-C56-3C1 engines listed by manufacturer's serial numbers in
the initial Lease Supplement (each of which engines, if originally a Model CFM-
C56-3B1 engine may subsequently be modified in such a manner as to constitute a
Model CFM-C56-3C1 engine), and whether or not from time to time installed on
such Airframe or any other airframe; (ii) any Acceptable Alternate Engine which
may from time to time be substituted for any of such two engines pursuant to
the terms hereof; and (iii) in either case, any and all Parts which are from
time to time incorporated or installed in or attached to any such engine and
any and all Parts removed therefrom so long as title thereto remains vested in
Lessor in accordance herewith. The term "Engines" means, as of any date of
determination, all Engines then leased hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" has the meaning specified in Section 14
hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such property: (i) the
loss of such property or of the use
4
<PAGE> 10
[Lease Agreement (1994 737 B)]
thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for normal
use by Lessee for any reason whatsoever; (ii) any damage to such property which
results in an insurance settlement with respect to such property on the basis
of a total loss, or a constructive or compromised total loss; (iii) the theft
or disappearance of such property, or the confiscation, condemnation, or
seizure of, or requisition of title to, or use of, such property by any
governmental or purported governmental authority (other than a requisition for
use by the United States Government or any government of registry of the
Aircraft or any agency or instrumentality thereof), which in the case of any
event referred to in this clause (iii) shall have resulted in the loss of title
or possession of such property by Lessee for a period in excess of 90
consecutive days or, if earlier, until the end of the Term; (iv) as a result of
any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft having
jurisdiction, use of such property in the normal course of the business of air
transportation shall have been prohibited for a period in excess of 180
consecutive days, unless (A) such grounding is applicable to Lessee's entire
fleet of Boeing 737-322 aircraft registered in such country, (B) Lessee, prior
to the expiration of such 180 day period, shall have undertaken and shall be
diligently carrying forward, in a manner that does not discriminate against the
Aircraft, all steps which are necessary or desirable to permit the normal use
of such property by Lessee, and (C) Lessee, within one year from the time of
grounding shall have conformed at least one such aircraft in its fleet to the
requirements of any such law, rule, regulation, order or other action and
commenced regular commercial use of the same in such jurisdiction, provided
that no such grounding shall extend beyond the expiration of the Basic Term and
any applicable Renewal Term; (v) the requisition for use by the United States
Government or any government of registry of the Aircraft or any instrumentality
or agency thereof, which in the case of any agency or instrumentality of the
United States Government, the obligations of which are guaranteed by the full
faith and credit of the United States Government, which shall have occurred
during the Basic Term (or the Interim Term or any Renewal Term) and shall have,
in the case of any government of registry of the Aircraft (other than the
United States Government, continued for more than two years (or, if earlier,
until the end of the Term), and in the case of the United States Government
shall have continued for a period that extends beyond the Term and Lessor shall
not have furnished the written notice specified in Section 10(d) hereof; (vi)
the operation of or location of the Aircraft, while under requisition for use
by any government, in any area excluded from coverage by any insurance policy
in effect with respect to the Aircraft required by the terms of Section 11,
unless in the case of a requisition by the government of the United States or
any government of registry or any agency or instrumentality thereof, Lessee
shall have obtained an indemnity in lieu thereof from such government (provided
that in the case of any indemnity provided by a government other than the
government of the United States (or any agency or instrumentality thereof),
Lessor and the Indenture Trustee (but in regard to the Indenture Trustee, only
so long as the Original Loan Participant is a Holder) shall have received an
opinion, in form and substance reasonably satisfactory to Lessor, as to the
enforceability of such indemnity within 15 Business Days of such requisition);
and (vii) any divestiture of title to an Engine treated as an
5
<PAGE> 11
[Lease Agreement (1994 737 B)]
Event of Loss pursuant to Section 7(b) hereof. An Event of Loss with respect
to the Aircraft shall be deemed to have occurred if an Event of Loss occurs
with respect to the Airframe.
"Excess Amount" for the Commencement Date means the amount
determined by multiplying Lessor's Cost by the percentage specified in Exhibit
B hereto opposite the Commencement Date (as such Exhibit B may be adjusted from
time to time as provided in Section 3(c) hereof); provided, however, to the
extent that the aggregate amount of interest due and payable for the period
from, and including, the Delivery Date to, but excluding, the Commencement Date
on the Certificates is less or more than the aggregate amount of interest on
the Certificates that would have been due and payable for such period if such
Certificates had borne interest at the Assumed Interest Rate during such
period, such amount shall be decreased or increased, as the case may be, by the
amount of such differential.
"Excluded Payments" has the meaning set forth in the Trust
Indenture.
"Expenses" means any and all liabilities, obligations, losses,
damages, penalties, claims (including, but not limited to, negligence, strict
or absolute liability, liability in tort and liabilities arising out of the
violation of laws or regulatory requirements of any kind), actions, suits,
costs, expenses and disbursements (including reasonable legal fees and expenses
and, to the extent not required to be paid by the Owner Trustee pursuant to
Section 16 of the Participation Agreement, Transaction Expenses, and all costs
and expenses relating to amendments, supplements, waivers and consents to and
under the Operative Documents, but excluding internal costs and expenses such
as salaries, any amounts that would be included in Break Amount and overhead of
whatsoever kind and nature).
"Fair Market Rental Value" means the fair market rental value
determined as provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value
determined as provided in Sections 19(a) and 19(c) hereof.
"Federal Aviation Administration" and "FAA" mean the United
States Federal Aviation Administration and any successor agency or agencies
thereto.
"Holder" has the meaning set forth in the Trust Indenture.
"Indemnitees" means the Owner Participant, the Owner Participant
Guarantor, the Owner Trustee, in its individual capacity and as trustee under
the Trust Agreement, the Trust Estate, the Indenture Estate, the Indenture
Trustee, in its individual capacity and as trustee under the Trust Indenture,
each Holder, the Original Loan Participant, and each of their respective
Affiliates, successors, permitted assigns, directors, officers, employees,
servants and agents.
6
<PAGE> 12
[Lease Agreement (1994 737 B)]
"Indenture Estate" has the meaning set forth in the Trust
Indenture.
"Indenture Trustee" has the meaning set forth in the Trust
Indenture.
"Indenture Trustee Documents" means the Participation Agreement
and the Trust Indenture.
"Interim Rent" means the amount determined by multiplying
Lessor's Cost by the percentage specified in Exhibit B hereto opposite the
Commencement Date under the heading "Interim Rent" (as such Exhibit B may be
adjusted from time to time as provided in Section 3(c) hereof).
"Interim Term" means the period commencing on the Delivery Date
and ending on and including the day immediately preceding the Commencement Date
unless earlier terminated in accordance with the provisions hereof.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby", or other like words mean
this Lease Agreement as originally executed or as modified, amended or
supplemented in accordance with the applicable provisions hereof and the terms
of the Trust Indenture, including, without limitation, supplementation hereof
by any Lease Supplement entered into in accordance with the applicable
provisions hereof and the terms of the Trust Indenture.
"Lease Period" means each of the consecutive periods throughout
the Basic Term and any Renewal Term ending on a Lease Period Date, the first
such period commencing on and including the Commencement Date.
"Lease Period Date" means, (A) with respect to the Basic Term,
each of (i) January 1, 1996, (ii) each July 1 and January 1 which occurs after
January 1, 1996 through and including January 1, 2016 and (iii) the Basic Term
Expiry Date and (B) with respect to any Renewal Term, each March 28 and
September 28 which occurs after the Basic Term Expiry Date (with respect to the
initial Renewal Term) or the last day of the preceding Renewal Term (with
respect to any subsequent Renewal Term), as the case may be, through and
including the last day of such Renewal Term.
"Lease Supplement" means a Lease Supplement (1994 737 B),
substantially in the form of Exhibit A hereto, to be entered into between
Lessor and Lessee on the Delivery Date for the purpose of leasing the Aircraft
under and pursuant to the terms of this Lease Agreement, and any subsequent
Lease Supplement entered into in accordance with the terms hereof and the terms
of the Trust Indenture.
7
<PAGE> 13
[Lease Agreement (1994 737 B)]
"Lessee Documents" means the Participation Agreement, the Lease,
any Lease Supplement, the Purchase Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's Bill of Sale, Owner Trustee's FAA Bill of Sale,
the Tax Indemnity Agreement and any other document executed by Lessee in
connection with the transactions contemplated by the Participation Agreement
and other Operative Documents.
"Lessor Liens" means any Lien or disposition of title arising as
a result of (i) claims against Lessor, First Security Bank of Utah, National
Association, in its individual capacity, or the Owner Participant not related
to the transactions contemplated by the Operative Documents, (ii) any act or
omission of the Owner Participant, Lessor, or First Security Bank of Utah,
National Association, in its individual capacity, which is not related to the
transactions contemplated by the Operative Documents or is in violation of any
of the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or First Security Bank of Utah, National Association, in
its individual capacity, with respect to Taxes or Expenses against which Lessee
is not required to indemnify the Owner Participant, Lessor or First Security
Bank of Utah, National Association, in its individual capacity or (iv) claims
against Lessor or the Owner Participant arising out of any transfer by Lessor
or the Owner Participant of all or any portion of the respective interests of
Lessor or the Owner Participant in the Aircraft, the Trust Estate or the
Operative Documents (other than a transfer of possession of the Aircraft by
Lessor pursuant to this Agreement, a transfer pursuant to the Trust Indenture
(other than a transfer pursuant to Article IV of the Trust Indenture not
attributable to a Lease Event of Default) or a transfer pursuant to Section 8,
9, 10 or 19 hereof, pursuant to Section 17 or 20 of the Participation Agreement
or pursuant to the exercise of the remedies set forth in Section 15 hereof);
provided, however, that any Lien which is attributable solely to First Security
Bank of Utah, National Association, in its individual capacity, or the Owner
Participant and would otherwise constitute a Lessor Lien hereunder shall not
constitute a Lessor Lien hereunder so long as (1) the existence of such Lien
poses no material risk of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (2) the existence of such Lien does not
interfere in any way with the use or operation of the Aircraft by Lessee (or
any Sublessee), (3) the existence of such Lien does not affect the priority or
perfection of, or otherwise jeopardize, the Lien of the Trust Indenture, (4)
First Security Bank of Utah, National Association, in its individual capacity,
or the Owner Participant, as the case may be, is diligently contesting such
Lien by appropriate proceeding and (5) the existence of such Lien does not
result in actual interruption in the payment of Rent assigned to the Indenture
Trustee for the benefit of the Holders of the Certificates.
"Lessor's Cost" for the Aircraft means the amount specified as
Lessor's Cost in Exhibit H hereto.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease or security interest.
"Loss Payment Date" has the meaning set forth in Section 10(a)
hereof.
8
<PAGE> 14
[Lease Agreement (1994 737 B)]
"Manufacturer" means The Boeing Company, a Delaware corporation,
and its subsidiaries, successors and assigns.
"Manufacturer Documents" means the Purchase Agreement, the
Consent and Agreement and any other document executed by the Manufacturer in
connection with the transactions contemplated by the Participation Agreement.
"Net Economic Return" means the Owner Participant's net after-tax
book yield and aggregate after-tax cash flow and, with respect to any
adjustments required to maintain the Owner Participant's Net Economic Return,
no less than 100% of the Owner Participant's book income under FASB 13 for the
five year period commencing with such adjustment, utilizing the multiple
investment sinking fund method of analysis, computed on the basis of the same
methodology and assumptions as were utilized by the Owner Participant in
determining Basic Rent, Excess Amount, Stipulated Loss Value percentages, EBO
Percentage and Termination Value percentages as of the Delivery Date, as such
assumptions may be revised from time to time for events which have been the
basis for adjustments to Rent pursuant to Section 3(c) hereof.
"Net Present Value of Rents" means the net present value, as of
the Delivery Date, of Basic Rent set forth in Exhibit B hereto, discounted at a
rate per Lease Period equal to (a) 11% per annum divided by (b) the number of
Lease Periods per year.
"Operative Documents" means the Lease (including any Lease
Supplement); the Participation Agreement; the Tax Indemnity Agreement; the
Trust Agreement; any Trust Supplement; the Purchase Agreement; the Owner
Trustee's Bill of Sale; the Owner Trustee's FAA Bill of Sale; the Owner
Trustee's Purchase Agreement; an acceptance certificate covering the Aircraft
in the form agreed to by the Participants and Lessee (the "Acceptance
Certificate"); the Trust Indenture; the Certificates outstanding at the time of
reference; the Owner Participant Guaranty Agreement; and the Consent and
Agreement.
"Original Amount" means, with respect to a Certificate, the
stated original principal amount of such Certificate and, with respect to all
the Certificates, the aggregate stated original principal amounts of such
Certificates, as the case may be.
"Original Loan Participant" means The Mitsubishi Trust and
Banking Corporation, New York Branch, and if such bank or other Original Loan
Participant sells, transfers, assigns or otherwise conveys its Certificates (or
any portion thereof) in accordance with Section 8(y) of the Participation
Agreement (other than pursuant to Section 17 or 20 of the Participation
Agreement and other than as a participation interest) to any Person, shall also
mean and include any such Person.
9
<PAGE> 15
[Lease Agreement (1994 737 B)]
"Owner Participant" means the Person executing the Participation
Agreement as the Owner Participant and any Person to which such Person
transfers all or any portion of its right, title and interest in and to the
Trust Agreement, the Trust Estate and the Participation Agreement, to the
extent permitted thereby.
"Owner Participant Documents" means the Participation Agreement,
the Trust Agreement, the Tax Indemnity Agreement and any other documents
executed by the Owner Participant in connection with the transactions
contemplated by the Participation Agreement and the other Operative Documents.
"Owner Participant Guarantor" has the meaning set forth in
Section 1(a) of the Participation Agreement.
"Owner Participant Guaranty Agreement" means that certain
agreement, dated as of the date hereof, made by Owner Participant Guarantor in
favor of Lessee, the Indenture Trustee, the Original Loan Participant and the
Owner Trustee, as such agreement may be amended or supplemented from time to
time pursuant to the applicable provisions thereof and the terms of the Trust
Indenture.
"Owner Trustee" means the Person executing the Participation
Agreement as Owner Trustee and any Person appointed as successor Owner Trustee
in each case not in its individual capacity but solely as Owner Trustee under
the Trust Agreement, except as otherwise expressly stated.
"Owner Trustee Documents" means the Participation Agreement, the
Trust Agreement, this Lease, any Lease Supplement, the Owner Trustee's Purchase
Agreement, the Trust Indenture, any Trust Supplement and the Certificates and
any other document executed by the Owner Trustee in connection with the
transactions contemplated by the Participation Agreement and the other
Operative Documents.
"Owner Trustee's Bill of Sale" means a bill of sale for the
Aircraft, dated the Delivery Date, executed by Lessee in favor of Lessor in
form and substance satisfactory to Lessor.
"Owner Trustee's FAA Bill of Sale" means a bill of sale for the
Aircraft on AC Form 8050-2 or such other form as may be approved by the FAA on
the Delivery Date executed by Lessee in favor of Lessor in form and substance
satisfactory to Lessor.
"Owner Trustee's Purchase Agreement" means the Owner Trustee's
Purchase Agreement and Assignment (1994 737 B), dated as of the date hereof,
between Lessee and the Owner Trustee, as the same may be amended, modified or
supplemented from time to time in accordance with the applicable provisions
thereof and the terms of the Trust Indenture.
10
<PAGE> 16
[Lease Agreement (1994 737 B)]
"Participants" means and includes the Original Loan Participant
and the Owner Participant.
"Participation Agreement" means that certain Participation
Agreement (1994 737 B) dated as of the date hereof among Lessee, the Indenture
Trustee, the Owner Participant, the Original Loan Participant and the Owner
Trustee, as such Participation Agreement may be amended or supplemented from
time to time pursuant to the applicable provisions thereof.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than (i)
complete Engines or engines and (ii) appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
which Lessee is entitled to use pursuant to a lease, license or other similar
arrangement with a third party (other than Lessor under this Lease) and which
are not necessary to the operation or navigation of the Aircraft or to maintain
its airworthiness certification), which are from time to time incorporated or
installed in or attached to an Airframe or any Engine or which have been
removed therefrom, but where title to which remains vested in Lessor in
accordance with Section 8 hereof.
"Past Due Rate" means (i) with respect to the portion of any
payment of Rent that may be required by the Trust Indenture to be paid by the
Indenture Trustee to any Holder, the "Past Due Rate" as defined in the Trust
Indenture and (ii) with respect to the remaining portion of any payment of Rent
(and the entire amount of any payment of Rent after the satisfaction and
discharge of the Trust Indenture), a fluctuating rate per annum equal to 2%
over the Base Rate; provided, however, in no event shall the Past Due Rate
exceed the highest rate allowed under applicable law.
"Permitted Lien" means any Lien referred to in clauses (i)
through (vi) of Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled in a
country listed in Exhibit F hereto as in effect from time to time.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Prepaid Rent" has the meaning set forth in Section 3(f) hereof.
"Purchase Agreement" means the agreement between Lessee and the
Manufacturer relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.
11
<PAGE> 17
[Lease Agreement (1994 737 B)]
"Reimbursement Amount" has the meaning set forth in Section 3(f)
hereof.
"Renewal Term" means the Fair Market Renewal Term or a Fixed
Renewal Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent, Interim Rent, Prepaid Rent and
Supplemental Rent, collectively.
"Replacement Airframe" means any airframe substituted for the
Airframe in accordance with Section 10(a) of this Lease.
"Replacement Engine" means any engine substituted for an Engine
in accordance with Section 9(d), 10(a) or 10(b) of this Lease.
"Special Purchase Option Date" means the dates specified as such
on Exhibit H hereto.
"Stipulated Loss Value" with respect to the Aircraft as of any
date through and including the last day of the Basic Term, means the amount
determined by multiplying Lessor's Cost for the Aircraft by the percentage
specified in Exhibit C hereto opposite the Stipulated Loss Value Date with
respect to which the amount of Stipulated Loss Value is determined (as such
Exhibit C may be adjusted from time to time as provided in Section 3(c) hereof
and in Section 8 of the Tax Indemnity Agreement). "Stipulated Loss Value" with
respect to the Aircraft, as of any date during any Renewal Term, shall be the
amount determined as provided in Section 19 hereof. To the extent that the
actual amount of interest paid and to be paid on the Certificates during the
Lease Period in which such Stipulated Loss Value Date occurs up to and
including such Stipulated Loss Value Date is greater or less than the amount
included in calculating the percentage set forth in Exhibit C with respect to
such Stipulated Loss Value Date on account of such interest, such percentage
shall be adjusted appropriately to compensate for such differential. To the
extent that an event giving rise to an obligation to pay any Stipulated Loss
Value occurs, and the actual date on which the loss of tax benefits resulting
from such event occurs shall be earlier or later than the date assumed in
calculating the Federal and New York income tax consequences reflected in the
applicable Stipulated Loss Value, such Stipulated Loss Value shall be
appropriately adjusted to reflect the actual date of such loss of tax benefits,
but shall be otherwise based on the original assumptions used in determining
such Stipulated Loss Value.
"Stipulated Loss Value Date" has the meaning set forth in the
initial Lease Supplement.
"Sublease" means any sublease permitted by the terms of Section
7(b)(viii) hereof.
12
<PAGE> 18
[Lease Agreement (1994 737 B)]
"Sublessee" means any Person for so long, but only so long, as
such Person is in possession of the Airframe and/or any Engine pursuant to the
terms of a Sublease which is then in effect pursuant to Section 7(b)(viii)
hereof.
"Supplemental Rent" means all amounts, liabilities and
obligations (other than Interim Rent and Basic Rent) which Lessee assumes or
agrees to pay to Lessor or others hereunder or under any of the other Operative
Documents, including payments of Stipulated Loss Value and Termination Value
and amounts calculated by reference thereto, an amount equal to the Break
Amount, if any, payable in accordance with Section 3(d) hereof and indemnity
payments. The parties acknowledge that Supplemental Rent is a general category
and, accordingly, agree that any provision of any Operative Document which
calls for the payment of Supplemental Rent and also calls for the payment of
specific items which are includable in Supplemental Rent is not to be
interpreted as requiring any double payment.
"Tax Indemnity Agreement" means that certain Tax Indemnity
Agreement (1994 737 B) dated as of the date hereof between the Owner
Participant and Lessee, as originally executed or as modified, amended or
supplemented pursuant to the applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation,
license, documentation and registration fees), taxes (including, without
limitation, income, gross receipts, sales, rental, use, turnover, value added,
property (tangible and intangible), excise and stamp taxes), licenses, levies,
imposts, duties, recording charges or fees, charges, assessments, or
withholdings of any nature whatsoever, together with any assessments,
penalties, fines, additions to tax and interest thereon (each, individually, a
"Tax").
"Term" means the Interim Term, Basic Term and, if actually
entered into, any Renewal Term.
"Termination Date" has the meaning set forth in Section 9(b)
hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including the last day of the Basic Term means the amount
determined by multiplying Lessor's Cost for the Aircraft by the percentage
specified in Exhibit D hereto opposite the Termination Date with respect to
which the amount of Termination Value is determined (as such Exhibit D may be
adjusted from time to time as provided in Section 3(c) hereof and in Section 8
of the Tax Indemnity Agreement). To the extent that the actual amount of
interest paid and to be paid on the Certificates during the Lease Period in
which such Termination Date occurs up to and including such Termination Date is
greater or less than the amount included in calculating the percentage set
forth in Exhibit D hereto with respect to such Termination Date on account of
such interest, such percentage shall be adjusted appropriately to compensate
for such differential. To the extent that an event giving rise to an
obligation to pay any Termination Value occurs, and the actual date on which
the loss of tax benefits resulting from such event occurs shall be earlier
13
<PAGE> 19
[Lease Agreement (1994 737 B)]
or later than the date assumed in calculating the Federal and New York income
tax consequences reflected in the applicable Termination Value, such
Termination Value shall be appropriately adjusted to reflect the actual date of
such loss of tax benefits, but shall be otherwise based on the original
assumptions used in determining such Termination Value.
"Transaction Expenses" means (i) with respect to the closing on
the Delivery Date and the subsequent placement of the permanent debt pursuant
to Section 20 of the Participation Agreement, the reasonable and actual fees,
expenses and disbursements of (1) Bingham, Dana & Gould, special counsel for
the Indenture Trustee, (2) Ray, Quinney & Nebeker, counsel for the Owner
Trustee, (3) Crowe & Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma,
(4) Akin, Gump, Strauss, Hauer & Feld, L.L.P., special counsel for the Holders
of the Certificates, (5) Vedder, Price, Kaufman & Kammholz, special counsel for
Lessee, and (6) Dewey Ballantine, special counsel for the Owner Participant and
the Owner Participant Guarantor, (ii) all fees, taxes and other charges payable
in connection with the recording or filing of instruments and financing
statements, (iii) the initial fee and reasonable and actual disbursements of
the Owner Trustee under the Trust Agreement, (iv) the initial fee and
reasonable and actual disbursements of the Indenture Trustee under the Trust
Indenture, (v) the fee of BK Associates (or of such other appraiser as shall be
acceptable to Lessee and the Owner Participant) with respect to the appraisal
of the Aircraft required on or before the Delivery Date pursuant to Section
4(a) of the Participation Agreement, (vi) the expenses of Capstar Partners,
Inc., (vii) the reasonable out-of-pocket expenses of the Original Loan
Participant, (viii) the reasonable out-of-pocket expenses of the Owner
Participant up to an aggregate of $10,000 (but excluding from Transaction
Expenses airfare charges incurred for travel on an airline other than United
Air Lines), (ix) the initial fee, if any, of the Original Loan Participant, (x)
the placement or underwriting fees, commissions and expenses, if any, in
placing the permanent debt pursuant to Section 20 of the Participation
Agreement and (xi) printing and distribution costs.
"Transportation Code" means Title 49 of the United States Code
("Transportation"), as amended.
"Trust Agreement" means that certain Trust Agreement (1994 737 B)
dated as of the date hereof between the Owner Participant and First Security
Bank of Utah, National Association, in its individual capacity, as originally
executed or as modified, amended or supplemented in accordance with the
applicable provisions thereof and the terms of the Trust Indenture, including,
without limitation, any Trust Supplement entered into pursuant to the
applicable provisions thereof.
"Trust Estate" has the meaning set forth in the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Security
Agreement (1994 737 B) dated as of the date hereof between Lessor and the
Indenture Trustee, as originally executed or as modified, amended or
supplemented in accordance with the provisions thereof
14
<PAGE> 20
[Lease Agreement (1994 737 B)]
and the terms of the Participation Agreement, including, without limitation,
any Trust Supplement entered into pursuant to the applicable provisions
thereof.
"Trust Office" means the principal corporate trust office of the
Owner Trustee located at 79 South Main Street, Salt Lake City, Utah 84111,
Attention: Corporate Trust Department, or such other office at which the Owner
Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to Lessee, the Owner
Participant, the Indenture Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust Agreement and
the Trust Indenture, substantially in the form of Exhibit A to the Trust
Indenture.
"U.S. Air Carrier" means any United States air carrier as to
which there is in force a certificate issued pursuant to Section 41102 of the
Transportation Code, and as to which there is in force an air carrier operating
certificate issued pursuant to Part 121 of the regulations under such Code, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"United States Government" means the federal government of the
United States of America or any instrumentality or agency thereof.
"Wet Lease" means any arrangement whereby Lessee agrees to
furnish the Airframe and Engines or engines installed thereon to a third party
pursuant to which such Airframe and Engines or engines (i) shall be operated
solely by regular employees of Lessee possessing all current certificates and
licenses that would be required under the Transportation Code (or if the
Aircraft is not registered in the United States, all certificates and licenses
required by the laws of the jurisdiction of registry) for the performance by
such employees of similar functions within the United States of America (or
such jurisdiction of registry) (it is understood that cabin attendants need not
be employees of Lessee) and (ii) shall be maintained by Lessee in accordance
with its normal maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees to accept
from Lessee the transfer of title to and simultaneously to lease to Lessee
hereunder, and Lessee hereby agrees to lease on the Delivery Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees that Lessor
will authorize one or more employees of Lessee, designated by Lessee in
writing, as the authorized representative or representatives of Lessor to
accept delivery of the Aircraft. Lessee hereby agrees that in the event
delivery of the Aircraft shall be accepted by an employee or employees of
Lessee pursuant to such authorization by Lessor, such acceptance of delivery by
such employee or employees on behalf of Lessor shall, without further act,
irrevocably constitute acceptance by Lessee of the Aircraft for all purposes of
this Lease.
15
<PAGE> 21
[Lease Agreement (1994 737 B)]
SECTION 3. Term and Rent. (a) Interim Term and Basic Term.
The Interim Term shall commence on the Delivery Date and end on and include the
day immediately preceding the Commencement Date unless earlier terminated
pursuant to the provisions hereof. The Basic Term shall commence on the
Commencement Date and end on the Basic Term Expiry Date or such earlier date as
this Lease may be terminated in accordance with the provisions hereof.
(b) Interim Rent and Basic Rent.
(i) Lessee shall pay Interim Rent in Dollars on the
Commencement Date in the amount for such date determined in accordance
with the definition of "Interim Rent."
(ii) Lessee shall pay Basic Rent in Dollars with respect
to each Lease Period during the Basic Term on each Lease Period Date
during the Basic Term in the respective amounts for each Lease Period
Date determined in accordance with Exhibit B hereto.
Although the Basic Rent amounts set forth in Exhibit B hereto
have been computed on the assumption that the rate of interest on the
Certificates throughout the Basic Term will be 10% per annum, computed on the
basis of a 360-day year of twelve 30-day months (the "Assumed Interest Rate"),
Lessor and Lessee recognize that the actual rate of interest on the
Certificates may, from time to time during the Basic Term, be a rate from time
to time which may be greater or less than the Assumed Interest Rate and that
the related basis upon which interest on the Certificates will be computed will
be as provided in the Trust Indenture. Accordingly, Basic Rent shall be
increased or decreased (but not below zero), as the case may be, by the Rent
Differential Amount (as defined herein). For purposes hereof, "Rent
Differential Amount" shall mean, as of any Lease Period Date, the absolute
value of the difference between (i) the aggregate amount of interest actually
due and payable on such Lease Period Date on the Certificates (or due and
payable on the next following Business Day if such date shall not constitute a
Business Day (unless, so long as the Original Loan Participant shall hold a
Certificate, such succeeding Business Day is in the next calendar month, in
which case the payment date shall be the next preceding Business Day)) and (ii)
the aggregate amount of interest on the Certificates that would have been due
and payable on such date if the Certificates had borne interest at the Assumed
Interest Rate. If, as of such date, the amount determined in accordance with
clause (i) of the immediately preceding sentence shall be greater than the
amount determined in accordance with clause (ii) of such sentence, the amount
of Basic Rent payable on such date shall be increased by the Rent Differential
Amount. If, as of such date, the amount determined in accordance with such
clause (ii) shall exceed the amount determined in accordance with such clause
(i), the amount of Basic Rent due on such date shall be decreased (but not
below zero) by the Rent Differential Amount.
16
<PAGE> 22
[Lease Agreement (1994 737 B)]
(c) Adjustments to Basic Rent, Interim Rent, Excess Amount,
Stipulated Loss Values, Termination Values and the EBO Percentage.
(i) In the event that (A) Transaction Expenses paid by
Lessor are determined to be other than 0.5% of Lessor's Cost, (B) there
shall be an optional refinancing or a refunding of the Certificates in
accordance with Section 17 or 20 of the Participation Agreement, (C) the
Delivery Date occurs other than on September 28, 1994, (D) there is an
optimization in accordance with Section 18 of the Participation
Agreement or (E) the Excess Amount is increased or decreased pursuant to
the operation of the proviso in the definition thereof; then in each
case the Basic Rent, Interim Rent and Excess Amount set forth in Exhibit
B, the Stipulated Loss Value percentages set forth in Exhibit C and the
Termination Value percentages set forth in Exhibit D and the EBO
Percentage set forth in Exhibit H shall be adjusted (upwards or
downwards as the case may be) using the same methods and assumptions (as
modified on account of the occurrence of any of the events referred to
in clauses (A)-(E)) used to calculate Basic Rent, Interim Rent and
Excess Amount and Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage as set forth in Exhibits B, C, D and H,
respectively, in each case in compliance with clauses (iv) and (v) of
this paragraph (c) and in order to: (1) maintain the Owner Participant's
Net Economic Return and (2) minimize the Net Present Value of Rents to
Lessee to the extent possible consistent with clause (1) hereof;
provided, however, in no event will the EBO Percentage be adjusted below
the greatest of (i) the Termination Value for the Aircraft as of the EBO
Date, (ii) 48.21862348% of Lessor's Cost and (iii) the present value as
of the EBO Date of (x) the remaining Basic Rent plus (y) 41.27530364% of
Lessor's Cost (i.e. the fair market value of the Aircraft as of the end
of the Basic Term as the same was determined on the Delivery Date) (for
purposes of illustration on the Delivery Date, such present value would
equal 60.44067122% of Lessor's Cost) (the present value calculation
described in this clause (iii) shall utilize a semi-annual discount rate
that on a compound basis is equal to 16.0%).
(ii) (Intentionally Omitted)
(iii) Any recalculation of Basic Rent, Interim Rent and
Excess Amount, Stipulated Loss Value and Termination Value percentages
and EBO Percentage pursuant to this Section 3(c) shall be determined by
the Owner Participant and shall be subject to the verification
procedures set forth in Exhibit E hereto. Such recalculated Basic Rent,
Interim Rent and Excess Amount, Stipulated Loss Value and Termination
Value percentages and EBO Percentage shall be set forth in an amendment
hereto.
(iv) Anything contained in the Participation Agreement
or this Lease to the contrary notwithstanding, each installment of Basic
Rent and Interim Rent payable hereunder, whether or not adjusted in
accordance with this Section 3(c), together with the
17
<PAGE> 23
[Lease Agreement (1994 737 B)]
amount of the Excess Amount and Supplemental Rent, if any, in respect of
the date on which such installment is payable, and each payment of
Termination Value, Stipulated Loss Value and EBO Percentage, whether or
not adjusted in accordance with this Section 3(c) or Section 8 of the
Tax Indemnity Agreement, and all other amounts excluding Excluded
Payments payable simultaneously by Lessee pursuant to this Lease, in
each case, on the date on which such payment is due, shall be in an
amount at least sufficient to pay in full, and shall be available to be
applied by Lessor in payment on account of, any payments then required
to be made on account of the principal amount (and Break Amount, if any)
of and accrued and unpaid interest on the Certificates then outstanding.
It is agreed that no installment of Basic Rent or Interim Rent or
payment of Excess Amount, Termination Value, Stipulated Loss Value or
EBO Percentage shall be increased or adjusted by reason of (A) any
attachment or diversion of Rent on account of (x) Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens) or (y) any other Lien on or
against the Trust Estate, any part thereof or the Operative Documents
arising as a result of claims against the Indenture Trustee or a Holder,
not related to the transactions contemplated by the Operative Documents,
(B) any modification of the payment terms of the Certificates made
without the prior written consent of Lessee other than as required or
permitted by the Participation Agreement, the Lease and any Lease
Supplement thereto and the Trust Indenture and any Trust Supplement
thereto, or (C) the acceleration of any Certificate due to the
occurrence of an "Event of Default" (as defined in the Trust Indenture)
which does not constitute an Event of Default hereunder.
(v) All adjustments to Basic Rent under this Section
3(c) shall be consistent with the requirements of Sections 4.02(5),
4.07(1) and (2) and Section 4.08(1) of Rev. Proc. 75-28 (provided that
the requirements of Section 4.08(1) shall apply on a prospective basis),
as modified and in effect on the Delivery Date, and shall not cause the
Lease to be a "disqualified leaseback or long-term agreement" within the
meaning of Section 467 of the Code and any final, temporary or proposed
regulations thereunder or any administrative or judicial interpretation
thereof in effect on the date of such adjustment (a "Section 467
Agreement") (it being understood that any such adjustment shall not be
treated as causing the Lease to be a Section 467 Agreement to the extent
the Lease would have been a Section 467 Agreement if no such adjustment
to Basic Rent had occurred).
(d) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value, Termination Value or EBO
Percentage as the same shall become due and owing and all other amounts of
Supplemental Rent within five Business Days after demand or on such date, or
within such other relevant period, as may be provided in any Operative
18
<PAGE> 24
[Lease Agreement (1994 737 B)]
Document, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent when due, Lessor shall have all rights, powers and remedies
provided for herein or in any other Operative Document or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall also pay on
behalf of Lessor as Supplemental Rent an amount equal to any amount payable by
Lessor as Break Amount as and when any such Break Amount shall be due and
payable and amounts payable under Section 2.17 of the Trust Indenture;
provided, however, that Lessee shall have no obligation to pay to Lessor any
Break Amount payable under Section 2.14 or 4.04(b) of the Trust Indenture due
to the occurrence of an "Event of Default" (as defined in the Trust Indenture)
which does not constitute an Event of Default hereunder. In the event that the
aggregate amount of interest actually due and payable on the Certificates on
the Commencement Date exceeds the aggregate amount of interest on the
Certificates that would have been due and payable if such Certificates had
borne interest at the Assumed Interest Rate, Lessee agrees to pay Lessor on the
Commencement Date, as Supplemental Rent, an amount equal to such excess.
Lessee also will pay to Lessor, or on behalf of Lessor to whomsoever shall be
entitled thereto, on demand, as Supplemental Rent, to the extent permitted by
applicable law, interest at the Past Due Rate with respect to any part of any
installment of Basic Rent or Interim Rent not paid when due for any period for
which the same shall be overdue and on any payment of Supplemental Rent not
paid when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent other than
Excluded Payments payable to Lessor shall be made directly by Lessee by wire
transfer of immediately available funds prior to 11:00 a.m., New York City
time, on the date of payment in Dollars, to Lessor at its office at First
Security Bank of Utah, National Association, 79 South Main Street, Salt Lake
City, Utah, 84111, Attention: Corporate Trust Department (or such other office
of Lessor in the continental United States or such other account as Lessor
shall direct in a notice to Lessee at least 10 Business Days prior to the date
such payment of Rent is due); provided, that so long as the Trust Indenture
shall not have been fully discharged, Lessor hereby directs and Lessee agrees,
that all Basic Rent (other than Excluded Payments) and all other amounts which
are required to be paid to or deposited with the Owner Trustee hereunder (other
than Excluded Payments) shall be paid directly to the Indenture Trustee at the
times and in funds specified in this Section 3(e) at the offices of the
Indenture Trustee at 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Corporate Trust Department (or such other office of Indenture
Trustee in the continental United States or such other account as Indenture
Trustee shall direct in a notice to Lessee at least 10 Business Days prior to
the date such payment of Basic Rent is due). Excluded Payments shall be paid
in Dollars in immediately available funds to the Person to whom payable at the
address of such Person specified in Schedule I of the Participation Agreement.
Notwithstanding anything to the contrary contained herein, if any
date on which a payment of Rent becomes due and payable is not a Business Day
then such payment shall be made on the next succeeding Business Day (unless, so
long as the Original Loan Participant shall hold a Certificate, such succeeding
Business Day is in the next calendar month, in which case the payment date
shall be the next preceding Business Day) and (except, with respect to any
Certificate held by the Original Loan Participant in regard to the amount of
Rent attributable to
19
<PAGE> 25
[Lease Agreement (1994 737 B)]
the corresponding payments on the Certificates held by the Original Loan
Participant) no interest shall accrue on the amount of such payment, if such
payment is made on such next succeeding Business Day.
(f) Prepayments of Certain Rent Payments. To the extent, if
any, that there shall not have been received by the Indenture Trustee at the
account of the Indenture Trustee referred to in Section 3(e) by 11:00 a.m., New
York time, on the Commencement Date from Lessor, an amount equal to the Excess
Amount payable for such date, Lessee shall advance to Lessor, as Prepaid Rent,
by paying to the Indenture Trustee on behalf of Lessor on the Commencement Date
an amount equal to the Excess Amount not so paid (such amount being herein
called "Prepaid Rent"); provided that Lessee will also pay to the Indenture
Trustee, on demand, as Supplemental Rent, to the extent permitted by applicable
law, interest at the Debt Rate on any Prepaid Rent not paid when due for any
period for which the same shall be overdue. Any Rent prepaid pursuant to this
Section 3(f) shall be offset against installments of Basic Rent in the order in
which they become due, subject to the last sentence of this paragraph. Lessor
agrees to reimburse Lessee in the manner and subject to the conditions provided
in the following sentence for (x) the Prepaid Rent so paid by Lessee determined
as of the date such payment was made, plus (y) the Supplemental Rent so paid by
Lessee pursuant to this Section 3(f), plus (z) accrued interest on the
unreimbursed portion thereof at a rate per annum equal to the greater of the
Base Rate plus 2% or the Debt Rate plus 2% from the date such amount is paid by
Lessee to but not including the date of each such reimbursement (such amounts
to be reimbursed being herein called the "Reimbursement Amount"). So long as
no Default or Event of Default has occurred and is continuing, Lessee may with
written notice to the Owner Participant and Indenture Trustee offset (without
duplication) against each succeeding payment (other than as limited by the
proviso to this sentence) due from Lessee to Lessor in respect of Basic Rent,
Stipulated Loss Value, Termination Value, EBO Percentage or any other amount
due hereunder to Lessor, until Lessee has been fully reimbursed for the
Reimbursement Amount; provided, however, that in the case of any payment due
from Lessee which is distributable under the terms of the Trust Indenture,
Lessee's right of offset shall be limited to amounts distributable to Lessor or
the Owner Participant thereunder. No such offset or aggregate combined effect
of separate offsets shall reduce the amount of any installment of Basic Rent to
an amount insufficient, together with all other amounts payable simultaneously
by Lessee, to pay in full the payments then required to be made on account of
the principal amount (and Break Amount, if any) of and accrued and unpaid
interest on the Certificates then outstanding.
SECTION 4. Lessor's Representations and Warranties. LESSOR
LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES
AND AGREES THAT AS BETWEEN LESSOR, ANY PARTICIPANT, THE INDENTURE TRUSTEE, AND
LESSEE (A) THE AIRFRAME AND EACH ENGINE IS OF SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT
THE AIRFRAME AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (C) NEITHER LESSOR
NOR OWNER PARTICIPANT IS A
20
<PAGE> 26
[Lease Agreement (1994 737 B)]
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR, THE
INDENTURE TRUSTEE NOR THE OWNER PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED
TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
CONDITION, DESIGN, OPERATION, VALUE, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except as set forth in Sections 8(f)(v) and 8(p)(ii) of the
Participation Agreement as to title and except that First Security Bank of
Utah, National Association, in its individual capacity, (i) represents and
warrants that on the Delivery Date, Lessor shall have received whatever title
to the Aircraft was conveyed to it by Lessee, (ii) represents and warrants that
on the Delivery Date the Aircraft shall be free of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) attributable to it in its individual capacity,
(iii) covenants that it will not, through its own actions or inactions, in such
capacity, interfere in Lessee's or any Sublessee's quiet enjoyment, use
operation or possession of the Aircraft unless this Lease shall have been
declared in default pursuant to Section 15 hereof, (iv) agrees that it will not
directly or indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it in its individual capacity on or with respect to the
Airframe or any Engine or any portion of the Trust Estate and (v) represents
and warrants that it is a "citizen of the United States" as defined in Section
40102(a)(15) of the Transportation Code and agrees that if at any time it shall
cease to be a "citizen of the United States" within the meaning of Section
40102(a)(15) of the Transportation Code, it will promptly resign as Owner
Trustee (if and so long as such citizenship is necessary under the
Transportation Code as in effect at such time or, if it is not necessary, if
and so long as the Owner Trustee's citizenship would have any adverse effect on
the Owner Participant, the Holders or Lessee), effective upon the appointment
of a successor Owner Trustee in accordance with the provisions of the Trust
Agreement. None of the provisions of this Section 4 or any other provision of
this Agreement shall be deemed to amend, modify or otherwise affect the
representations, warranties or other obligations (express or implied) of the
Manufacturer, any subcontractor or supplier of the Manufacturer with respect to
the Airframe, Engines, or any Parts, or to release the Manufacturer, or any
such subcontractor or supplier from any such representation, warranty or
obligation. Unless a Section 14(a), 14(b), 14(f) or 14(g) Default or any Event
of Default shall have occurred and be continuing, Lessor agrees to make
available to Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made by the Manufacturer or any of its subcontractors
or suppliers and any other claims against the Manufacturer or any such
subcontractor or supplier with respect to the Aircraft, all pursuant to and in
accordance with the terms of the Owner Trustee's Purchase Agreement.
21
<PAGE> 27
[Lease Agreement (1994 737 B)]
SECTION 5. Return of the Aircraft. (a) Condition Upon Return.
Unless purchased by Lessee pursuant to Section 19(b) hereof, upon the
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(b) or 15 hereof, Lessee will at its expense return the
Aircraft to Lessor at Lessee's maintenance base located at San Francisco
International Airport (or any principal maintenance base established by Lessee
in the continental United States subsequent to the date hereof), provided,
however, that if Lessor shall have made the request for storage pursuant to
Section 5(d) hereof, Lessee shall return the Aircraft at the site of storage.
At the time of such return, (A) Lessee will, at its own cost and expense,
unless otherwise requested by Lessor to retain the existing registration of the
Aircraft, cause the Aircraft, if it is not then so registered, to be registered
under the laws of the United States with the FAA in the name of Lessor or its
designee, provided that Lessee shall be relieved of its obligations under this
sentence if such registration is prohibited by reason of the failure of Lessor,
the Owner Participant or Lessor's designee to be eligible on such date to own
an aircraft registered with the Federal Aviation Administration, and (B) the
Airframe will be fully equipped with the Engines (or Acceptable Alternate
Engines) installed thereon. Also, at the time of such return, Lessor shall
have good title to such Airframe and Engines or Acceptable Alternate Engines,
and such Airframe and Engines or Acceptable Alternate Engines (i) shall be
certified (or, if not then registered under the Transportation Code by reason
of the proviso to clause (A) in the preceding sentence or because Lessor has so
requested that the Aircraft not be so registered, shall hold a valid
certificate of airworthiness issued by the country of registry and be eligible
for certification by the FAA) as an airworthy aircraft by the Federal Aviation
Administration, (ii) shall be free and clear of all Liens (other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and rights of third parties under
pooling, interchange, overhaul, repair or other similar agreements or
arrangements, (iii) shall be in a regular passenger configuration, and in as
good a condition as when delivered by Lessee to Lessor, ordinary wear and tear
excepted, and otherwise in the condition required to be maintained under
Lessee's FAA-approved maintenance plan (notwithstanding any Sublease
theretofore in effect) and shall be in compliance with all applicable FAA
regulations airworthiness directives and Manufacturer's mandatory service
bulletins (except for regulations, directives and bulletins (A) that permit
compliance at a later time and would not, in the normal course of Lessee's
maintenance plan, be complied with by the date of return and without
discriminating on the basis of the status of the Aircraft as a leased aircraft,
or (B) that are being diligently contested in good faith by Lessee, so long as
such contest does not interrupt the normal use of the Aircraft and such contest
does not involve any material risk of criminal liability or any unindemnified
material risk of civil liability to Lessor, the Owner Participant or the
Indenture Trustee (but in regard to the Indenture Trustee, only so long as the
Original Loan Participant is a Holder), jeopardize the right, title and
interest of Lessor or the Owner Participant in and to the Airframe and/or the
Engines, or result in a claim, loss or expense for which Lessor or the Owner
Participant is not indemnified and for which Lessee is not then willing to
indemnify Lessor, the Owner Participant or the Indenture Trustee (but in regard
to the Indenture Trustee, only so long as the Original Loan Participant is a
Holder) in a manner reasonably satisfactory to such Person, provided that if
Lessee does not prevail in such contest then Lessee
22
<PAGE> 28
[Lease Agreement (1994 737 B)]
shall, at its sole expense, cause the Aircraft to be promptly put in the
condition it would have been on the last day of the Term but for this clause
(B)), (iv) in the event that Lessee shall not then be using a continuous
maintenance program with respect to the Airframe immediately prior to such
return but instead shall have been using a block overhaul program with respect
to the Airframe, then (A) such block overhaul program shall have been approved
by the government of registry of the Aircraft and (B) the Airframe shall have
remaining until the next scheduled block overhaul at least 25% of the allowable
hours between block overhauls permitted under the block overhaul program then
used by Lessee, (v) in the event that Lessee during the period of operation of
the Aircraft immediately prior to such return shall not have been using an on-
condition maintenance program with respect to the Engines (or Acceptable
Alternate Engines), Lessee agrees that the average number of hours or cycles of
operation (whichever shall be applicable under the maintenance program then in
use with respect to such Engines (or Acceptable Alternate Engines)) on such
Engines (or Acceptable Alternate Engines) remaining until the next scheduled
engine heavy maintenance shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine heavy maintenance allowed under
the maintenance program then in use with respect to such Engines (or Acceptable
Alternate Engines), (vi) shall have all Lessee's and any Sublessee's exterior
marking removed or painted over with areas thereof refinished to match adjacent
areas, and (vii) shall be in a state of cleanliness suitable under Lessee's
normal service standards for operation in Lessee's revenue passenger service
and in all such cases the Aircraft shall not have been discriminated against
whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
In addition, the following conditions shall be complied with at
the time of the return of the Aircraft: (i) Lessee shall deliver to Lessor any
"no cost" modification kits designated for the Aircraft that Lessee has in its
possession and that have not been incorporated at the time of the return of the
Aircraft, (ii) Lessor may purchase from Lessee at Lessee's cost any service
bulletin kits purchased by Lessee for the Aircraft and (iii) without limiting
the obligations of the Lessee set forth in the preceding paragraph, in the
event the FAA shall issue a directive which would require improvements to the
Aircraft in order for the airworthiness certificate of the Aircraft to be
maintained in good standing, and if Lessee shall have not been required to
terminate such directive in accordance with the terms of this Section 5 prior
to the return of the Aircraft but such directive must be terminated on or
before one year following such return, the Lessee shall, at the sole cost and
expense of Lessor, comply with such directive but only if (x) within 180 days
prior to the return of the Aircraft Lessee receives from Lessor a written
request to comply with such directive at Lessor's sole cost and expense
(determined on the basis of what a third party would charge for comparable
services) and (y) after receipt by Lessee of such request, the Aircraft is
subject to a maintenance check of the type at which such modification is made,
in accordance with Lessee's general maintenance program, and Lessee has the
personnel, parts, facilities and other resources available to accomplish the
modification and the modification can be made without disrupting the operations
of Lessee's maintenance facility or Lessee's operations.
23
<PAGE> 29
[Lease Agreement (1994 737 B)]
For purposes of this Section 5(a), any maintenance program used
by Lessee for airframes (including the Airframe) substantially similar to the
maintenance program described in the excerpts from "United Air Lines 737
Maintenance Program" furnished to Lessor and the Owner Participant shall be
considered a continuous maintenance program (and not a block maintenance
program) and any engine maintenance program used by Lessee for engines
(including the Engines) substantially similar to the maintenance program
described in "United Air Lines 737 Maintenance Program" shall be considered an
on-condition maintenance program.
If clause (iv) of the first paragraph of this Section 5(a) shall
be applicable but the Airframe does not meet the conditions specified in said
clause (iv), Lessee shall pay or cause to be paid to Lessor, concurrently with
the return thereof, a Dollar amount computed by multiplying (i) 120% of the
direct cost to Lessee (based upon the direct cost to Lessee for similar
aircraft in the fleet of Lessee) during the preceding 12 months of performing
an airframe block overhaul of the type referred to in such clause (iv) by (ii)
a fraction of which (x) the numerator shall be the excess of 25% of the hours
of operation allowable between such block overhauls over the actual number of
hours of operation remaining on the Airframe to the next such block overhaul
and (y) the denominator shall be the number of hours of operation allowable
between such block overhauls in accordance with such block overhaul program.
If clause (v) of the first paragraph of this Section 5(a) shall
be applicable but the Engines (or Acceptable Alternate Engines) do not meet the
conditions specified in said clause (v), Lessee shall pay or cause to be paid
to Lessor, concurrently with the return thereof, a Dollar amount computed by
multiplying (i) 120% of the direct cost to Lessee (based upon the direct cost
to Lessee for similar aircraft in the fleet of Lessee) during the preceding 12
months of performing for an engine of the same model as the Engines (or
Acceptable Alternate Engines) the scheduled engine heavy maintenance under the
maintenance program then used by Lessee for engines of the same model as the
Engines (or Acceptable Alternate Engines) by (ii) a fraction of which (x) the
numerator shall be the excess of 25% of the hours or cycles (whichever is
applicable) of operation of one Engine between engine heavy maintenance
allowable under the maintenance program then in use with respect to such
Engines (or Acceptable Alternate Engines) over the actual average number of
hours or cycles of operation of such Engines (or Acceptable Alternate Engines)
remaining until the next such scheduled engine heavy maintenance and (y) the
denominator shall be the number of hours or cycles allowable between such
scheduled engine heavy maintenance.
During the last three months of the Term (unless Lessee shall
have elected to purchase the Aircraft or renew this Lease in accordance with
the terms of this Lease), with reasonable notice, Lessee will cooperate, and
cause any Sublessee to cooperate, at Lessor's sole cost, in all reasonable
respects with the efforts of Lessor to sell or lease the Aircraft, including,
without limitation, permitting prospective purchasers or lessees to inspect the
Aircraft, any maintenance records relating to the Aircraft then required to be
retained by the FAA or by the comparable government agency of the country in
which the Aircraft is registered, all in
24
<PAGE> 30
[Lease Agreement (1994 737 B)]
accordance with Section 12 hereof, provided that any such cooperation shall not
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee or any Sublessee.
(b) Return of Other Engines. In the event that an Acceptable
Alternate Engine shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery, will,
at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) bill of sale with respect to each such Acceptable
Alternate Engine, in form and substance reasonably satisfactory to Lessor
(together with an opinion of counsel (which may be Lessee's General Counsel) to
the effect that such full warranty bill of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that each such
Acceptable Alternate Engine is free and clear of all Liens other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)), against receipt from Lessor of a
bill of sale evidencing the transfer, without recourse or warranty (except as
to the absence of Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens)) by Lessor
to Lessee or its designee of all of Lessor's right, title and interest in and
to any Engine not installed on the Airframe at the time of the return of the
Airframe.
(c) Fuel and Manuals. Upon the return of the Airframe upon
any termination of this Lease in accordance with paragraph (a) of this Section
5, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and inspection, modification and overhaul records in the English
language (if available) which (i) are required to be maintained with respect to
the Airframe, the Engines or any part thereof in accordance with Section 7(a)
hereof, (ii) have been created since the Airframe's or Engine's or Acceptable
Alternate Engine's (whichever is applicable) last heavy maintenance visit and
(iii) are required to lawfully operate the Aircraft in the United States under
a United States certificate of airworthiness without performing additional
maintenance. Lessee shall have no obligation with respect to the amount of
fuel or oil contained in the Aircraft and all fuel or oil remaining on board
the Aircraft shall be the property of Lessor without charge.
(d) Storage Upon Return. If, at any time at least 15 days
prior to the end of the Basic Term or any Renewal Term or pursuant to Section
9(c) or Section 15, Lessee receives from Lessor a written request for storage
of the Aircraft upon its return hereunder, Lessee will provide Lessor, or cause
Lessor to be provided, with storage facilities for the Aircraft (at Lessor's
risk and at Lessor's cost for insurance, maintenance and Lessee's reasonable
out-of-pocket expenses other than storage fees) for a period not exceeding
forty-five (45) days commencing on the date of such termination, at a location
in the forty-eight contiguous states of the United States selected by Lessee
and used as a location for the storage of aircraft. Lessee shall, at Lessor's
written request, maintain insurance (if available) for the Aircraft during such
period and shall be reimbursed by Lessor for the premiums thereon.
25
<PAGE> 31
[Lease Agreement (1994 737 B)]
(e) Severable Parts. At any time after Lessee has advised
Lessor that it has determined not to renew this Lease or purchase the Aircraft,
or the Aircraft is otherwise to be returned to Lessor, Lessee shall, at
Lessor's request, advise Lessor of the nature and condition of all severable
Parts owned by Lessee which have been used by Lessee during the prior six
months and which Lessee has or intends to remove from the Aircraft as permitted
by Section 8 hereof. Lessor may, at its option, upon 30 days written notice to
Lessee, purchase any or all of such Parts from Lessee upon the expiration of
the Term at their then fair market value.
SECTION 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, title thereto or any interest therein or in this Lease, except (i)
the respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided (including any Sublease permitted pursuant to Section 7(b)), the Lien
of the Trust Indenture, and any other rights existing pursuant to the Operative
Documents, (ii) Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens), (iii)
Liens for Taxes of Lessee (or any Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such proceedings
do not involve any material risk of the sale, forfeiture or loss of the
Airframe or any Engine or any interest therein, (iv) materialmen's, mechanics',
workmen's, repairmen's, employees' or other like liens arising in the ordinary
course of Lessee's or any Sublessee's business securing obligations that are
not overdue for a period of more than 30 days or are being contested in good
faith by appropriate proceedings so long as during such 30 day period there is
not, or such proceedings do not involve, any material risk of the sale,
forfeiture or loss of the Airframe or any Engine or any interest therein, (v)
Liens arising out of any judgment or award against Lessee (or any Sublessee),
unless there exists a material risk of the sale, forfeiture or loss of the
Airframe or any Engine or any interest therein or unless the judgment secured
shall not, within 45 days after the entry thereof, have been discharged,
vacated, reversed or execution thereof stayed pending appeal or shall not have
been discharged, vacated or reversed within 45 days after the expiration of
such stay, and (vi) any other Lien with respect to which Lessee (or any
Sublessee) shall have provided a bond or other security in an amount and under
terms reasonably satisfactory to Lessor. Lessee will promptly, at its own
expense, take (or cause to be taken) such actions as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any time.
SECTION 7. Registration, Maintenance and Operation; Possession
and Subleases; Insignia. (a) (1) Registration and Maintenance. Lessee, at
its own cost and expense, shall (or shall cause any Sublessee to): (i) upon
delivery of the Aircraft, cause the Aircraft to be duly registered in the name
of Lessor, and, subject to subparagraph (3) of this Section 7(a), to remain
duly registered in the name of Lessor under the Transportation Code (except to
the extent that such registration cannot be effected because of Lessor's or the
Owner Participant's failure to comply with the citizenship requirements for
registration of aircraft under the Transportation Code), provided that Lessor
and the Owner Participant shall execute and deliver all such documents as
Lessee (or any Sublessee) may reasonably request for the purpose of effecting
and
26
<PAGE> 32
[Lease Agreement (1994 737 B)]
continuing such registration, and Lessee shall cause the Trust Indenture to be
duly recorded and maintained of record as a first mortgage on the Aircraft;
(ii) maintain, service, repair, and overhaul (or cause to be maintained,
serviced, repaired, and overhauled) the Aircraft (and any engine which is not
an Engine but which is installed on the Aircraft) (x) so as to keep the
Aircraft in as good an operating condition as when delivered by Lessee to
Lessor, ordinary wear and tear excepted, and so as to keep the Aircraft in such
condition as may be necessary to enable the airworthiness certification for the
Aircraft to be maintained in good standing at all times (other than during
temporary periods of storage in accordance with applicable regulations) under
(I) the Transportation Code, except when all of Lessee's Boeing Model 737-322
aircraft (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of such grounding) registered in the United
States have been grounded by the FAA unless such grounding was caused by the
failure of Lessee to maintain, service, repair or overhaul the Aircraft in
accordance with this Lease, or (II) the applicable laws of any other
jurisdiction in which the Aircraft may then be registered from time to time,
except when all of Lessee's Boeing Model 737-322 aircraft (powered by engines
of the same type as those with which the Airframe shall be equipped at the time
of such grounding) registered in such jurisdiction have been grounded by the
aeronautical authority of such jurisdiction unless such grounding was caused by
the failure of Lessee to maintain, service, repair or overhaul the Aircraft in
accordance with this Lease and (y) in substantially the same manner as Lessee
(or any Sublessee) maintains, services, repairs or overhauls similar aircraft
operated by Lessee (or such Sublessee) in similar circumstances and without in
any way discriminating against the Aircraft, whether by reason of its leased
status or otherwise; or such other manner as shall have been approved by the
Owner Participant and the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Holder); (iii)
maintain or cause to be maintained all records, logs and other materials
required to be maintained in respect of the Aircraft by the FAA and the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered (which records, logs and other materials, as
between Lessor and Lessee and all parties claiming through Lessee, shall be the
property of Lessor but shall be maintained by Lessee during the Term of this
Lease and shall become the property of Lessee upon Lessee's purchase of the
Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event
of Loss and Lessee's compliance with Section 10); (iv) promptly furnish or
cause to be furnished to Lessor or the Owner Participant such information as
may be required to enable Lessor or the Owner Participant to file any reports
required to be filed by Lessor or the Owner Participant with any governmental
authority because of Lessor's ownership of the Aircraft; and (v) advise Lessor
no later than March 1 of each year through the year after the year in which the
Term shall end as to the routing of the Aircraft during the preceding calendar
year.
(2) Operation. Lessee will not (or permit any
Sublessee to) maintain, use, service, repair, overhaul or operate the
Aircraft in violation of any law or any rule, regulation, treaty, order
or certificate of any government or governmental authority (domestic or
foreign) having jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued by
any such authority, except that,
27
<PAGE> 33
[Lease Agreement (1994 737 B)]
after Lessee shall have provided Lessor with a certificate of its
President, any Vice President, the Treasurer or any Assistant Treasurer
stating all relevant facts pertaining thereto, Lessee or any Sublessee
may contest in good faith the validity or application of any such law,
rule, regulation, order, certificate, license, registration or violation
in any reasonable manner which does not jeopardize the right, title and
interest of the Lessor, the Owner Participant or the Indenture Trustee
(but in regard to the Indenture Trustee, only so long as the Original
Loan Participant is a Holder) in and to the Airframe and/or the Engines,
result in a claim, loss or expense for which Lessor, the Owner
Participant or the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Holder) is
not indemnified and for which Lessee is not then willing to indemnify
Lessor, Owner Participant or the Indenture Trustee (but in regard to the
Indenture Trustee, only so long as the Original Loan Participant is a
Holder) in a manner reasonably satisfactory to such person or otherwise
materially adversely affect Lessor, the Indenture Trustee (but in regard
to the Indenture Trustee, only so long as the Original Loan Participant
is a Holder) or the Owner Participant, but only so long as such
proceedings do not involve any material risk of criminal liability or
any unindemnified material risk of civil liability to Lessor, the Owner
Participant or the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Holder) for
which Lessor, the Owner Participant or the Indenture Trustee (but in
regard to the Indenture Trustee only so long as the Original Loan
Participant is a Holder) is not indemnified and for which Lessee is not
then willing to indemnify Lessor, the Owner Participant or the Indenture
Trustee (but in regard to the Indenture Trustee, only so long as the
Original Loan Participant is a Holder) in a manner reasonably
satisfactory to such person. If the indemnities or insurance specified
in Section 11(f), or some combination thereof, have not been obtained,
Lessee will not operate the Aircraft, or permit any Sublessee to operate
the Aircraft, in or to any area excluded from coverage by any insurance
required to be maintained by the terms of Section 11, provided, however,
that the failure of Lessee to comply with the provisions of this
sentence shall not give rise to an Event of Default hereunder where such
failure is attributable to a hijacking, medical emergency, equipment
malfunction, weather conditions, navigational error or other isolated
extraordinary event beyond the control of Lessee and Lessee is taking
all reasonable steps to remedy such failure as soon as is reasonably
practicable.
(3) Reregistration. At any time after the close of the
calendar year in which occurs the seventh anniversary of the Delivery
Date, Lessor shall, at the request and sole expense of Lessee, cooperate
with Lessee and take all actions required to change the country of
registration of the Aircraft upon compliance by Lessee with all of the
terms of Section 8(e) of the Participation Agreement.
(4) Operating Certificates. So long as no Event of
Default has occurred and is continuing, Lessor hereby authorizes Lessee,
at Lessee's expense to act as its agent for the purpose of obtaining any
required replacement operating certificates
28
<PAGE> 34
[Lease Agreement (1994 737 B)]
from the FAA. This authority includes, but is not limited to, obtaining
Registration Certificates, Airworthiness Certificates, Certificates of
Sanitary Construction, Ferry Permits and Experimental Operating Permits.
In particular, this authority includes the ability to make use of
Exemption No. 5318 issued by the FAA. This authority will allow duly
authorized personnel of Lessee to sign any application forms required in
the process of obtaining such operating certificates, and this authority
will also allow such personnel, where necessary and appropriate, to sign
certificates as the attorney-in-fact for Lessor. Lessee hereby agrees
that it will notify Lessor of any action that it has taken in accordance
with this Section 7(a)(4) as agent for the Lessor. Nothing in this
Section 7(a)(4) shall permit Lessee to deregister the Aircraft or change
the government of registry of the Aircraft except as provided in Section
7(a)(3) above.
(b) Possession and Subleases. Lessee will not, without the
prior written consent of Lessor and the Indenture Trustee (but in regard to the
Indenture Trustee, only so long as the Original Loan Participant is a Holder),
sublease or otherwise in any manner deliver, transfer or relinquish possession
of the Airframe or any Engine or install or permit any Engine to be installed
on any airframe other than the Airframe; provided that, so long as no Section
14(a), (b), (f) or (g) Default or, in the case of paragraph (viii) of this
Section 7(b), no Section 14(d) (solely with respect to Lessee's obligations
under Section 7(a) or (b)(viii) hereof or Section 8 hereof) Default, or any
Event of Default shall have occurred and be continuing at the time of such
sublease, delivery, transfer or relinquishment of possession or installation,
and so long as the action to be taken shall not deprive the Indenture Trustee
of the perfected lien of the Trust Indenture on the Airframe or any Engine and
Lessee and any Sublessee shall continue to comply with the provisions of
Sections 6, 7(a) and 11 hereof, Lessee may, without the prior written consent
of Lessor:
(i) subject the Engines or engines then installed on
the Airframe to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline
industry and entered into by Lessee (or any Sublessee) in the ordinary
course of its business; provided that if Lessor's title to any Engine
shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be an Event of Loss with respect to such
Engine and Lessee shall (or shall cause Sublessee to) comply with
Section 10(b) hereof in respect thereof;
(ii) deliver possession of the Airframe or any Engine to
the manufacturer thereof or to any other Person for testing, service,
repair, maintenance or overhaul work on the Airframe or Engine or any
Part of any thereof or for alterations or modifications in or additions
to such Airframe or Engine to the extent required or permitted by the
terms of Section 8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee
(or any Sublessee) which airframe is free and clear of all Liens,
except: (A) Permitted Liens and those
29
<PAGE> 35
[Lease Agreement (1994 737 B)]
which apply only to the engines (other than Engines), appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment
(other than Parts) installed on such airframe (but not to the airframe
as an entirety), (B) the rights of third parties under interchange
agreements which would be permitted under clause (i) above, provided
that Lessor's title to such Engine shall not be divested as a result
thereof and (C) mortgage Liens or other security interests, provided,
that (as regards this clause (C)), such mortgage Liens or other security
interests effectively provide that such Engine shall not become subject
to the lien of such mortgage or security interest, notwithstanding the
installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee
(or any Sublessee) or purchased by Lessee (or any Sublessee) subject to
a conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such
lease, conditional sale or other security agreement effectively provides
that such Engine shall not become subject to the lien of such lease,
conditional sale or other security agreement, notwithstanding the
installation thereof on such airframe;
(v) install an Engine on an airframe owned by Lessee
(or any Sublessee), leased to Lessee (or any Sublessee) or purchased by
Lessee (or any Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither subparagraph (iii)
nor subparagraph (iv) of this paragraph (b) is applicable, provided that
such installation shall be deemed an Event of Loss with respect to such
Engine and Lessee shall (or shall cause any Sublessee to) comply with
Section 10(b) hereof in respect thereof, Lessor not intending hereby to
waive any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 10(b);
(vi) transfer (or permit any Sublessee to transfer)
possession of the Airframe or any Engine to the United States of America
or any instrumentality or agency thereof pursuant to the Civil Reserve
Air Fleet Program for a period, including all permissible renewal
periods (so long as such renewal options have been irrevocably exercised
by Lessee), that does not extend beyond the end of the Term so long as
Lessee (or any Sublessee) shall promptly notify Lessor (x) upon
transferring possession of the Airframe or any Engine to the United
States of America or any agency or instrumentality thereof pursuant to
the Civil Reserve Air Fleet Program and (y) of the name and the address
of the Contracting Office Representative for the Military Airlift
Command of the United States Air Force to whom notice must be given
pursuant to Section 15 hereof;
30
<PAGE> 36
[Lease Agreement (1994 737 B)]
(vii) transfer possession of the Airframe or any Engine
to the United States of America or any instrumentality or agency thereof
pursuant to a contract, a copy of which shall be provided to Lessor
provided that the term of such contract, including all permissible
renewal periods (so long as such renewal options have been irrevocably
exercised by Lessee), shall not continue beyond the end of the Term; or
(viii) so long as the Sublessee is not subject to a
proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date the Sublease is entered into, Lessee
may, at any time in its sole discretion, enter into a sublease with (1)
a U.S. Air Carrier, (2) after the close of the calendar year in which
there occurs the seventh anniversary of the Delivery Date, any Permitted
Sublessee, or (3) after the close of the calendar year in which there
occurs the seventh anniversary of the Delivery Date, any other Person
approved in writing by the Owner Participant and the Indenture Trustee
(but in regard to the Indenture Trustee, only so long as the Original
Loan Participant is a Holder), which approval shall not be unreasonably
withheld if in regard to this subclause (3) Lessor and the Indenture
Trustee receive an opinion of counsel reasonably acceptable to Lessor
and the Indenture Trustee that the terms of the sublease and other
Operative Documents will be valid in the country where Sublessee is
domiciled and that such country would give effect to the priority and
validity of the Lien of the Trust Indenture; that no Participant is
required to register to do business in the Sublessee's country of
domicile; that there is no tort liability for owners or financiers not
in possession that is more extensive than under United States law or any
state law (it being understood that if such opinion cannot be given in a
form satisfactory to the Owner Participant or the Indenture Trustee (but
in regard to the Indenture Trustee, only so long as the Original Loan
Participant is a Holder) such opinion will be waived if insurance
reasonably satisfactory to the Owner Participant, the Indenture Trustee
(but in regard to the Indenture Trustee, only so long as the Original
Loan Participant is a Holder) and the Lessor, in its individual
capacity, is provided at Lessee's expense to cover such risk); that fair
compensation in a currency freely convertible into Dollars is mandated
if there is a requisition of use or title of the Aircraft by the country
in which the Sublessee is domiciled (it being understood that if such
opinion cannot be given in a form reasonably satisfactory to the Owner
Participant such opinion will be waived if insurance reasonably
satisfactory to the Owner Participant and the Indenture Trustee (but in
regard to the Indenture Trustee, only so long as the Original Loan
Participant is a Holder), is provided at Lessee's expense to cover such
risk); that there exist no possessory rights in favor of the Sublessee
which upon Lessee's bankruptcy or other Default hereunder (assuming the
Sublessee is not bankrupt) would prevent the return of the Aircraft in
accordance with the terms hereof or inhibit the Lessor's rights therein;
provided, however, (A) that no sublease, including all permissible
renewal periods, shall extend beyond the Basic Term or any Renewal Term
then in effect, unless Lessee shall have irrevocably committed to
purchase the Aircraft or renew this Lease in accordance with the terms
hereof at the end of the Basic Term or Renewal Term, as the case may be,
to a date beyond the latest
31
<PAGE> 37
[Lease Agreement (1994 737 B)]
permissible expiration date of such sublease, and (B) that, on the date
of such sublease, the United States and the country in which sublessee
is domiciled and principally located maintain diplomatic relations.
The rights of any Sublessee or other transferee (other than a
transferee where the transfer is of an Engine which is deemed an Event of Loss)
shall be subject and subordinate to, all the terms of this Lease (and any
Sublease shall expressly state that it is so subject and subordinate),
including, without limitation, the covenants contained in Section 7(a) hereof,
the inspection rights contained in Section 12 hereof and Lessor's (and, so long
as the Trust Indenture is in effect, the Indenture Trustee's (as Lessor's
assignee)) rights to repossess the Aircraft and to void any Sublease upon such
repossession, and Lessee shall remain primarily liable for the performance of
all of the terms of this Lease, and the terms of any such Sublease shall not
permit any Sublessee to take any action not permitted to be taken by Lessee in
the Lease with respect to the Aircraft. No pooling agreement, Sublease or
other relinquishment of possession of the Airframe or any Engine shall in any
way discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights or remedies hereunder. Lessor agrees,
for the benefit of Lessee (and any Sublessee) and for the benefit of any
mortgagee or other holder of a security interest in any engine owned by Lessee
(or any Sublessee), any lessor of any engine other than an Engine leased to
Lessee (or any Sublessee) and any conditional vendor of any engine other than
an Engine purchased by Lessee (or any Sublessee) subject to a conditional sale
agreement or any other security agreement, that no interest shall be created
under the Lease in any engine so owned, leased or purchased and that neither
Lessor nor its successors or assigns will acquire or claim, as against Lessee
(or any Sublessee) or any such mortgagee, lessor or conditional vendor or other
holder of a security interest or any successor or assignee of any thereof, any
right, title or interest in such engine as the result of such engine being
installed on the Airframe; provided, however, that such agreement of Lessor
shall not be for the benefit of any lessor or secured party of an airframe
leased to Lessee (or any Sublessee) or purchased by Lessee (or any Sublessee)
subject to a conditional sale or other security agreement or for the benefit of
any mortgagee or any other holder of a security interest in an airframe owned
by Lessee (or any Sublessee), on which airframe Lessee (or any Sublessee) then
proposes to install an Engine, unless such lessor, conditional vendor, other
secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against Lessor, any right title or interest in an Engine as a result of such
Engine being installed on such airframe. Lessee shall provide the Owner
Participant and the Indenture Trustee written notice (which notice shall be
given no later than forty-five (45) days prior to entering into such Sublease)
of any Sublease and a copy of any Sublease which in either case has a term of
more than one (1) year. If an Event of Default shall have occurred and be
continuing, Lessee shall direct all payments under any such Sublease to be paid
to Lessor during the continuance of such Event of Default.
32
<PAGE> 38
[Lease Agreement (1994 737 B)]
Any Wet Lease or similar arrangement under which Lessee maintains
operational control of the Aircraft shall not constitute a delivery, transfer
or relinquishment of possession for purposes of this Section. Lessor
acknowledges that any consolidation or merger of Lessee or conveyance, transfer
or lease of all or substantially all of Lessee's assets permitted by the
Operative Documents shall not be prohibited by this Section.
No Sublease permitted pursuant to this Section shall permit any
further sub-subleasing of the Aircraft.
(c) Insignia. On or prior to the Delivery Date, or as soon
thereafter as practicable, Lessee agrees to affix and maintain (or cause to be
affixed and maintained) in the cockpit of the Airframe adjacent to the
registration certificate therein and on each Engine a nameplate bearing the
inscription:
Leased From
First Security Bank of Utah, National Association, not in its
individual capacity but solely as Owner Trustee, Owner and Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien
of the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company, as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents).
Except as above provided, Lessee will not allow the name of any
person, association or corporation to be placed on the Airframe or on any
Engine as a designation that might be interpreted as a claim of ownership;
provided, that nothing herein contained shall prohibit Lessee (or any
Sublessee) from placing its customary colors and insignia on the Airframe or
any Engine.
SECTION 8. Replacement and Pooling of Parts;
Alterations, Modifications and Additions.
(a) Replacement of Parts. Lessee, at its own cost and
expense, will promptly replace or cause to be replaced all Parts which may from
time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for
33
<PAGE> 39
[Lease Agreement (1994 737 B)]
use for any reason whatsoever, except as otherwise provided in Section 8(c).
All replacement Parts shall be owned by Lessee free and clear of all Liens
(except Permitted Liens, pooling arrangements permitted by Section 8(b) hereof
and replacement Parts temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility
substantially equal to, the Parts replaced assuming such replaced Parts were in
the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by Parts which meet the requirements for replacement Parts
specified above. Immediately upon any replacement Part becoming incorporated
or installed in or attached to the Airframe or any Engine, without further act
(subject only to Permitted Liens and any pooling arrangement permitted by
Section 8(b) hereof and except replacement Parts temporarily installed on an
emergency basis), (i) title shall vest in and such replacement Part shall
become the property of Lessor and shall become subject to this Lease and be
deemed a Part for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to the Airframe or such
Engine and shall become subject to the Lien of the Trust Indenture and (ii) the
replaced Part shall no longer be the property of Lessor and shall no longer be
deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or
any Engine as provided in Section 8(a) hereof may be subjected by Lessee (or
any Sublessee) to a pooling arrangement of the type which is permitted by
Section 7(b)(i) hereof; provided, that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 8(a) as promptly as practicable after the removal of
such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Airframe or an Engine in accordance with such
Sections may be owned by any third party subject to such a pooling arrangement,
provided, that Lessee (or any Sublessee), at its expense, as promptly
thereafter as practicable, and in any event within 90 days, either (i) causes
such replacement Part to become the property of Lessor free and clear of all
Liens other than Permitted Liens or (ii) replaces such replacement Part with a
further replacement Part owned by Lessee (or any Sublessee) which shall become
the property of Lessor, free and clear of all Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Lessee, at its
own expense, will make (or cause to be made) such alterations and modifications
in and additions to the Airframe and Engines as may be required from time to
time to be made during the Term so as to comply with any law, rule, regulation
or order of any regulatory agency or body of any jurisdiction in which the
Aircraft may then be registered; provided, however, that, after Lessee shall
have provided Lessor with a certificate of its President, any Vice President,
the Treasurer or any Assistant Treasurer stating all relevant facts pertaining
thereto, Lessee or any Sublessee may, in good faith, and by appropriate
proceedings contest the validity or application of any such law, rule,
regulation or order in any reasonable manner which does not jeopardize the
Owner Participant's right, title or interest in and to the Airframe and/or the
Engines, result in a claim,
34
<PAGE> 40
[Lease Agreement (1994 737 B)]
loss or expense for which the Lessee is not required to indemnify the Owner
Participant pursuant to the Operative Documents and for which the Lessee is not
then willing to indemnify the Owner Participant in a manner reasonably
satisfactory to the Owner Participant or otherwise materially adversely affect
Lessor, the Owner Participant or the Indenture Trustee, but only so long as
such proceedings do not involve any material risk of criminal liability or any
unindemnified material risk of civil liability to Lessor or the Owner
Participant for which Lessor or the Owner Participant is not indemnified and
for which Lessee is not then willing to indemnify Lessor or the Owner
Participant in a manner reasonably satisfactory to such person. In addition,
Lessee (or any Sublessee), at its own expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine as
Lessee (or any Sublessee) may deem desirable in the proper conduct of its
business, including removal of Parts which Lessee (or any Sublessee) deems to
be obsolete or no longer suitable or appropriate for use on the Airframe or
such Engine (such parts, "Obsolete Parts"); provided that no such alteration,
modification, removal or addition impairs the condition or airworthiness of the
Airframe or such Engine, or materially diminishes the fair market value, the
utility or, in regard to the Airframe, remaining economic useful life of the
Airframe or such Engine below the fair market value, utility or, in regard to
the Airframe, remaining economic useful life thereof immediately prior to such
alteration, modification, removal or addition assuming the Airframe or such
Engine was then in the condition required to be maintained by the terms of this
Lease. In addition, the fair market value (but not the utility) of the
Airframe or any Engine may be reduced by the value of Obsolete Parts which
shall have been removed so long as the aggregate value of all Obsolete Parts
which shall have been removed and not replaced shall not exceed $400,000. All
Parts incorporated or installed in or attached or added to the Airframe or an
Engine as the result of such alteration, modification or addition (except those
parts which Lessee has leased from others and which may be removed by Lessee
pursuant to the next sentence) (the "Additional Parts") shall, without further
act, become the property of, and title to such Parts shall vest in, Lessor.
Notwithstanding the foregoing sentence, Lessee (or any Sublessee) may, at its
own expense, at any time during the Term, so long as no Default under Section
14(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) or an Event of Default shall
have occurred and be continuing, remove or suffer to be removed any Additional
Part, provided that such Additional Part (i) is in addition to, and not in
replacement of or substitution for, any Part originally incorporated or
installed in or attached to such Airframe or any Engine at the time of delivery
thereof hereunder or any Part in replacement of or substitution for any such
Part, (ii) is not required to be incorporated or installed in or attached or
added to the Airframe or any Engine pursuant to the terms of Section 7 hereof
or the first sentence of this paragraph (c) and (iii) can be removed from the
Airframe or such Engine without impairing the condition or airworthiness or
diminishing the fair market value, utility or, in regard to the Airframe,
remaining economic useful life of the Airframe or such Engine which the
Airframe or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed the property of Lessor or
part of the Airframe or Engine from which it was removed. Any
35
<PAGE> 41
[Lease Agreement (1994 737 B)]
Additional Part not removed as above provided prior to the return of the
Airframe or Engine to Lessor hereunder shall remain the property of Lessor.
SECTION 9. Early Termination.
(a) (Intentionally Omitted).
(b) Termination for Obsolescence/Surplus. So long as no Event
of Default under Section 14(d) hereunder (solely with respect to Lessee's
obligations under Section 7(a)(1) hereof and Section 8 hereof) shall have
occurred and be continuing, Lessee shall have the right to terminate this Lease
on any Lease Period Date occurring on or after the close of the calendar year
in which occurs the seventh anniversary of the Delivery Date if Lessee shall
have made a good faith determination that the Aircraft is surplus to Lessee's
requirements or economically obsolete to Lessee. Lessee shall give to Lessor
and Indenture Trustee at least one hundred and eighty (180) days revocable
(except as provided below) advance written notice of Lessee's intention to so
terminate this Lease (any such notice, a "Termination Notice") (i) specifying
the Lease Period Date on which Lessee intends to terminate this Lease in
accordance with this Section 9(b) (such specified date, a "Termination Date")
and (ii) attaching a certificate of the Assistant Treasurer or any more senior
officer of Lessee which states that the Aircraft is surplus to Lessee's
requirements or economically obsolete to Lessee. The Termination Notice shall
become irrevocable twenty (20) days prior to the Termination Date. Lessee
shall exercise this option by arranging for the sale of the Aircraft pursuant
to Section 9(c), provided, however, that Lessee may not withdraw its notice if
the Lessor has elected to retain the Aircraft pursuant to Section 9(c) or if
the highest bid obtained by Lessee pursuant to Section 9(c) is greater than the
then applicable Termination Value.
(c) Sale of the Aircraft. In the event that Lessee shall have
proposed to terminate this Lease under Section 9(b), then during the period
commencing with the date of the Termination Notice until the proposed
Termination Date Lessee, as non-exclusive agent for Lessor and at no expense to
Lessor, shall use reasonable efforts to obtain bids in Dollars for the purchase
of the Aircraft and, in the event it receives any bid, Lessee shall, within
five Business Days after receipt thereof and at least ten Business Days prior
to the proposed Termination Date, advise Lessor in writing of the amount and
terms of such bid, and the name and address of the party or parties (who shall
not be Lessee or any Affiliate of Lessee or any person with whom Lessee or any
such Affiliate has an arrangement or understanding regarding the future use of
the Aircraft by Lessee or any such Affiliate but who may be the Owner
Participant, any Affiliate thereof or any Person contacted by the Owner
Participant) submitting such bid. After Lessee shall have advised Lessor of
all bids received, the Owner Participant, any Affiliate thereof or any Person
contacted by the Owner Participant may submit a further bid or bids to Lessee
not later than five Business Days prior to the Termination Date proposed by
Lessee (unless Lessee shall have revoked the Termination Notice specifying such
proposed Termination Date). Subject to the next succeeding sentence, on or
before the Termination Date, subject to the release of all
36
<PAGE> 42
[Lease Agreement (1994 737 B)]
mortgage and security interests with respect to the Aircraft under the Trust
Indenture: (1) Lessee shall deliver the Aircraft, or cause the Aircraft to be
delivered to the highest bidder as determined below, in the same manner and in
the same condition and otherwise in accordance with all the terms of this Lease
as if delivery were made to Lessor pursuant to Section 5 hereof, and Lessee
shall duly transfer to Lessor title to any engine installed on the Airframe and
not owned by Lessor, all in accordance with the terms of Section 5 hereof, (2)
Lessor shall comply with the terms of the Trust Indenture and shall, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), subject to prior or concurrent payment by Lessee
of all amounts due under clause (3) of this sentence, sell the Aircraft for
cash in Dollars to the entity, if any, which shall have submitted the highest
bona fide bid (evaluated on a net cash basis) therefor, the total selling price
realized at such sale to be retained by Lessor, and (3) Lessee shall
simultaneously pay or cause to be paid to Lessor in the manner provided in
Section 3(e) hereof, (A) if the proceeds of the sale of the Aircraft so sold,
net of reasonable out-of-pocket costs and expenses incurred by Lessor and the
Owner Participant in connection therewith, including, without limitation,
applicable sales or transfer taxes and legal fees, are less than the
Termination Value for the Aircraft computed as of the Termination Date, the
difference in Dollars, (B) all unpaid Basic Rent due on or prior to the
Termination Date (other than Basic Rent payable in advance on the Termination
Date, if any) and all unpaid Supplemental Rent with respect to the Aircraft due
on or prior to such Termination Date, and (C) the Break Amount, if any, due on
the Certificates and upon receiving all such payments referred to in clauses
(2) and (3) above Lessor simultaneously will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and interest in and
to any Engines constituting part of the Aircraft which were not sold with the
Aircraft. Notwithstanding the preceding sentence, Lessor may, if Lessee has
not already revoked the Termination Notice, elect to retain title to the
Aircraft. If Lessor so elects, Lessor shall give to Lessee written notice of
such election at least ten Business Days prior to the Termination Date
accompanied by an irrevocable undertaking by the Owner Participant to make
available to Lessor for payment to the Indenture Trustee on the Termination
Date the amount required to pay in full the unpaid Original Amount of the
Certificates outstanding on the Termination Date together with all other
amounts due on such Termination Date thereunder less amounts to be paid by
Lessee as a result of the payment thereof as set forth in the second following
sentence. Upon receipt of notice of such an election by Lessor and the
accompanying undertaking by the Owner Participant, Lessee shall cease its
efforts to obtain bids as provided above and shall reject all bids theretofore
or thereafter received. On the Termination Date, Lessor shall (subject to the
payment by Lessee of all Rent due on or prior to such date as set forth below)
pay in full the unpaid Original Amount of the Certificates outstanding on the
Termination Date together with all other amounts due thereunder less any
amounts to be paid by Lessee as a result of the payment thereof and, provided
that the Certificates are paid as aforesaid, Lessee shall deliver the Airframe
and Engines or engines to Lessor in accordance with Section 5 and shall pay all
Basic Rent due on or prior to the Termination Date (other than Basic Rent
payable in advance on the
37
<PAGE> 43
[Lease Agreement (1994 737 B)]
Termination Date, if any) and all unpaid Supplemental Rent due on or prior to
such Termination Date, and Break Amount, if any. If no sale shall have
occurred on the Termination Date or Lessor has not, after making its election
referred to above, made the payment contemplated by the preceding sentence and
thereby caused this Lease to terminate, this Lease shall continue in full force
and effect as to the Aircraft, Lessee shall be entitled to keep any deposits or
other advances received from the proposed purchaser(s) of the Aircraft (without
in any way limiting any other rights or remedies against such proposed
purchaser(s) available to Lessor or Lessee), Lessee shall pay the reasonable
out-of-pocket costs and expenses, including legal fees, incurred by the Owner
Participant, Indenture Trustee and Lessor (unless such failure to terminate the
Lease is a consequence of the failure of Lessor or the Owner Participant
without due cause to make, or cause to be made, the payment referred to in the
immediately preceding sentence), if any, in connection with preparation for
such sale and Lessee may give one or more additional Termination Notices,
provided no more than three such notices may be given during the Term and only
one such notice may be given during any 365 day period (not counting, in either
case, any Termination Notice for a Termination Date on which this Lease does
not terminate as a consequence of the failure of Lessor or the Owner
Participant without due cause to make or cause to be made the payment referred
to in the immediately preceding sentence). In the event of any such sale or
such retention of the Aircraft by Lessor and upon compliance by Lessee with the
provisions of this paragraph, the obligation of Lessee to pay Basic Rent or any
other amounts hereunder shall cease to accrue. Upon payment of all amounts
that may then be due hereunder, this Lease shall terminate. Lessor may, but
shall be under no duty to, solicit bids, inquire into the efforts of Lessee to
obtain bids or otherwise take any action in connection with any such sale other
than to transfer (in accordance with the foregoing provisions) to the purchaser
named in the highest bid certified by Lessee to Lessor all of Lessor's right,
title and interest in the Aircraft, against receipt of the payments provided
herein.
(d) Termination as to Engines. Lessee shall have the right at
its option at any time during the Term, on at least 30 days' prior written
notice, to terminate this Lease with respect to any Engine. In such event, and
prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10(b) to the same extent as if
an Event of Loss had occurred with respect to such Engine, and Lessor shall
transfer title to the replaced Engine as provided in Section 5(b). No
termination of this Lease with respect to any Engine as contemplated by this
Section 9(d) shall result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of
Loss with Respect to the Aircraft. Upon the occurrence of an Event of Loss
with respect to the Airframe or the Airframe and the Engines and/or engines
then installed thereon, Lessee shall (1) forthwith (and in any event, within
fifteen days after such occurrence) give Lessor written notice of such Event of
Loss and (2) within 60 days after such occurrence, give Lessor written notice
of its election to perform one of the following options (it being understood
that the failure to give such notice shall be deemed to be an election of the
option set forth in clause (i) below):
38
<PAGE> 44
[Lease Agreement (1994 737 B)]
(i) Not later than the earlier of (x) the Business Day
next succeeding the 100th day following the occurrence of such Event of
Loss or (y) the third Business Day following receipt by the loss payee
of the insurance proceeds in respect to such Event of Loss (but not
earlier than the first Business Day next succeeding the 65th day
following the occurrence of such Event of Loss) (the applicable date
being the "Loss Payment Date"), Lessee shall, to the extent not paid to
Lessor or Indenture Trustee, as the case may be, as insurance proceeds,
pay or cause to be paid to Lessor as specified in Section 3(e) hereof,
(A) the Stipulated Loss Value of the Aircraft computed as of the
Stipulated Loss Value Date occurring on or immediately following the
date of such Event of Loss, plus (B) if such Stipulated Loss Value Date
is a Lease Period Date, Basic Rent due on such Lease Period Date, plus
(C) unpaid Supplemental Rent with respect to the Aircraft due on or
prior to the date of payment, plus (D) Break Amount, if any, due on the
Certificates, plus (E) interest on such Stipulated Loss Value at the
Debt Rate from and including such Stipulated Loss Value Date to, but not
including, the date of any advance payment in respect of Stipulated Loss
Value as provided below, and thereafter on the unpaid balance of such
Stipulated Loss Value from and including the date of such advance
payment to, but excluding, the date such Stipulated Loss Value is paid
in full; provided, however, that if the Commencement Date or a Lease
Period Date shall occur after the Stipulated Loss Value Date with
respect to which Stipulated Loss Value is determined but prior to the
date of such payment of the sum of the amounts specified in clauses (A),
(B), (C), (D) and (E) above, Lessee shall pay on the Commencement Date
or such Lease Period Date an amount equal to the Basic Rent that would
have been due on the Commencement Date or such Lease Period Date if such
Event of Loss had not occurred, which amount shall be credited as an
advance against the amounts payable pursuant to clauses (A), (B), (C),
(D) and (E) above, or
(ii) Not later than the earlier of (x) the Business Day
next succeeding the 100th day following the occurrence of such Event of
Loss or (y) the third Business Day following receipt by the loss payee
of the insurance proceeds with respect to such Event of Loss (but not
earlier than the first Business Day next succeeding the 65th day
following the occurrence of such Event of Loss), Lessee shall, provided
that no Section 14(a), (b), (f) or (g) Default or any Event of Default
shall have occurred and be continuing, substitute an aircraft or an
airframe or an airframe and one or more engines, as the case may be in
accordance with the terms hereof, provided that if Lessee shall have
elected to make a substitution under this clause (ii) and shall fail for
any reason to make such substitution in accordance with the terms hereof
and of the Trust Indenture, Lessee shall make the payments required by
clause (i) above as and when due thereunder.
At such time as Lessor shall have received the sum of the amounts
specified in clauses (A), (B), (C), (D) and (E) of subparagraph (i) above,
together with all other amounts that then may be due hereunder, under the
Participation Agreement and under the Tax Indemnity Agreement, (1) the
obligation of Lessee to pay the installments of Basic Rent, Interim Rent,
39
<PAGE> 45
[Lease Agreement (1994 737 B)]
Supplemental Rent, Stipulated Loss Value, Termination Value, EBO Percentage or
any other amount shall cease to accrue, (2) this Lease shall terminate, (3)
Lessor will comply with the terms of the Trust Indenture and transfer to or at
the direction of Lessee, without recourse or warranty (except as to the absence
of Lessor Liens (including for this purpose Liens that would be Lessor Liens
but for the proviso to the definition of Lessor Liens)), all Lessor's right,
title and interest in and to the Airframe and the Engines "as-is, where-is" and
furnish to or at the direction of Lessee, at Lessee's expense, a bill of sale
in form and substance reasonably satisfactory to Lessee (or any Sublessee),
evidencing such transfer, and (4) Lessee will be subrogated to all claims of
Lessor if any against third parties (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at its own cost
and expense in accordance with Section 11(e) hereof), but only to the extent
the same relate to physical damage to or loss of the Airframe and any Engines
which were subject to such Event of Loss.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall, not later than the Business Day next succeeding the 100th day following
the occurrence of such Event of Loss (A) convey or cause to be conveyed to
Lessor an aircraft (or an airframe or an airframe and an engine which, together
with the Engines or Engine constituting a part of the Aircraft but not
installed thereon at the time of such Event of Loss, constitute the Aircraft)
free and clear of all Liens (other than Permitted Liens) and having at least
the fair market value, utility and, with respect to the airframe, remaining
economic useful life and being in as good an operating condition as, the
Aircraft subject to such Event of Loss assuming that the Aircraft had been
maintained in accordance with this Lease; provided that any aircraft, airframe
or engine so substituted hereunder shall be of the same or improved make and
model as those initially leased hereunder and (B) prior to or at the time of
any such substitution, Lessee (or any Sublessee), at its own expense, will (1)
furnish Lessor with a full warranty bill of sale and a FAA bill of sale, in
form and substance reasonably satisfactory to Lessor, evidencing such transfer
of title, (2) cause a Lease Supplement and a Trust Supplement to be duly
executed by Lessee and filed for recording pursuant to the Transportation Code,
or the applicable laws, rules and regulations of any other jurisdiction in
which the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in
order to perfect the security interests therein created by or pursuant to the
Trust Indenture (and, with regard to precautionary filings, this Lease), (3)
furnish Lessor with such evidence of Lessor's title to such replacement
aircraft and of compliance with the insurance provisions of Section 11 with
respect to such substituted property as Lessor or the Indenture Trustee may
reasonably request, (4) provide an opinion of outside tax counsel, reasonably
satisfactory to Owner Participant, to the effect that such substitution will
not result in any adverse tax consequences (including under Section 861 of the
Code) to Lessor or the Owner Participant, (5) provide an opinion of counsel,
which counsel and opinion shall be reasonably acceptable to Lessor, the Owner
Participant and the Indenture Trustee, to the effect that Lessor and the
Indenture Trustee (as assignee of all right, title and interest of Lessor under
the Lease) shall be entitled to the benefits and protections of Section 1110 of
the Bankruptcy
40
<PAGE> 46
[Lease Agreement (1994 737 B)]
Code with respect to the aircraft substituted hereunder and (6) provide an
opinion of counsel, which counsel and opinion shall be reasonably acceptable to
the Lessor and the Indenture Trustee, to the effect that title to such
replacement aircraft has been duly conveyed to Lessor free and clear of all
Liens except Permitted Liens and that such replacement aircraft is duly
subjected to the Lien of the Trust Indenture, and Lessor simultaneously will
comply with the terms of the Trust Indenture and transfer to or at the
direction of Lessee, without recourse or warranty (except as to the absence of
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)), all of Lessor's right,
title and interest, if any, in and to the Aircraft or the Airframe and one or
more Engines, as the case may be, "as-is, where-is" with respect to which such
Event of Loss occurred and furnish to or at the direction of Lessee, at
Lessee's expense, a bill of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer. Lessee will be subrogated to all claims
of Lessor, if any, against third parties (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at its own cost
and expense in accordance with Section 11(e) hereof) but only to the extent the
same relate to physical damage to or loss of the Airframe and any Engine which
were subject to such Event of Loss. For all purposes hereof, the property so
substituted shall after such transfer be deemed part of the property leased
hereunder and shall be deemed an "Aircraft," "Airframe" and "Engine," as the
case may be, as defined herein. No Event of Loss with respect to the Airframe
or the Airframe and the Engines or engines then installed thereon for which
substitution has been elected pursuant to Section 10(a)(ii) hereof shall result
in any reduction in Basic Rent or Interim Rent.
(b) Event of Loss with Respect to an Engine. Upon the
occurrence of an Event of Loss with respect to an Engine under circumstances in
which there has not occurred an Event of Loss with respect to the Airframe,
Lessee shall forthwith (and in any event, within fifteen days after such
occurrence) give Lessor written notice thereof and shall, within sixty (60)
days after the occurrence of such Event of Loss, convey or cause to be conveyed
to Lessor, as replacement for the Engine with respect to which such Event of
Loss occurred, title to an Acceptable Alternate Engine free and clear of all
Liens (other than Permitted Liens, which engine may upon its transfer to Lessor
become subject to any and all Permitted Liens) and having a value and utility
at least equal to, and being in as good an operating condition as and having
been maintained in the same manner as, the Engine subject to such Event of Loss
(assuming that such Engine had been maintained in accordance with this Lease).
Prior to or at the time of any such conveyance, Lessee, at its own expense,
will (i) furnish Lessor with a warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to such replacement
engine, (ii) cause a Lease Supplement and Trust Supplement to be duly executed
by Lessee and to be filed for recording pursuant to the Transportation Code, or
the applicable laws, rules and regulations of any other jurisdiction in which
the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in
order to perfect the security interests therein created by or pursuant to the
Trust Indenture (and, with regard to precautionary filings, this Lease), (iii)
furnish Lessor with such evidence of
41
<PAGE> 47
[Lease Agreement (1994 737 B)]
Lessor's title to such Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 11 hereof with respect to such replacement
engine as Lessor may reasonably request, and (iv) provide an opinion of
Lessee's counsel to the Lessor and the Indenture Trustee to the effect that
title to such Acceptable Alternate Engine has been duly conveyed to Lessor free
and clear of all Liens except Permitted Liens and that such Acceptable
Alternate Engine is duly subjected to the Lien of the Trust Indenture, and
Lessor will comply with the terms of the Trust Indenture and transfer to or at
the direction of Lessee without recourse or warranty (except as to absence of
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)) all of Lessor's right,
title and interest, if any, in and to (A) the Engine with respect to which such
Event of Loss occurred and furnish to or at the direction of Lessee, and at
Lessee's expense, a bill of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer and (B) all claims, if any, against third
parties (other than Lessor's or the Owner Participant's insurers under policies
independently maintained at its own cost and expense in accordance with Section
11(e) hereof), for damage to or loss of the Engine subject to such Event of
Loss, and such Engine shall thereupon cease to be an Engine leased hereunder.
For all purposes hereof, each such replacement engine shall, after such
conveyance, be deemed part of the property leased hereunder, and shall be
deemed an "Engine." No Event of Loss with respect to an Engine under the
circumstances contemplated by the terms of this paragraph (b) shall result in
any reduction in Basic Rent or Interim Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with
respect to an Event of Loss, other than a requisition for use by the United
States Government or other government of registry of the Aircraft or any
instrumentality or agency of any thereof not constituting an Event of Loss,
will be applied as follows:
(i) if payments are received with respect to the
Airframe (or the Airframe and any Engine or engines then installed
thereon), (A) unless the same are replaced pursuant to the last
paragraph of Section 10(a), after reimbursement of Lessor (as provided
in Section 7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses, so much of such payments remaining as
shall not exceed the Stipulated Loss Value and the other amounts payable
under Section 10(a) hereof required to be paid by Lessee pursuant to
Section 10(a), shall be applied in reduction of Lessee's obligation to
pay Stipulated Loss Value and the other amounts payable under Section
10(a) hereof, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of
Stipulated Loss Value and such other amounts, and following the
foregoing application, the balance, if any, of such payments shall be
distributed between Lessee and Lessor as their respective interests may
appear; or (B) if such property is replaced pursuant to the last
paragraph of Section 10(a), such payments shall be paid over to or
retained by, Lessee; provided, that Lessee shall have
42
<PAGE> 48
[Lease Agreement (1994 737 B)]
fully performed or, concurrently therewith, will fully perform the terms
of the last paragraph of Section 10(a) with respect to the Event of Loss
for which such payments are made; and
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 10(b) hereof, so much
of such payments remaining after reimbursement of Lessor (as provided
for in Section 7.01 of the Trust Agreement) and the Owner Participant
for reasonable costs and expenses shall be paid over to, or retained by,
Lessee, provided that Lessee shall have fully performed, or concurrently
therewith will perform, the terms of Section 10(b) with respect to the
Event of Loss for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other
government of registry of the Aircraft or any instrumentality or agency of any
thereof, Lessee shall promptly notify Lessor of such requisition, and all of
Lessee's obligations under this Lease Agreement with respect to the Aircraft
shall continue to the same extent as if such requisition had not occurred. If
Lessee shall fail to return the Aircraft on or before the end of the Term, such
failure shall constitute an Event of Loss which shall be deemed to have
occurred on the last day of the Term, provided, however, that Lessor may notify
Lessee in writing on or before the twentieth day prior to the last day of the
Term that, in the event Lessee shall fail by reason of such requisition to
return the Airframe and such Engines or engines on or before the end of the
Term, such failure shall not be deemed an Event of Loss. Upon the giving of
such notice and such failure to return by the end of the Term, Lessee shall be
relieved of all of its obligations pursuant to the provisions of Section 5
hereof (but not under any other Section), except that if any engine not owned
by Lessor shall then be installed on the Airframe, Lessee will, at no cost to
Lessor, furnish, or cause to be furnished, to Lessor a full warranty (as to
title) bill of sale with respect to each such engine, in form and substance
reasonably satisfactory to Lessor (together with an opinion of counsel (which
may be Lessee's General Counsel) to the effect that such full warranty bill of
sale has been duly authorized and delivered and is enforceable in accordance
with its terms and that such engines are free and clear of Liens other than
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens), against receipt from
Lessor, at Lessee's expense, of a bill of sale evidencing the transfer, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), by Lessor to Lessee or its designee of all of
Lessor's right, title and interest in and to any Engine constituting part of
the Aircraft but not then installed on the Airframe. All payments received by
Lessor or Lessee from such government for the use of such Airframe and Engines
or engines during the Term shall be paid over to, or retained by, Lessee (or,
if directed by Lessee, any Sublessee); and all payments received by Lessor or
Lessee from such government for the use of such Airframe and Engines or engines
after the end of the Term
43
<PAGE> 49
[Lease Agreement (1994 737 B)]
shall be paid over to, or retained by, Lessor unless Lessee shall have
exercised its purchase option hereunder, or there is a deemed Event of Loss
hereunder, in which case such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft. In the event of the
requisition for use of an Engine by the United States Government or any other
government of registry of the Aircraft or any agency or instrumentality of any
thereof (other than in the circumstances contemplated by subsection (d)),
Lessee shall replace (or cause any Sublessee to replace) such Engine hereunder
and Lessor and Lessee (or Sublessee as the case may be) shall comply with the
terms of Section 10(b) hereof to the same extent as if an Event of Loss had
occurred with respect to such Engine. Upon compliance with Section 10(b)
hereof, any payments received by Lessor or Lessee from such government with
respect to such requisition shall be paid over to, or retained by Lessee.
(f) Application of Payments During Existence of Events of
Default. Any amount referred to in this Section 10 which is payable to or
retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or any Sublessee) if at the time of such payment or retention a Default
or an Event of Default shall have occurred and be continuing, but shall be held
by or paid over to Lessor as security for the obligations of Lessee (or such
Sublessee) under this Lease and applied against Lessee's obligations hereunder
as and when due. At such time as there shall not be continuing any such
Default or Event of Default, such amount shall be paid to Lessee to the extent
not previously applied in accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property
Damage Insurance. (1) Except as provided in clause (2) of this Section 11(a),
and subject to self-insurance to the extent permitted by Section 11(d) hereof,
Lessee will carry or cause to be carried with respect to the Aircraft at its or
any Sublessee's expense (i) comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury, and property damage
liability) insurance (exclusive of manufacturer's product liability insurance
and including, without limitation, aircraft war risk and hijacking insurance,
if and to the extent the same is maintained by Lessee (or any Sublessee) with
respect to other aircraft owned or leased, and operated, by Lessee (or any
Sublessee) on the same routes and (ii) cargo liability insurance, (A) in an
amount not less than the greater of (x) the amounts of comprehensive airline
liability insurance from time to time applicable to aircraft owned or leased,
and operated by Lessee of the same type as the Aircraft and (y) $300,000,000
per occurrence, (B) of the type and covering the same risks as from time to
time are applicable to aircraft owned or leased, and operated by Lessee of the
same type as the Aircraft, and (C) which is maintained in effect with insurers
of recognized reputation and responsibility; provided, however, that Lessee
need not maintain cargo liability insurance, or may maintain such insurance in
an amount less than $300,000,000 per occurrence, as long as the amount of cargo
liability insurance, if any, maintained with respect to the Aircraft is the
same as
44
<PAGE> 50
[Lease Agreement (1994 737 B)]
the cargo liability insurance, if any, maintained for other Boeing Model
737-322 aircraft owned or leased, and operated by Lessee.
(2) During any period that the Airframe or any Engine,
as the case may be, is on the ground and not in operation, Lessee may
carry or cause to be carried as to such non-operating property, in lieu
of the insurance required by clause (1) above, and subject to
self-insurance to the extent permitted by Section 11(d) hereof,
insurance by insurers of recognized reputation and responsibility
otherwise conforming with the provisions of clause (1) except that (A)
the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable
to property owned or leased by Lessee of the same type as such non-
operating property and which is on the ground and not in operation; and
(B) the scope of the risks covered and the type of insurance shall be
the same as from time to time shall be applicable to property owned or
leased by Lessee of the same type as such non-operating property and
which is on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1)
Except as provided in clause (2) of this Section 11(b), and subject to the
provisions of Section 11(d) hereof permitting self-insurance, Lessee shall
maintain or cause to be maintained in effect, at its or any Sublessee's
expense, with insurers of recognized reputation and responsibility, all-risk
aircraft hull insurance covering the Aircraft and fire, and extended coverage
and all-risk aircraft hull insurance covering Engines and Parts while
temporarily removed from the Aircraft and not replaced by similar components
(including, without limitation, aircraft war risk and governmental confiscation
and expropriation (other than by the government of registry of the Aircraft)
and hijacking insurance, if and to the extent the same is maintained by Lessee
(or any Sublessee) with respect to other aircraft owned or leased, and operated
by Lessee (or such Sublessee) on the same routes); provided, that such
insurance shall at all times while the Aircraft is subject to this Lease be for
an amount (taking into account self-insurance to the extent permitted by
Section 11(d) hereof) not less than the Stipulated Loss Value for the Aircraft;
and provided further, that subject to compliance with Section 11(d) hereof,
such all-risk property damage insurance covering Engines and Parts while
temporarily removed from the Airframe or an airframe of (in the case of Parts)
an Engine need be obtained only to the extent available at reasonable cost (as
reasonably determined by Lessee). In the case of a loss with respect to an
engine (other than an Engine) installed on the Airframe in circumstances which
do not constitute an Event of Loss with respect to the Airframe, Lessor shall
promptly remit any payment made to it of any insurance proceeds in respect of
such loss to Lessee or any other third party that is entitled to receive such
proceeds.
All losses will be adjusted by Lessee with the insurers
giving due regard to Lessor's and, so long as the Lien of the Trust
Indenture shall not be discharged, the Indenture Trustee's interest,
provided, however, that during a period when a Section 14(a), (b), (f)
or (g) Default or an Event of Default has occurred and is continuing,
Lessee
45
<PAGE> 51
[Lease Agreement (1994 737 B)]
shall not agree to any such adjustment without the consent of Lessor and
the Indenture Trustee (but in regard to the Indenture Trustee, only so
long as the Original Loan Participant is a Holder). As between Lessor
and Lessee, it is agreed that all proceeds of insurance maintained in
compliance with the preceding paragraph and received as the result of
the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect
to the Airframe (or the Airframe and the Engines installed
thereon), (i) unless such property is replaced pursuant to the
last paragraph of Section 10(a) hereof, so much of such payments
remaining, after reimbursement of Lessor (as provided in Section
7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses, as shall not exceed the Stipulated
Loss Value and the other amounts payable under Section 10(a)
hereof required to be paid by Lessee pursuant to Section 10(a)
hereof shall be applied in reduction of Lessee's obligation to
pay such Stipulated Loss Value and the other amounts payable
under Section 10(a) hereof, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for
its payment of such Stipulated Loss Value and the other amounts
payable under Section 10(a) hereof, and the balance, if any, of
such payments remaining thereafter will be paid over to, or
retained by, Lessee (or if directed by Lessee, any Sublessee); or
(ii) if such property is replaced pursuant to the last paragraph
of Section 10(a) hereof, such payments shall be paid over to, or
retained by, Lessee (or if directed by Lessee, any Sublessee),
provided that Lessee shall have fully performed or, concurrently
therewith, will fully perform the terms of the last paragraph of
Section 10(a) hereof with respect to the Event of Loss for which
such payments are made; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 10(b)
hereof, so much of such payments remaining after reimbursement of
Lessor and the Owner Participant for reasonable costs and
expenses shall be paid over to, or retained by, Lessee (or if
directed by Lessee, any Sublessee), provided that Lessee shall
have fully performed or, concurrently therewith, will fully
perform the terms of Section 10(b) hereof with respect to the
Event of Loss for which such payments are made.
(2) During any period that the Aircraft is on the
ground and not in operation, Lessee may carry or cause to be carried, in
lieu of the insurance required by clause (1) above, and subject to
self-insurance to the extent permitted by Section 11(d) hereof,
insurance otherwise conforming with the provisions of said clause (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 or leased by
Lessee of the same type as the Aircraft similarly on the ground and not
in operation, provided that, subject to the self-insurance to the extent
permitted by Section 11(d) hereof, Lessee shall maintain insurance
against risk of
46
<PAGE> 52
[Lease Agreement (1994 737 B)]
loss or damage to the Aircraft in an amount at least equal to the
Stipulated Loss Value of the Aircraft during such period that the
Aircraft is on the ground and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be
furnished, to Lessor, the Indenture Trustee, the Owner Participant and, so long
as the Original Loan Participant shall hold any Certificate, the Original Loan
Participant, on or before the Delivery Date, and each annual anniversary of the
Delivery Date during the Term, a report, signed by Rollins, Hudig Hall of
Illinois, Inc. or any other independent firm of insurance brokers reasonably
acceptable to Lessor which brokers may be in the regular employ of Lessee (the
"Insurance Broker"), describing in reasonable detail the hull and liability
insurance (and property insurance for detached engines and parts) then carried
and maintained with respect to the Aircraft and stating the opinion of such
firm that (a) such insurance complies with the terms hereof and (b) that such
insurance together with any self-insurance permitted hereby provides coverage
that are in substantially similar forms, are of such types and have limits
within the range of limits as are customarily carried by U.S. carriers;
provided, however, that the opinion set forth in clause (b) shall not be
required if the Insurance Broker then generally does not provide such an
opinion or will provide such an opinion for material additional cost; and
provided further that all information contained in the foregoing report shall
not be made available by Lessor, the Indenture Trustee, the Original Loan
Participant, or the Owner Participant to anyone except (A) to prospective and
permitted transferees of Lessor's, the Owner Participant's, the Original Loan
Participant's or the Indenture Trustee's interest or their respective counsel,
independent certified public accountants, independent insurance brokers or
other agents, who agree to hold such information confidential, (B) to Lessor's,
Owner Participant's, the Original Loan Participant's or the Indenture Trustee's
counsel or independent certified public accountants, independent insurance
brokers or other agents who agree to hold such information confidential, (C) as
may be required by any statute, court or administrative order or decree or
governmental ruling or regulation, or (D) as may be necessary for purposes of
protecting the interest of any such Person or for enforcement of this Lease by
Lessor or the Indenture Trustee; provided, however, that any and all
disclosures permitted by clauses (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted. Lessee will cause such Insurance
Broker to agree to advise Lessor, the Indenture Trustee, the Owner Participant,
and, so long as the Original Loan Participant holds any Certificate, the
Original Loan Participant, in writing of any act or omission on the part of
Lessee of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft and to advise
such Persons in writing at least 30 days (7 days in the case of war risk and
allied perils coverage) prior to the cancellation or material adverse change of
any insurance maintained pursuant to this Section 11, provided that if the
notice period specified above is not reasonably obtainable, the Insurance
Broker shall provide for as long a period of prior notice as shall then be
reasonably obtainable. In addition, Lessee will also cause such Insurance
Broker to deliver to Lessor, the Indenture Trustee, the Owner Participant and,
so long as the Original Loan Participant holds any Certificate, the Original
Loan Participant, on or prior to the date of expiration of any insurance policy
referenced in a previously delivered
47
<PAGE> 53
[Lease Agreement (1994 737 B)]
certificate of insurance, a new certificate of insurance, substantially in the
same form as delivered by Lessee to such parties on the Delivery Date except
for the changes in the report or the coverage consistent with the terms hereof.
In the event that Lessee or any Sublessee shall fail to maintain or cause to be
maintained insurance as herein provided, Lessor, the Indenture Trustee or, so
long as the Original Loan Participant holds any Certificate, the Original Loan
Participant may at its sole option, but shall be under no duty to, provide such
insurance and, in such event, Lessee shall, upon demand, reimburse Lessor, the
Indenture Trustee or the Original Loan Participant, as Supplemental Rent, for
the cost thereof to Lessor, the Indenture Trustee or the Original Loan
Participant, as the case may be; provided, however, that no exercise by Lessor,
or the Indenture Trustee or the Original Loan Participant, as the case may be,
of said option shall affect the provisions of this Lease, including the
provisions that failure by Lessee to maintain the prescribed insurance shall
constitute an Event of Default.
(d) Self-Insurance. Lessee may self-insure the risks required
to be insured against pursuant to this Section 11 under a program applicable to
all aircraft (whether owned or leased) in Lessee's fleet, but in no case shall
the aggregate amount of such self-insurance in regard to Sections 11(a) and
11(b) hereof exceed for any calendar year, with respect to all of the aircraft
(whether owned or leased) in Lessee's fleet (including, without limitation, the
Aircraft) the lesser of (A) 50% of the highest replacement value of any single
aircraft in Lessee's fleet or (B) 1-1/2% of the average aggregate insurable
value (during the preceding calendar year) of all aircraft (including, without
limitation, the Aircraft) on which Lessee carries insurance. In addition to
the foregoing right to self-insure, Lessee (and any Sublessee) may self-insure
to the extent of any applicable mandatory minimum per aircraft (or, if
applicable, per annum or other period) hull or liability insurance deductible
imposed by the aircraft hull or liability insurer.
(e) Additional Insurance by Lessor and Lessee. Lessee (and
any Sublessee) may at its own expense carry insurance with respect to its
interest in the Aircraft in amounts in excess of that required to be maintained
by this Section 11. The Owner Participant may carry for its own account at its
sole cost and expense insurance with respect to its interest in the Aircraft,
provided that such insurance does not prevent Lessee (or any Sublessee) from
carrying the insurance required or permitted by this Section 11 or adversely
affect such insurance or the cost thereof.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance provided by, the United States
Government or any agency or instrumentality thereof, the obligations of which
are supported by the full faith and credit of the federal government of the
United States, against such risk in an amount which, when added to the amount
of insurance against such risk maintained by Lessee (or any Sublessee) shall be
at least equal to the amount of insurance against such risk otherwise required
by this Section 11 (taking into account self-insurance permitted by Section
11(d) hereof).
48
<PAGE> 54
[Lease Agreement (1994 737 B)]
(g) Application of Payments During Existence of an Event of
Default. Any amount referred to in this Section 11 which is payable to or
retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or any Sublessee) if at the time of such payment or retention a Section
14(a), 14(b), 14(d) (solely with respect to Lessee's obligations under Section
7(a) or (b)(viii) hereof or Section 8 hereof), 14(f) or 14(g) Default or any
Event of Default shall have occurred and be continuing, but shall be held by or
paid over to Lessor as security for the obligations of Lessee under this Lease
and, if such a Default or any Event of Default shall have occurred and be
continuing, applied against Lessee's obligations hereunder as and when due. At
such time as there shall not be continuing any such Default or any Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
(h) Terms of Insurance Policies. Any policies carried in
accordance with Sections 11(a) and 11(b) hereof covering the Aircraft, and any
policies taken out in substitution or replacement for any such policies, (A)
shall name the Additional Insureds as additional insureds, or, if appropriate,
loss payees, as their respective interests may appear (but without imposing on
any such party liability to pay premiums with respect to such insurance), (B)
may provide for self-insurance to the extent permitted in Section 11(d) hereof,
(C) shall provide that if the insurers cancel such insurance for any reason
whatever, or if the same is allowed to lapse for non-payment of premium or if
any material change is made in the insurance which adversely affects the
interest of any Additional Insured, such lapse, cancellation or change shall
not be effective as to any Additional Insured for thirty days (ten days in the
case of lapse for nonpayment of premium and seven days in the case of war risk
and allied perils coverage) after receipt by such Additional Insured of written
notice by such insurers of such lapse, cancellation or change; provided,
however, 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, (D) shall provide that in respect of the
respective interests of each Additional Insured in such policies the insurance
shall not be invalidated by any action or inaction of Lessee (or any Sublessee)
or any other Person and shall insure the respective interests of the Additional
Insureds, as they appear, regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Lessee (or any
Sublessee) or by any other Person, (E) shall be primary without any right of
contribution from any other insurance which is carried by any Additional
Insured, (F) shall expressly provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, (G) shall waive any right of the
insurers to set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any Additional Insured,
and (H) shall provide that (i) in the event of a loss involving the Aircraft,
Airframe, or an Engine for which proceeds are in excess of $3,000,000, the
proceeds in respect of such loss up to the amount of Stipulated Loss Value for
the Aircraft shall be payable to Lessor (or, so long as the Trust Indenture
shall be in effect, the Indenture Trustee), it being understood and agreed that
in the case of any payment to Lessor (or the Indenture Trustee) otherwise than
in respect of an Event of Loss, Lessor (or the Indenture Trustee) shall, upon
receipt of evidence reasonably
49
<PAGE> 55
[Lease Agreement (1994 737 B)]
satisfactory to it that the damages 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, and any interest or income earned
thereon in accordance with Section 22 hereof, to Lessee or its order, and (ii)
the entire amount of any such loss for which proceeds are $3,000,000 or less or
the amount of any proceeds of any such loss in excess of Stipulated Loss Value
for the Aircraft shall be paid to Lessee or its order unless a Section 14(a),
14(b), 14(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), 14(f) or 14(g) Default or any Event of
Default shall have occurred and be continuing and the insurers have been
notified thereof by Lessor or the Indenture Trustee.
SECTION 12. Inspection. At reasonable times, and upon at least
10 days prior written notice, the Owner Participant and the Indenture Trustee
or their respective authorized representatives, may inspect the Aircraft
(provided, however, that such inspections by the Owner Participant or the
Indenture Trustee and their respective authorized representatives shall, in
regard to each of the Owner Participant and the Indenture Trustee be limited to
one inspection of the Aircraft during any consecutive twelve-month period
except during the continuance of a Default or an Event of Default when such
inspection right shall not be so limited) and inspect and make copies of the
books and records of Lessee and any Sublessee required to be maintained by the
FAA or the regulatory agency or body of another jurisdiction in which the
Aircraft is then registered relating to the maintenance of the Aircraft (at the
Owner Participant's or the Indenture Trustee's risk and expense, as the case
may be) and shall keep any information or copies obtained thereby confidential
and shall not disclose the same to any Person, except (A) to Lessor or the
Original Loan Participant and to prospective and permitted transferees of
Lessor's, the Owner Participant's, the Original Loan Participant's, the
Original Loan Participant's or the Indenture Trustee's interest (and such
prospective and permitted transferee's counsel, independent insurance advisors
or other agents) who agree to hold such information confidential, (B) to
Lessor's, the Owner Participant's, the Original Loan Participant's or the
Indenture Trustee's counsel, independent insurance advisors or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, (D) as may be necessary for purposes of protecting the interest of
any such Person or for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures permitted by clauses
(C) and (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of Persons for whom such disclosures are hereby
permitted. Any such inspection of the Aircraft shall be subject to Lessee's
safety and security rules applicable at the location of the Aircraft, shall be
a visual, walk-around inspection of the interior and exterior of the Aircraft
and shall not include opening any panels, bays or the like without the express
consent of Lessee (except in connection with a heavy maintenance visit when a
panel, bay or the like is scheduled or required to be open), which consent
Lessee may in its sole discretion withhold; provided that no exercise of such
inspection right shall interfere with the normal operation or maintenance of
the Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt
by Lessee of a written request from the Owner Participant specifying that the
Owner Participant desires to have an authorized
50
<PAGE> 56
[Lease Agreement (1994 737 B)]
representative observe the last scheduled heavy maintenance visit to be
performed on the Aircraft (or substantially equivalent successor type of
maintenance work) during the Term, Lessee shall cooperate with the Owner
Participant to enable the Owner Participant's representative to observe such
last scheduled heavy maintenance visit to be performed on the Aircraft during
the Term, including reasonable advance notification to the Owner Participant of
the time and place of such scheduled heavy maintenance visit; provided that the
Owner Participant's authorized representative shall merely observe such
scheduled heavy maintenance visit, shall not interfere with or extend in any
manner the normal conduct or duration of the scheduled heavy maintenance visit,
and shall not be entitled to direct any of the work performed in connection
with such scheduled heavy maintenance visit. Neither the Owner Participant nor
the Indenture Trustee shall have any duty to make any such inspection nor shall
either of them incur any liability or obligations by reason of not making any
such inspection.
SECTION 13. Assignment. Except as otherwise provided in the
Operative Documents, Lessee will not, without the prior written consent of
Lessor, assign any of its rights hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided in the Operative Documents. Subject to the
foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns.
SECTION 14. Events of Default. Each of the following events
shall constitute an Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Event of Default shall continue so long as, but only as long as, it shall not
have been remedied:
(a) Lessee shall not have made a payment of Basic Rent,
Interim Rent, Stipulated Loss Value, Termination Value, EBO Percentage or Break
Amount within 5 days (or in the event the Original Loan Participant shall no
longer be a Holder, 10 days) after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value, Termination Value, EBO Percentage,
Break Amount or any other amounts measured thereby) after the same shall have
become due and such failure shall continue for 10 days (or in the event the
Original Loan Participant shall no longer be a Holder, 15 days) after Lessee's
receipt of written demand therefor by the party entitled thereto (provided that
any failure to pay any amount owed by Lessee under the Tax Indemnity Agreement
or any failure of Lessee to pay to Lessor or the Owner Participant when due any
Excluded Payments shall not constitute an Event of Default unless written
notice is given by the Owner Participant to Lessee and the Indenture Trustee
that such failure shall constitute an Event of Default); or
51
<PAGE> 57
[Lease Agreement (1994 737 B)]
(c) Lessee 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 11 hereof; or
(d) Lessee shall have failed to perform or observe in any
material respect (or caused to be performed and observed) any other covenant or
agreement to be performed or observed by it under any Operative Document, and
such failure shall continue unremedied for a period of thirty days after
written notice thereof by Lessor or the Indenture Trustee; provided, however,
that if Lessee shall have undertaken to cure any such failure and,
notwithstanding the reasonable diligence of Lessee in attempting to cure such
failure, such failure is not cured within said thirty day period but is curable
with future due diligence, there shall exist no Event of Default under this
Section 14 so long as Lessee is proceeding with due diligence to cure such
failure and such failure is in fact cured within 90 days (or in the event that
the Original Loan Participant shall no longer be a Holder, one year); or
(e) any representation or warranty made by Lessee herein or in
the Participation Agreement or any document or certificate furnished by Lessee
in connection herewith or therewith or pursuant hereto or thereto (except the
representations and warranties set forth in Section 4 of the Tax Indemnity
Agreement) shall prove to have been incorrect in any material respect at the
time made and shall remain material at the time in question; provided, however,
such incorrectness shall constitute a default hereunder only if such
incorrectness shall continue uncured for a period of thirty (30) days after the
receipt by Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(f) the commencement of an involuntary case or other
proceeding in respect of Lessee in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law in the United
States or seeking the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Lessee or for all or
substantially all of its property, or seeking the winding-up or liquidation of
its affairs and the continuation of any such case or other proceeding
undismissed or unstayed for a period of 60 consecutive days (or in the event
the Original Loan Participant shall no longer be a Holder, 90 consecutive days)
or an order for relief under Chapter 11 of the Bankruptcy Code with respect to
Lessee as debtor or any other order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without the
consent of Lessee, a receiver, trustee or liquidator of Lessee, or for all or
substantially all of its property, or sequestering of all or substantially all
of the property of Lessee and any such order, judgment or decree or appointment
or sequestration shall be final or shall remain in force undismissed, unstayed
or unvacated for a period of 60 consecutive days (or in the event the Original
Loan Participant shall no longer be a Holder, 90 consecutive days) after the
date of entry thereof; or
52
<PAGE> 58
[Lease Agreement (1994 737 B)]
(g) the commencement by Lessee of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Lessee or for all or substantially
all of its property, or the making by Lessee of any assignment for the benefit
of creditors or Lessee shall take any corporate action to authorize any of the
foregoing; or
(h) Lessee shall fail to maintain its status as a U.S. Air
Carrier and such failure shall continue for 5 consecutive Business Days;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of any event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of
Default and at any time thereafter so long as any such Event of Default shall
not have been remedied, Lessor may, at its option, declare by written notice to
Lessee this Lease Agreement to be in default; and at any time thereafter, so
long as such Event of Default shall be continuing, Lessor may do one or more of
the following with respect to all or any part of the Airframe and any or all of
the Engines as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory requirements of,
applicable law then in effect; provided, however, that during any period the
Aircraft is subject to the Civil Reserve Air Fleet Program in accordance with
the provisions of Section 7(b) hereof and in the possession of the United
States Government or an instrumentality or agency thereof, Lessor shall not, on
account of any Event of Default, be entitled to do any of the following in such
manner as to limit Lessee's control under this Lease (or any Sublessee's
control under any Sublease) of any Airframe or any Engines, unless at least 60
days' (or such lesser period as may then be applicable under the Military
Airlift Command Program of the United States Government) prior written notice
of default hereunder shall have been given by Lessor by registered or certified
mail to Lessee (and any Sublessee) with a copy addressed to the Contracting
Office Representative for the Military Airlift Command of the United States Air
Force under any contract with Lessee (or any Sublessee) relating to the
Aircraft:
(a) upon the written demand of Lessor and at Lessee's
expense, cause Lessee to return promptly, and Lessee shall return
promptly, the Airframe or any Engine as Lessor may so demand to Lessor
or its order in the manner and condition required by, and otherwise in
accordance with all the provisions of, Section 5 hereof as if such
Airframe or Engine were being returned at the end of the Term, or
Lessor, at its option, may enter upon the premises where all or any part
of the Airframe or any Engine is
53
<PAGE> 59
[Lease Agreement (1994 737 B)]
located and take immediate possession of and remove the same by summary
proceedings or otherwise (and, at Lessor's option, store the same at
Lessee's premises until disposal thereof by Lessor), all without
liability accruing to Lessor for or by reason of such entry or taking of
possession or removing whether for the restoration of damage to property
caused by such action or otherwise;
(b) sell the Aircraft at public or private sale, as
Lessor may determine, or otherwise dispose of, hold, use, operate, lease
to others or keep idle the Aircraft as Lessor, in its sole discretion,
may determine, all free and clear of any rights of Lessee, except as
hereinafter set forth in this Section 15;
(c) hold, keep idle or lease to others the Aircraft or
any Part thereof, as Lessor in its sole discretion may determine, free
and clear of any rights of Lessee and without any duty to account to
Lessee with respect thereto, except that Lessee's obligation to pay
Basic Rent with respect to the Aircraft on Lease Period Dates subsequent
to the date upon which Lessee shall have been deprived of use of the
Aircraft pursuant to this Section 15 shall be reduced by the net
proceeds, if any, received by Lessor from leasing the Aircraft to any
Person other than Lessee;
(d) whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph
(a), (b) or (c) above with respect to the Aircraft, Lessor, by written
notice to Lessee specifying a payment date which shall be the Lease
Period Date not earlier than ten days from the date of such notice, may
demand that Lessee pay to Lessor, and Lessee shall pay Lessor, on the
payment date so specified, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the installments of Basic Rent for the
Aircraft due for Lease Periods commencing on or after the Commencement
Date or the Lease Period Date, as the case may be, specified as the
payment date in such notice), any unpaid Basic Rent due on Lease Period
Dates on or prior to the payment date so specified plus whichever of the
following amounts Lessor, in its sole discretion, shall specify in such
notice (with interest thereon at the Past Due Rate from such specified
payment date until the date of actual payment of such amount): (i) an
amount equal to the excess, if any, of the Stipulated Loss Value for the
Aircraft, computed as of the Lease Period Date specified as the payment
date in such notice over the aggregate fair market rental value
(computed as hereafter in this Section 15 provided) of such Aircraft for
the remainder of the Term, after discounting such aggregate fair market
rental value to present value as of the Lease Period Date specified as
the payment date in such notice at an annual rate equal to the Past Due
Rate; or (ii) an amount equal to the excess, if any, of the Stipulated
Loss Value for such Aircraft, computed as of the Lease Period Date
specified as the payment date in such notice, over the fair market sales
value of such Aircraft (computed as hereafter in this Section provided)
as of the Lease Period Date specified as the payment date in such
notice;
54
<PAGE> 60
[Lease Agreement (1994 737 B)]
(e) in the event Lessor pursuant to paragraph (b)
above, shall have sold the Aircraft, Lessor, in lieu of exercising its
rights under paragraph (d) above with respect to such Aircraft, may, if
it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay
to Lessor, on the date of such sale, as liquidated damages for loss of a
bargain and not as a penalty, any unpaid Basic Rent with respect to the
Aircraft due on or prior to such date plus the amount of any deficiency
between the net proceeds of such sale (after deduction of all reasonable
costs of sale) and the Stipulated Loss Value of such Aircraft, computed
as of the Stipulated Loss Value date on or immediately following the
date of such sale, together with interest, if any, on the amount of such
deficiency, at the Past Due Rate, from the date of such sale to the date
of actual payment of such amount;
(f) rescind or terminate this Lease Agreement; and/or
(g) exercise any other right or remedy which may be
available to it under applicable law or proceed by appropriate court
action to enforce the terms hereof or to recover damages for breach
hereof.
For the purposes of paragraph (d) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, in each case based upon the actual condition and location of the Aircraft,
which value shall be determined by mutual agreement or, in the absence of
mutual written agreement, pursuant to an appraisal prepared and delivered by a
nationally recognized firm of independent aircraft appraisers nominated by
Lessor, and Lessor shall promptly notify Lessee of such nomination. Any
appraisal obtained pursuant to this Section 15 shall take into account then
prevailing market conditions for aircraft of the same type as the Aircraft.
The cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies, for the payment of Break Amount, if any, and for all reasonable and
actual legal fees and other costs and expenses incurred by Lessor, the
Indenture Trustee, the Holders and the Owner Participant in connection with any
default or the exercise of remedies hereunder including the return of the
Airframe or any Engine in accordance with the terms of Section 5 or in placing
such Airframe or Engine in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor, the Indenture Trustee, a Holder or the Owner Participant
may bid for and purchase such property. Lessor agrees to give Lessee at least
10 days' written notice of the date fixed for any
55
<PAGE> 61
[Lease Agreement (1994 737 B)]
public sale of any Airframe or Engine or of the date on or after which will
occur the execution of any contract providing for any private sale; provided,
however, that Lessee may not bid at any such public sale. Except as otherwise
expressly provided above, no remedy referred to in this Section 15 is intended
to be exclusive, but each shall be cumulative and in addition to any other
remedy referred to above or otherwise available to Lessor at law or in equity;
and the exercise or beginning of exercise by Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by Lessor of any
or all of such other remedies. No waiver by Lessor of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. To the extent permitted by applicable
law, Lessee hereby waives any right now or hereafter conferred by statute or
otherwise which may require Lessor to sell, lease, or otherwise use the
Aircraft or Parts thereof in mitigation of Lessor's damages as set forth in
this Section 15 or which may otherwise limit or modify any of Lessor's rights
and remedies in this Section 15.
SECTION 16. Lessee's Cooperation Concerning Certain Matters.
(a) Forthwith upon the execution and delivery of each Lease Supplement and
Trust Supplement from time to time required by the terms hereof and upon the
execution and delivery of any amendment to this Lease or to the Trust Agreement
or Trust Indenture, Lessee at its expense will cause such Lease Supplement,
Trust Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well) or
amendment to be duly filed and recorded, and maintained of record, in
accordance with the applicable laws of the government of registry of the
Aircraft. In addition, Lessee at its expense will promptly and duly execute
and deliver to Lessor such further documents and take such further action as
Lessor may from time to time reasonably request in order more effectively to
carry out the intent and purpose of this Lease and to establish and protect the
rights and remedies created or intended to be created in favor of Lessor and
the Indenture Trustee hereunder, including, without limitation, if requested by
Lessor, at the expense of Lessee, the execution and delivery of supplements or
amendments hereto, each in recordable form, subjecting to this Lease and the
Trust Indenture, any airframe or engine substituted for the Airframe or any
Engine pursuant to the terms thereof and the recording or filing of
counterparts thereof, in accordance with the laws of such jurisdictions as
Lessor may from time to time deem advisable.
(b) Lessee will furnish to Lessor, the Indenture Trustee, the
Owner Participant and, so long as the Original Loan Participant holds any
Certificate, the Original Loan Participant:
(i) Quarterly Statements - As soon as practicable after
the end of the first, second, and third quarterly fiscal periods in each
fiscal year of Lessee, and in any event within 60 days thereafter,
duplicate copies of:
56
<PAGE> 62
[Lease Agreement (1994 737 B)]
(1) a consolidated balance sheet of Lessee as at
the end of such quarter setting forth in comparative form the
amounts for the end of the corresponding period of the preceding
fiscal year,
(2) consolidated statements of income and
retained earnings of Lessee for such quarterly period, setting
forth in comparative form the amounts for the corresponding
period of the preceding fiscal year, and
(3) consolidated statements of cash flow of
Lessee for the portion of the fiscal year ending with said
quarter, setting forth in comparative form the amounts for the
corresponding period of the preceding fiscal year;
(ii) Annual Statements - As soon as practicable after
the end of each fiscal year, and in any event within 120 days
thereafter, duplicate copies of:
(1) a consolidated balance sheet of Lessee as at
the end of such year, and
(2) consolidated statements of income and
retained earnings and of cash flow of Lessee for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the
previous fiscal year and accompanied by an auditor's report of a firm of
independent certified public accountants of recognized national standing
(which report may be adverse, qualified or disclaim an opinion);
(iii) SEC Reports - Promptly upon their becoming
available, one copy of each financial statement, report, or proxy
statement sent by UAL Corporation to its shareholders generally, and of
each regular or periodic report and any prospectus (in the form in which
it becomes effective) filed by Lessee or UAL Corporation with the
Securities and Exchange Commission or any successor agency; and
(iv) Notice of Default or Claimed Default - Immediately
upon an officer of Lessee becoming aware of the existence of a Default
or an Event of Default (or that Lessor has given notice or taken any
other action with respect to an Event of Default or a claimed default
under this Lease), a written notice specifying the nature of the
Default, Event of Default, or claimed default and any such notice given
or action taken by Lessor and what action Lessee is taking or proposes
to take with respect thereto.
(c) Commencing in 1995, on or before April 30 of each year
during the Term, Lessee will deliver to Lessor and the Indenture Trustee a
certificate of Lessee, signed by the President, a Vice President, the Chief
Financial Officer or the principal accounting officer of
57
<PAGE> 63
[Lease Agreement (1994 737 B)]
Lessee to the effect that the signer is familiar with or has reviewed the
relevant terms of this Lease and the signer does not have knowledge of the
existence, as of the date of such certificate, of any condition or event which
constitutes a Default or an Event of Default.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be in writing (including telex, telecopier or similar
writing) and shall be effective (a) if given by telecopier when transmitted and
the appropriate confirmation received; provided, that any such notice is
confirmed by certified mail, (b) if given by certified mail, three Business
Days after being deposited in the mails, (c) if given by telex, upon receipt by
the party transmitting the telex of such party's callback code at the end of
such telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by other means, when received or
personally delivered, addressed:
(i) if to Lessee, at P. O. Box 66100, Chicago, Illinois
60666 (or, if given by overnight delivery service, 1200 East Algonquin
Road, Elk Grove Township, Illinois 60007) Attention: Vice President and
Treasurer, telecopier number (708) 952-7117, or to such other address or
telex or telecopier number as Lessee shall from time to time designate
in writing to Lessor;
(ii) if to Lessor, at 79 South Main Street, Salt Lake
City, Utah 84111, Attention: Corporate Trust Department, telecopier
number (801) 246-5053 or telex number 3789450 (Answerback: FIRSTSECBK),
or to such other address or telex or telecopier number as Lessor shall
from time to time designate in writing to Lessee; and
(iii) if to the Indenture Trustee, the Owner Participant
or the Original Loan Participant, addressed to the Indenture Trustee,
the Owner Participant or the Original Loan Participant at such address
or telex or telecopier number as the Indenture Trustee, the Owner
Participant or the Original Loan Participant shall have furnished by
notice to Lessor and to Lessee, and, until an address is so furnished,
addressed to the Indenture Trustee, the Owner Participant or the
Original Loan Participant at its address or telecopier number set forth
in Schedule I to the Participation Agreement.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant.
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc.
(a) This Lease is a net lease, and it is intended that Lessee
shall pay all costs and expenses of every character, whether seen or
unforeseen, ordinary or extraordinary or structural or non-structural, in
connection with the use, operation, maintenance, repair and reconstruction of
the Airframe and each Engine by Lessee, including the costs and expenses
particularly set forth in this Lease. Lessee shall have no right to reduce or
set-off against payments of Rent except as expressly set forth in Section 3(f)
and this Section 18(a). If at any
58
<PAGE> 64
[Lease Agreement (1994 737 B)]
time that Lessee is required (a) to make a payment of Termination Value or Fair
Market Sales Value pursuant to Section 9 or Stipulated Loss Value pursuant to
Section 10, (b) to make any indemnity payment to the Owner Participant pursuant
to Section 7 of the Participation Agreement or Section 5 of the Tax Indemnity
Agreement, or (c) to pay the EBO Percentage or other purchase price of the
Aircraft pursuant to Section 19(b), (i) there shall exist any amount paid by
Lessee as Prepaid Rent which has not been reimbursed to Lessee in full
(together with interest thereon at the applicable rate set forth in Section
3(f)), either by direct payment by Lessor, or by way of Lessee's application of
its right of set-off pursuant to Section 3(f), or (ii) there shall exist any
Lessor Liens attributable to the Owner Participant (or Lessee shall have
previously incurred a charge to discharge any Lessor Liens attributable to the
Owner Participant), then Lessee shall be entitled to deduct from the portion
required to be paid to the Owner Participant of such payment of Termination
Value or Fair Market Sales Value or payment of indemnity, or such payment of
the EBO Percentage or other purchase price, or any combination thereof, as the
case may be, an amount sufficient to so reimburse Lessee or to reimburse Lessee
for the cost of discharging such Lessor Liens, as the case may be.
Notwithstanding anything contained in this Section 18(a) to the contrary, any
payments of Fair Market Sales Value, Termination Value, Stipulated Loss Value
or EBO Percentage made to the Indenture Trustee shall be in an amount which,
together with any other amounts payable hereunder, is at least sufficient to
pay in full, as of the date of payment thereof, the amount of principal of, and
any accrued and unpaid interest on, the outstanding Certificates, together with
Break Amount, if any, thereon and amounts due the Original Loan Participant
under the Trust Indenture, if any, and, to such extent, shall not be subject to
set-off hereunder.
(b) Except as otherwise expressly provided, this Lease shall
not terminate nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension, deferment or reduction of any Rent which the
Lessee is obligated to pay hereunder, nor shall the obligations hereunder of
the Lessee be affected, by reason of (A) any damage to or the destruction or
loss of all or any portion of the Airframe or any Engine from whatever cause,
(B) the loss or theft of any portion of the Airframe or any Engine, (C) the
taking of the Airframe or any Engine or any portion thereof by condemnation,
confiscation, requisition or otherwise, (D) the prohibition, limitation or
restriction of Lessee's use of all or any part of the Airframe or any Engine,
or the interference with such use by any Person, (E) the inadequacy or
incorrectness of the description of any portion of the Airframe or any Engine
or the failure of this Lease to demise to Lessee the Airframe or any Engine or
any portion thereof, (F) Lessee's acquisition or ownership of all or any part
of the Airframe or any Engine otherwise than pursuant to an express provision
of this Lease, (G) any defect in compliance with specifications, condition,
merchantability, design, airworthiness, quality, durability, operation or
fitness for use for any purpose of the Airframe or any Engine or any portion
thereof, (H) any defect in the title to, or registration of or the existence of
any Liens or rights of others whatsoever with respect to, the Airframe or any
Engine or any portion thereof, (I) any insolvency, bankruptcy, reorganization
or similar proceedings by or against any Sublessee or any Person (J) any
breach, default or misrepresentation by Lessor, any Participant or the
Indenture Trustee under this Lease or any
59
<PAGE> 65
[Lease Agreement (1994 737 B)]
other Operative Document or any of the documents referred to herein or therein
or (K) any invalidity or unenforceability, in whole or in part, of this Lease
or any other Operative Document or any of the documents referred to herein or
therein, or any other infirmity herein or therein, or any lack of power or
authority of any party to this Lease or any other Operative Document or any
such documents to enter into the same, or (L) any other circumstance, happening
or act whatsoever, whether or not unforeseen or similar to any of the
foregoing, it being the intention of the parties hereto that the obligations of
the Lessee shall be absolute and unconditional and shall be separate and
independent covenants and agreements and shall continue unaffected unless and
until this Lease shall have terminated in accordance with its terms upon
payment by Lessee of all sums payable by Lessee hereunder and performance by
Lessee of all obligations required to be performed by Lessee hereunder.
Lessee covenants that it will remain obligated under this Lease
in accordance with its terms and will take no action to terminate, rescind or
avoid this lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting Lessor or the Owner Participant or any assignee of Lessor
the Owner Participant or any other action with respect to this Lease which may
be taken in any such proceeding by any trustee or receiver of Lessor or the
Owner Participant or of any assignee of Lessor or the Owner Participant or by
any court or any of the foregoing actions which may be taken by or against any
of Lessor's predecessors in interest in the Airframe or any Engine.
If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees, without limitation of the other
rights and remedies of Lessor hereunder, to pay to Lessor an amount equal to
each Rent payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part.
Except as expressly provided herein, Lessee waives all rights now
or hereafter conferred by law (x) to quit, terminate, rescind or surrender this
Lease or the Airframe or any Engine or any part thereof, or (y) to any
abatement, suspension, deferment, return or reduction of the Rent.
SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
Renewal Options.
(1) Fixed Renewal Term. Not less than 180 days before
the end of the Basic Term, Lessee may, so long as no Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) Default or any Event
of Default has occurred and is continuing, deliver to Lessor a revocable
written notice (which notice shall become irrevocable 120 days prior to
the end
60
<PAGE> 66
[Lease Agreement (1994 737 B)]
of the Basic Term) electing to renew this Lease for a term having a
duration and at a Basic Rent as determined below (the "Fixed Renewal
Term"). At least 180 days, before the end of the Basic Term Lessee
shall, as a condition to its exercise of the option set forth in this
Section 19(a)(2), notify Lessor of its demand for an appraisal pursuant
to the appraisal procedures of Section 19(c) hereof. The appraiser(s)
so appointed shall determine the total useful life, the remaining useful
life and the future residual value of the Aircraft on the expiration
date for the Fixed Renewal Term as may be set by reason of the maximum
period therefor in accordance with the constraints set forth in the
following sentence. The duration of the Fixed Renewal Term shall be a
period specified by Lessee before the end of the Basic Term which is (a)
not less than one year and not more than three years (in integral
multiples of six months) and (b) not more than the longest period of
time (i) which would cause the Term, after giving effect to such Fixed
Renewal Term, to be equal to 80% of the then estimated useful life of
the Aircraft as determined by the appraiser(s) and (ii) at the
expiration of which the residual value of the Aircraft, as estimated by
the appraiser(s), would be at least equal to 20% of Lessor's Cost
(without taking into account inflation or deflation during the Term).
The annual Basic Rent payable during the Fixed Renewal Term shall be
equal to one-half of the average annual Basic Rent payments for the
Aircraft over the Basic Term.
(2) Fair Market Renewal Term. So long as no Section
14(a), (b), (d) (solely with respect to Lessee's obligations under
Section 7(a) or (b)(viii) hereof or Section 8 hereof), (f) or (g)
Default or any Event of Default has occurred and is continuing, Lessee
shall have the right to renew this Lease for additional periods of at
least one year commencing at the end of the Basic Term, the Fixed
Renewal Term or any prior Fair Market Renewal Term for a Basic Rent
equal to the Fair Market Rental Value of the Aircraft for such period
(each such renewal term, a "Fair Market Renewal Term"); provided,
however, each Fair Market Renewal Term shall be an integral multiple of
six months. Each such option to renew shall be exercised upon delivery
by Lessee to Lessor of a revocable written notice of Lessee's intent to
renew the Lease at least 180 days prior to the commencement of such Fair
Market Renewal Term (which notice shall become irrevocable 120 days
prior to the anticipated commencement of such Fair Market Renewal Term).
(3) Waiver. If no written notice is delivered by
Lessee to Lessor pursuant to Section 19(a)(1) or (2) on or before the
day specified therefore, Lessee shall be deemed to have waived any right
to renew this Lease.
(4) Conditions Precedent, Payment of Basic Rent. At
the end of the Basic Term or any Renewal Term, if Lessee has elected to
renew this Lease as aforesaid, and provided that there shall not then
have occurred and be continuing a Default or an Event of Default and
that all necessary governmental authorizations and approvals shall have
been received and that Basic Rent for the Renewal Term has already been
61
<PAGE> 67
[Lease Agreement (1994 737 B)]
determined as above provided, (i) this Lease shall continue in full
force and effect during the Renewal Term, and (ii) Basic Rent for such
Renewal Term shall be payable in semi-annual installments in arrears,
each such installment being due and payable on each Lease Period Date
occurring during the Renewal Term, commencing with the Lease Period Date
immediately following the commencement of the Renewal Term.
(5) Termination Value; Stipulated Loss Value. The
amounts which are payable during any Renewal Term in respect of
Termination Value as used in Section 15 and Stipulated Loss Value with
respect to the Aircraft shall be determined on the basis of the Fair
Market Sales Value of the Aircraft as of the commencement of such
Renewal Term, amortized on a straight-line basis over such Renewal Term
to the projected Fair Market Sales Value of the Aircraft as of the
expiration of such Renewal Term, as such Fair Market Sales Value in each
case is determined prior to the commencement of such Renewal Term. In
determining Fair Market Sales Value for purposes of calculating
Stipulated Loss Value and Termination Value for any Renewal Term effect
shall be given to the encumbrance on the Aircraft of any Fixed Renewal
Term available or in force.
(b) Purchase Options. Lessee shall have the option, (i) with
respect to subsections (1) and (2) below, upon at least 120 days revocable
prior written notice to Lessor (which notice shall become irrevocable 20 days
prior to the relevant purchase date) and (ii) with respect to subsections (3)
and (4) below, upon at least 180 days revocable prior written notice to Lessor
(which notice shall become irrevocable 120 days prior to the relevant purchase
date) (each, a "Purchase Option Date"), to terminate this Lease and to purchase
the Aircraft:
(1) on any Special Purchase Option Date for a purchase
price equal to the greater of the Fair Market Sales Value or the
Termination Value of the Aircraft on such date;
(2) on the EBO Date for a purchase price equal to the
EBO Percentage;
(3) on the last Business Day of the Basic Term for a
purchase price equal to the Fair Market Sales Value of the Aircraft on
such date; and
(4) on the last Business Day of any Renewal Term for a
purchase price equal to the Fair Market Sales Value of the Aircraft on
such date.
Notwithstanding the foregoing, the purchase price on any Purchase Option Date
shall be sufficient, together with all other amounts payable simultaneously by
Lessee, to pay in full the payments then required to be made on account of the
principal amount (and Break Amount, if any) of and accrued and unpaid interest
on the Certificates then outstanding. Upon payment to Lessor in immediately
available funds of the full amount of the purchase price plus all Basic
62
<PAGE> 68
[Lease Agreement (1994 737 B)]
Rent due on or prior to such purchase date (unless denominated "advance"
rental), all Supplemental Rent due on or prior to such purchase date (including
amounts equal to or Break Amount, if any) and payment of any other amounts then
due hereunder (including all reasonable costs or expenses of Lessor in
connection with such purchase), Lessor will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and interest in and
to the Aircraft.
(c) Valuation. At any time not earlier than 365 days prior to
the date on which Lessee may purchase an Aircraft pursuant to Section 19(b)
hereof or renew this Lease pursuant to Section 19(a) hereof, Lessee may deliver
to Lessor a revocable notice of its intent to exercise its renewal option or
purchase option. For all purposes of this Section 19, including the appraisal
referred to in this Section 19(c), in determining Fair Market Rental Value or
Fair Market Sales Value, the Aircraft shall be valued (i) as if in the
condition and otherwise in compliance with the terms of Section 5 upon a return
of the Aircraft in the United States and as if it had been maintained at all
times as required in accordance with Sections 7(a)(1) and 8 hereof, (ii) on the
basis of the value which would obtain in an arm's-length transaction between an
informed and willing buyer-user or lessee (other than a lessee or an Affiliate
of a lessee currently in possession or a used equipment scrap dealer) under no
compulsion to buy or lease and an informed and willing seller or lessor
unaffiliated with such buyer-user or lessee and under no compulsion to sell or
lease and giving effect to the purchase and renewal options of Lessee provided
in this Lease, and (iii) in the case of such valuation for determining Fair
Market Rental Value, assuming such lessee would have substantially the same
obligations during the Fair Market Renewal Term as provided hereunder including
without limitation the obligations of Lessee to carry and maintain the
insurance required by Section 11 hereof. Upon receipt of such notice Lessor
and Lessee shall confer in good faith with a view to reaching agreement on the
Fair Market Rental Value or Fair Market Sales Value of the Aircraft. If the
parties have not so agreed by 240 days prior to the end of the Basic Term or
the Renewal Term in question, then the question shall be determined by an
appraisal mutually agreed to by two recognized independent aircraft appraisers,
one of which appraisers shall be chosen by Lessor and one by Lessee within five
Business Days after Lessor or Lessee shall have received written notice from
the other party of a demand that such an appraisal be made, which notice shall
specify the appraiser chosen by the party giving the notice or, if such
appraisers cannot agree on the amount of such appraisal within five Business
Days after the end of such five-day period, each shall render its own appraisal
and shall by mutual consent choose another appraiser within five Business Days
after the end of such five-day period. If, within such five-day period, such
two appraisers fail to appoint a third appraiser, then either Lessor or Lessee,
on behalf of both, may apply to the American Arbitration Association (or any
successor organization thereto) in Chicago, Illinois for the appointment of
such third appraiser. The decision of the third appraiser so appointed shall
be given within ten Business Days after the appointment of such third
appraiser. As soon as the third appraiser has delivered his appraisal, that
appraisal shall be compared with the appraisals given by the other two
appraisers. If the determination of one appraiser is more disparate from
63
<PAGE> 69
[Lease Agreement (1994 737 B)]
the average of all three determinations than each of the other two
determinations, then the determination of such appraiser shall be excluded, the
remaining two determinations shall be averaged and such average shall be final
and binding upon the parties hereto; otherwise the average of all three
determinations shall be final and binding upon the parties thereto. Lessee and
Lessor shall equally bear all expenses relating to such appraisal procedure,
provided, that if Lessee revokes its notice of intent to exercise its renewal
option or purchase option after an appraisal procedure has begun, then Lessee
shall bear all expenses relating to such appraisal procedure.
SECTION 20. Security for Lessor's Obligation to Holders of
Certificates. In order to secure the indebtedness evidenced by the
Certificates, Lessor has agreed in the Trust Indenture, among other things, to
assign to the Indenture Trustee this Lease and to mortgage the Aircraft in
favor of the Indenture Trustee, subject to the reservations and conditions
therein set forth. To the extent, if any, that this Lease constitutes chattel
paper (as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction), no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the original
counterpart, which shall be identified as the counterpart containing the
receipt therefor executed by the Indenture Trustee as indenture trustee under
the Trust Indenture on the signature page thereof. Lessee hereby accepts and
consents to the assignment of all Lessor's right, title and interest in and to
this Lease pursuant to the terms of the Trust Indenture. Lessee agrees to pay
directly to the Indenture Trustee (or, after receipt by Lessee of notice from
the Indenture Trustee of the discharge of the Trust Indenture, to Lessor), all
amounts of Rent (other than Excluded Payments) due or to become due hereunder
and assigned to the Indenture Trustee and Lessee agrees that the Indenture
Trustee's right to such payments hereunder shall be absolute and unconditional
and shall not be affected by any circumstance. Notwithstanding the foregoing
assignment of this Lease, the obligations of Lessor to Lessee to perform the
terms and conditions of this Lease shall remain in full force and effect.
Lessee further acknowledges that the Trust Indenture provides that so long as
the Certificates are outstanding Lessor may not consent to any amendment,
modification or waiver to this Lease without the prior consent of the Indenture
Trustee (except as provided in Section 6.08 or Article IX of the Trust
Indenture) and Lessee agrees to provide to the Indenture Trustee a copy of all
notices, consents, certificates or other information provided hereunder to
Lessor.
SECTION 21. Lessor's Right to Perform for Lessee. If Lessee
fails to make any payment of Rent required to be made by it hereunder or fails
to perform or comply with any of its agreements contained herein, then (but in
each case, except in the case of failure to pay Rent or in the case of failure
to maintain insurance as required hereunder, no earlier than five Business Days
after notice as to the occurrence of such failure, whether or not it shall yet
constitute an Event of Default hereunder) Lessor may itself make such payment
or perform or comply with such agreement but shall not be obligated hereunder
to do so, and the amount of such payment and the amount of the reasonable
expenses of Lessor incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
64
<PAGE> 70
[Lease Agreement (1994 737 B)]
interest thereon at the Past Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
Limited. (a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee shall, until paid to Lessee,
be invested by Lessor or, if the Trust Indenture shall not have been
discharged, by the Indenture Trustee, as the case may be, as Lessee (or in the
event a Default under Section 14(a), (b), (f) or (g) or an Event of Default has
occurred and is continuing, Lessor) may from time to time direct in writing
(and in absence of a written direction by Lessee, there shall be no obligation
to invest such moneys) in (i) obligations of, or guaranteed by, the United
States Government or agencies thereof, (ii) open market commercial paper of any
corporation incorporated under the laws of the United States of America or any
State thereof rated at least P-1 or its equivalent by Moody's Investors
Service, Inc. or at least A-1 or its equivalent by Standard & Poor's
Corporation, (iii) certificates of deposit issued by commercial banks organized
under the laws of the United States or of any political subdivision thereof
having a combined capital and surplus in excess of $500,000,000 which banks or
their holding companies have a rating of A or its equivalent by Moody's
Investors Service, Inc. or Standard & Poor's Corporation; provided, however,
that the aggregate amount at any one time so invested in certificates of
deposit issued by any one bank shall not exceed 5% of such bank's capital and
surplus, (iv) U.S. dollar denominated offshore certificates of deposit issued
by, or offshore time deposits with, any commercial bank described in (iii) or
any subsidiary thereof and (v) repurchase agreements with any financial
institution having combined capital and surplus of at least $500,000,000 with
any of the obligations described in clause (i) through (iv) as collateral.
There shall be promptly remitted to Lessee or its order (but no more frequently
than monthly) any gain (including interest received) realized as a result of
any such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) unless a Default or an Event of
Default shall have occurred and be continuing. If a Default under Section
14(a), (b), (d) (solely with respect to Lessee's obligations under Section 7(a)
or (b)(viii) hereof or Section 8 hereof), (f) or (g) or an Event of Default
shall have occurred and be continuing, Lessor or if the Trust Indenture shall
not have been discharged, the Indenture Trustee as assignee of Lessor, shall
hold any such gain as security for the obligations of Lessee under this Lease
and apply it against such obligations as and when due, and once all such
Defaults and Events of Default have been remedied any gain not so applied shall
be remitted to Lessee. Lessee shall be responsible for any net loss realized
as a result of any such investment and shall reimburse Lessor (or the Indenture
Trustee, as the case may be) therefor on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that, except as expressly set forth herein and in the other
Operative Documents, all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under
the Trust Agreement, and the institution acting as Lessor shall not be liable
in its individual capacity for any breach thereof except for its gross
negligence or willful
65
<PAGE> 71
[Lease Agreement (1994 737 B)]
misconduct or for breach of its covenants, representations and warranties
contained herein, to the extent covenanted or made in its individual capacity.
SECTION 23. Miscellaneous. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and any assignee of Lessor's
rights hereunder. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. The section and
paragraph headings in this Lease and the table of contents are for convenience
of reference only and shall not modify, define, expand or limit any of the
terms or provisions hereof and all references herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF ILLINOIS AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 24. Successor Trustee. Lessee agrees that in the case
of the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee, succeed to all the rights, powers and title of
Lessor hereunder and shall be deemed to be Lessor and the owner of the Aircraft
for all purposes hereof without in any way altering the terms of this Lease or
Lessee's obligations hereunder. One such appointment and designation of a
successor Owner Trustee shall not exhaust the right to appoint and designate
further successor Owner Trustees pursuant to the Trust Agreement, but such
right may be executed repeatedly as long as this Lease shall be in effect.
SECTION 25. Bankruptcy. Lessee hereby acknowledges that Lessor
and the Indenture Trustee are entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft and that this Lease is a "lease"
within the meaning of said Section 1110. Lessee agrees not to take any
position in connection with any bankruptcy proceedings involving it that is
inconsistent with a lessor's rights under Section 1110 of the Bankruptcy Code
or any comparable or successor provision affording protection to lessors of
aircraft.
* * *
66
<PAGE> 72
[Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
to be duly executed as of the day and year first above written.
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, not in its individual
capacity, except as expressly
provided in Section 4 hereof, but
solely as Owner Trustee,
Lessor
By
------------------------------------
Title
----------------------------------
UNITED AIR LINES, INC.,
Lessee
By
--------------------------------------
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on this ____ day of September, 1994.(1)
STATE STREET BANK AND TRUST COMPANY,
Indenture Trustee
By
-------------------------------------
Title
---------------------------------
____________________
(1) This language contained in the original counterpart only.
67
<PAGE> 73
[Lease Agreement (1994 737 B)]
EXHIBIT A
LEASE SUPPLEMENT NO. 1 (1994 737 B)
LEASE SUPPLEMENT No. 1 (1994 737 B), dated September __, 1994
between FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement
(1994 737 B) dated as of September 1, 1994, between MS Financing Inc., as Owner
Participant, and such Owner Trustee (such Owner Trustee, in its capacity as
such Owner Trustee, being herein called "Lessor"), and UNITED AIR LINES, INC.
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement (1994 737 B) dated as of September 1, 1994 relating to one Boeing
737-322 aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease is attached hereto, and made a part hereof, and
this Lease Supplement together with such attachment, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document.(2)
The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease, attached and made a part of Lease Supplement
No. 1 (1994 737 B) dated September __, 1994, has been recorded by the Federal
Aviation Administration on September __, 1994, as one document and assigned
Conveyance No. ______________.(3)
NOW, THEREFORE, in consideration of the premises and other good
and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under
the Lease and Lessee hereby accepts and leases from Lessor under the
Lease the following described Boeing 737-322 aircraft (the "Aircraft"),
which Aircraft as of the date hereof consists of the following
components:
(i) Airframe: U.S. Registration No. N398UA and
manufacturer's serial no. 24673; and
(ii) Engines: one (1) CFM International Inc., Model
CFM-C56-3B1 engine bearing manufacturer's serial no. 724453 and
one (1) CFM International
____________________
(2) This language for Lease Supplement No. 1.
(3) This language for other Lease Supplements.
<PAGE> 74
[Lease Agreement (1994 737 B)]
Inc., Model CFM-C56-3C1 engine bearing manufacturer's serial no.
724431 (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof. Except
as otherwise provided in the Lease, the Term for the Aircraft shall
commence on the Delivery Date and end on the Basic Term Expiry Date.
3. (a) The Commencement Date is July 1, 1995.
(b) The Stipulated Loss Value Date shall mean
the 1st calendar day of each calendar month during the Interim
Term and the Basic Term and the 28th calendar day of each
calendar month during any Renewal Term.
4. Lessee hereby confirms its agreement to pay Lessor
Basic Rent and Interim Rent for the Aircraft throughout the Term
therefor in accordance with Section 3 of the Lease.
5. Lessee hereby confirms to Lessor that Lessee has
accepted the Aircraft for all purposes hereof and of the Lease as being
airworthy, in good working order and repair and without defect or
inherent vice in title, condition, design, operation or fitness for use;
provided, however, that nothing contained herein or in the Lease shall
in any way diminish or otherwise affect any right Lessee or Lessor may
have with respect to the Aircraft against The Boeing Company, or any
subcontractor or supplier of The Boeing Company, under the Purchase
Agreement or otherwise.
6. All of the terms and provisions of the Lease are
hereby incorporated by reference in this Lease Supplement to the same
extent as if fully set forth herein.
7. This Lease Supplement may be executed by the
parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
* * *
<PAGE> 75
[Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee,
Lessor
By:
-----------------------------------
Title:
--------------------------------
UNITED AIR LINES, INC.,
Lessee
By:
-----------------------------------
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this _____ day of September, 1994.(4)
STATE STREET BANK AND TRUST
COMPANY,
Indenture Trustee
By:
-----------------------------------
Authorized Officer
____________________
(4) This language contained in the original counterpart only.
<PAGE> 1
EXHIBIT 4.20
*
Doc. No. 1.02
Aircraft N398UA
-------------------------------------------------------------------------
FIRST AMENDMENT TO LEASE AGREEMENT
(1994 737 B)
Dated January 26, 1996
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
__________________________________
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
__________________________________
- --------------------------------------------------------------------------------
As set forth in Section 20 of the Lease, Lessor has assigned to the Indenture
Trustee (as defined in the Lease) certain of its right, title and interest in
and to the Lease, including all amendments thereto. To the extent, if any,
that this First Amendment to Lease Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest herein may be created through the transfer
or possession of any counterpart other than the original executed counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by the Indenture Trustee on the signature page thereof.
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST AMENDMENT TO LEASE AGREEMENT
(1994 737 B)
THIS FIRST AMENDMENT TO LEASE AGREEMENT (1994 737 B) dated
January 26, 1996 (this "Amendment") between FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, but solely as Owner Trustee under the Trust Agreement (in such
capacity, "Lessor"), and UNITED AIR LINES, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware ("Lessee"), amends that
certain Lease Agreement (1994 737 B) dated as of September 1, 1994 (the
"Original Lease") between Lessee and Lessor (the Original Lease, as
supplemented by Lease Supplement No. 1 (1994 737 B) dated September 28, 1994
("Lease Supplement No. 1") between Lessor and Lessee, being referred to herein
as the "Lease").
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease;
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor
the Aircraft, which consists of the following components: (i) Airframe: FAA
Registration No. N398UA, Manufacturer's serial no. 24673; and (ii) Engines: one
(1) CFM International, Inc. Model CFM-C56-3B1 engine bearing manufacturer's
serial no. 724453 and one (1) CFM International, Inc. Model CFM-C56-3C1 engine
bearing manufacturer's serial no. 724431;
WHEREAS, a counterpart of the Original Lease, to which was
attached and made a part thereof a counterpart of Lease Supplement No. 1, was
recorded by the Federal Aviation Administration on November 1, 1994 and
assigned Conveyance No. II002366; and
WHEREAS, in connection with the refinancing of the
Certificates pursuant to Section 20 of the Participation Agreement, Lessor and
Lessee desire to amend the Lease in certain respects;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Amendment to Section 1 of the Lease. Section 1 of
the Lease is hereby amended as follows:
(a) The definition of "Base Rate" is hereby
amended to be and read in its entirety as follows:
<PAGE> 3
[First Amendment to Lease Agreement (1994 737 B)]
"Base Rate" means the rate of interest announced from time to
time by The First National Bank of Chicago at its principal office in
Chicago, Illinois as its "corporate base rate" (or its equivalent
successor rate if the corporate base rate is no longer used); provided
that for purposes of Section 2.17 of the Trust Indenture, "Base Rate"
means, with respect to any Original Loan Participant, the rate of
interest announced from time to time by such Original Loan Participant
in its principal office in the United States (or, with respect to any
Original Loan Participant that does not announce such a rate, by The
First National Bank of Chicago at its principal office in Chicago,
Illinois) as its "corporate base rate" (or its equivalent successor
rate if the corporate base rate is no longer used)."
(b) The definition of "Original Loan Participant" in
Section 1 is hereby amended to be and read in its entirety as follows:
"Original Loan Participant" means (i) with respect to the
period from the Delivery Date to but excluding the 1996 Refinancing
Date, The Mitsubishi Trust and Banking Corporation, New York Branch
and Compagnie Financiere de CIC et de L'Union Europeenne and (ii) with
respect to the period thereafter, The Mitsubishi Trust and Banking
Corporation, acting through its New York Branch, and National
Westminster Bank plc, acting through its New York or Nassau Branch,
and if such bank or other Original Loan Participant sells, transfers,
assigns or otherwise conveys its Certificates (or any portion thereof)
in accordance with Section 8(y) of the Participation Agreement (other
than pursuant to Section 20 of the Participation Agreement and other
than as a participation interest) to any Person, shall also mean and
include any such Person."
(c) The definition of "Transaction Expenses" in Section 1 is
hereby amended to be and read in its entirety as follows:
"Transaction Expenses" means (i) with respect to the closing
on the Delivery Date and the refinancing of the debt pursuant to
Section 20 of the Participation Agreement, the reasonable and actual
fees, expenses and disbursements of (1) Bingham, Dana & Gould, special
counsel for the Indenture Trustee, (2) Ray, Quinney & Nebeker, counsel
for the Owner Trustee, (3) Crowe &
2
<PAGE> 4
[First Amendment to Lease Agreement (1994 737 B)]
Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, (4) Akin,
Gump, Strauss, Hauer & Feld, L.L.P., special counsel for the Original
Loan Participant in connection with the closing on the Delivery Date,
and Coudert Brothers, special counsel for the Original Loan
Participants in connection with the refinancing on the 1996
Refinancing Date, (5) Vedder, Price, Kaufman & Kammholz, special
counsel for Lessee, and (6) Dewey Ballantine, special counsel for the
Owner Participant and the Owner Participant Guarantor, (ii) all fees,
taxes and other charges payable in connection with the recording or
filing of instruments and financing statements, (iii) the initial fee
and reasonable and actual disbursements of the Owner Trustee under the
Trust Agreement, (iv) the initial fee and reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (v)
the fee of BK Associates (or of such other appraiser as shall be
acceptable to Lessee and the Owner Participant) with respect to the
appraisal of the Aircraft required on or before the Delivery Date
pursuant to Section 4(a) of the Participation Agreement and the fee of
Avitas, Inc. (or of such other appraiser as shall be acceptable to
Lessee and the Owner Participant) with respect to the appraisal of the
Aircraft required in connection with the refinancing on the 1996
Refinancing Date, (vi) the expenses of Capstar Partners, Inc., (vii)
the reasonable out-of-pocket expenses of the Original Loan Participant
in connection with the closing on the Delivery Date and the
refinancing on the 1996 Refinancing Date, (viii) the reasonable
out-of-pocket expenses of the Owner Participant up to an aggregate of
$10,000 (but excluding from Transaction Expenses airfare charges
incurred for travel on an airline other than United Air Lines), (ix)
the initial fee, if any, of the Original Loan Participants in
connection with the closing on the Delivery Date and the refinancing
on the 1996 Refinancing Date, and (x) printing and distribution
costs."
(d) The following new definitions are hereby added to
Section 1 in alphabetical order, which definitions shall be and read
in its entirety as follows:
"1996 Refinancing Date" means January 26, 1996.
3
<PAGE> 5
[First Amendment to Lease Agreement (1994 737 B)]
"Extraordinary Purchase Option Date" means the second
Stipulated Loss Value Date following the Initial Interest Step-Up Date
(or, if the Owner Participant provides Lessee with a Refinancing Mandate Request
Letter and a Qualifying Refinancing shall not occur within the 90 day period
referred to therein, the first Stipulated Loss Value Date following such 90-day
period).
"Failed Refinancing Notice" means a written notice from Lessee
to Lessor and Owner Participant (i) stating that Lessee is then unable
to identify a lender or lenders willing to refinance the outstanding
Certificates on the Lessee's standard terms and conditions (as
determined by Lessee in its sole reasonable discretion) at a
Qualifying Interest Rate (any such refinancing being herein called a
"Qualifying Refinancing") and (ii) providing that if the Owner
Participant provides Lessee with a Refinancing Mandate Request Letter,
(A) the Lessee shall be deemed to have provided the Owner Participant
with the exclusive mandate referred to in the definition of the term
Refinancing Mandate Request Letter, (B) the Lessee shall be deemed to
have agreed to effect a Qualifying Refinancing identified in
connection with such exclusive mandate, and (C) the Lessee will
confirm such exclusive mandate by countersigning such Refinancing
Mandate Request Letter within one Business Day after receipt thereof.
"Initial Interest Step-Up Date" has the meaning set forth in
the Trust Indenture.
"Lending Office" means, with respect to any Original Loan
Participant, the principal lending office through which the
indebtedness evidenced by the Certificates held by such Original Loan
Participant is to be made or maintained.
"Qualifying Interest Rate" means an interest rate equal to or
less than the sum of the Qualifying Interest Rate Spread plus the
average yield to stated maturity of the United States Treasury Notes
or Bonds corresponding in maturity to the remaining weighted average
life of the Certificates (as customarily determined), as quoted on the
Telerate U.S. Treasury and Money Markets page 678 (or any successor
page) the Business Day prior to the date of the Failed Refinancing
Notice and as specified by Lessee in the Failed Refinancing Notice.
If no possible maturity corresponds to such weighted average life to
maturity, yields for the two most closely corresponding published
maturities shall be interpolated on a straight-line basis.
"Qualifying Interest Rate Spread" has the meaning set forth in
Exhibit H hereto.
"Qualifying Refinancing" has the meaning set forth in the
definition of Failed Refinancing Notice.
4
<PAGE> 6
[First Amendment to Lease Agreement (1994 737 B)]
"Refinancing Mandate Request Letter" means a written letter
from the Owner Participant to Lessee within ten (10) days after the
date of receipt by Owner Participant of the Failed Refinancing Notice
stating that it reasonably believes that it can identify a lender or
lenders willing to refinance the outstanding Certificates within
ninety (90) days after the date of receipt by the Owner Participant of
the Failed Refinancing Notice pursuant to a Qualifying Refinancing and
requesting that Lessee provide it with an exclusive mandate for such
period to effect such Qualifying Refinancing, which letter when
countersigned by Lessee shall confirm that Lessee has provided the
Owner Participant with such mandate; provided that such letter shall
under no circumstances obligate the Owner Participant to identify such
a lender or lenders or to effect any refinancing."
SECTION 2. Amendment to Section 3 of the Lease. Section
3(c)(i) of the Lease is hereby amended by deleting the words "0.5% of Lessor's
Cost" which appear therein and inserting the words "1.3433597% of Lessor's
Cost" in lieu thereof.
SECTION 3. Amendment to Section 19 of the Lease. Section
19(b)(1) is hereby amended to be and to read in its entirety as follows:
"(1) on (i) any Special Purchase Option Date or (ii)
the applicable Extraordinary Purchase Option Date, in each
case for a purchase price equal to the greater of the Fair
Market Sales Value or the Termination Value of the Aircraft on
such date; provided that in order for Lessee to exercise its
purchase option pursuant to clause (ii) of this Section
19(b)(1) and to terminate this Lease and purchase the Aircraft
on the Extraordinary Purchase Option Date, Lessee shall have
provided Lessor and Owner Participant with (x) at least 120
days revocable prior written notice of the possibility that it
will purchase the Aircraft on such Extraordinary Purchase
Option Date (which notice shall become irrevocable 20 days
prior to such date) and (y) a Failed Refinancing Notice not
earlier than 120 days and not later than 20 days prior to such
date (provided that if the Owner Participant provides Lessee
with a Refinancing Mandate Request Letter and if a Qualifying
Refinancing shall occur within the 90 day period referred to
therein, Lessee's notice of such purchase option shall be
deemed for all purposes hereof to have been revoked);"
SECTION 4. Amendments to Exhibits B, C, D and H to the Lease.
Exhibits B, C, D and H to the Lease are hereby deleted in their entirety and
replaced with Exhibits B, C, D and H, respectively, to this Amendment.
SECTION 5. Ratification; References to Lease. Except as
amended hereby, the Lease continues and shall remain in full force and effect
in all respects. From and after the date of this Amendment, each and every
reference in the Lease to "this Lease," "this Agreement," "herein," "hereof" or
similar words and
5v
<PAGE> 7
[First Amendment to Lease Agreement (1994 737 B)]
phrases referring to this Lease or any word or phrase referring to a section or
provision of the Lease is deemed for all purposes to be a reference to the
Lease or such section or provision as amended pursuant to this Amendment.
SECTION 6. Miscellaneous. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No term or
provision of this Amendment may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Lessor, Lessee and any
assignee of Lessor's rights hereunder. The Lease shall constitute an agreement
of lease, and nothing contained herein shall be construed as conveying to
Lessee any right, title or interest in the Aircraft except as a lessee only.
The section headings in this Amendment are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or provisions
hereof. THIS AMENDMENT HAS BEEN DELIVERED IN THE STATE OF ILLINOIS AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. This Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of such counterparts shall together constitute but one and
the same instrument. Notwithstanding the immediately preceding sentence, to
the extent, if any, that this Amendment (whether alone or together with any
other portion of the Lease) constitutes chattel paper (as such term is defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Amendment may be created through the transfer or
possession of any counterpart other than the original counterpart, which shall
be identified as the counterpart containing the receipt therefor executed by
the Indenture Trustee as indenture trustee under the Trust Indenture on a
signature page of such counterpart.
* * *
6
<PAGE> 8
[First Amendment to Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
First Amendment to Lease Agreement to be duly executed on the day and year
first above written.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee,
Lessor
By:________________________________
UNITED AIR LINES, INC.,
Lessee
By:________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing First
Amendment to Lease Agreement is hereby acknowledged on this _____ day of
January, 1996.
STATE STREET BANK AND TRUST COMPANY
Indenture Trustee
By
---------------------------------
Authorized Officer
7
<PAGE> 1
EXHIBIT 4.21
*
Doc. No. 1.03
Aircraft N398UA
------------------------------------------------------------------------
SECOND AMENDMENT TO LEASE AGREEMENT
(1994 737 B)
Dated January 26, 1996
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
-----------------------------------
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
-----------------------------------
- --------------------------------------------------------------------------------
As set forth in Section 20 of the Lease, Lessor has assigned to the Indenture
Trustee (as defined in the Lease) certain of its right, title and interest in
and to the Lease, including all amendments thereto. To the extent, if any,
that this Second Amendment to Lease Agreement constitutes chattel paper (as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest herein may be created through the
transfer or possession of any counterpart other than the original executed
counterpart, which shall be identified as the counterpart containing the
receipt therefor executed by the Indenture Trustee on the signature page
thereof.
- --------------------------------------------------------------------------------
<PAGE> 2
SECOND AMENDMENT TO LEASE AGREEMENT
(1994 737 B)
THIS SECOND AMENDMENT TO LEASE AGREEMENT (1994 737 B) dated
January 26, 1996 (this "Amendment") between FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, but solely as Owner Trustee under the Trust Agreement (in such
capacity, "Lessor"), and UNITED AIR LINES, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware ("Lessee"), amends that
certain Lease Agreement (1994 737 B) dated as of September 1, 1994 (the
"Original Lease") between Lessee and Lessor (the Original Lease, as
supplemented by Lease Supplement No. 1 (1994 737 B) dated September 28, 1994
("Lease Supplement No. 1") and as amended by the First Amendment to Lease
Agreement (1994 737 B) dated January 26, 1996 ("First Amendment"), each between
Lessor and Lessee, being referred to herein as the "Lease").
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease;
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor
the Aircraft, which consists of the following components: (i) Airframe: FAA
Registration No. N398UA, Manufacturer's serial no. 24673; and (ii) Engines: one
(1) CFM International, Inc. Model CFM-C56-3B1 engine bearing manufacturer's
serial no. 724453 and one (1) CFM International, Inc. Model CFM-C56-3C1 engine
bearing manufacturer's serial no. 724431;
WHEREAS, a counterpart of the Original Lease, to which was
attached and made a part thereof a counterpart of Lease Supplement No. 1, was
recorded by the Federal Aviation Administration on November 1, 1994 and
assigned Conveyance No. II002366;
WHEREAS, a counterpart of the First Amendment was filed with
the Federal Aviation Administration on January 26, 1996;
WHEREAS, an amendment was inadvertantly omitted from the First
Amendment and Lessor and Lessee desire to further amend the Lease to reflect
such amendment;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Amendment to Section 3 of the Lease. Section 3(b)
of the Lease is hereby amended by deleting the reference to "10%" which appears
therein and inserting a reference to "8.5%" in lieu thereof.
<PAGE> 3
[Second Amendment to Lease Agreement (1994 737 B)]
SECTION 2. Ratification; References to Lease. Except as
amended hereby, the Lease continues and shall remain in full force and effect
in all respects. From and after the date of this Amendment, each and every
reference in the Lease to "this Lease," "this Agreement," "herein," "hereof" or
similar words and phrases referring to this Lease or any word or phrase
referring to a section or provision of the Lease is deemed for all purposes to
be a reference to the Lease or such section or provision as amended pursuant to
this Amendment.
SECTION 3. Miscellaneous. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No term or
provision of this Amendment may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Lessor, Lessee and any
assignee of Lessor's rights hereunder. The Lease shall constitute an agreement
of lease, and nothing contained herein shall be construed as conveying to
Lessee any right, title or interest in the Aircraft except as a lessee only.
The section headings in this Amendment are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or provisions
hereof. THIS AMENDMENT HAS BEEN DELIVERED IN THE STATE OF ILLINOIS AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. This Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of such counterparts shall together constitute but one and
the same instrument. Notwithstanding the immediately preceding sentence, to
the extent, if any, that this Amendment (whether alone or together with any
other portion of the Lease) constitutes chattel paper (as such term is defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Amendment may be created through the transfer or
possession of any counterpart other than the original counterpart, which shall
be identified as the counterpart containing the receipt therefor executed by
the Indenture Trustee as indenture trustee under the Trust Indenture on a
signature page of such counterpart.
* * *
2
<PAGE> 4
[Second Amendment to Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Second Amendment to Lease Agreement to be duly executed on the day and year
first above written.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee,
Lessor
By:
----------------------------------
UNITED AIR LINES, INC.,
Lessee
By:
----------------------------------
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Second
Amendment to Lease Agreement is hereby acknowledged on this _____ day of
January, 1996.
STATE STREET BANK AND TRUST COMPANY
Indenture Trustee
By
-----------------------------------
Authorized Officer
3
<PAGE> 1
EXHIBIT 4.22
*
Aircraft N398
- --------------------------------------------------------------------------------
THIRD AMENDMENT TO LEASE AGREEMENT
(1994 737 B)
Dated as of December 23, 1997
between
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity
except as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
------------------------------------
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
------------------------------------
- -------------------------------------------------------------------------------
As set forth in Section 20 of the Lease, Lessor has assigned to the Indenture
Trustee (as defined in the Lease) certain of its right, title and interest in
and to the Lease, including all amendments thereto. To the extent, if any,
that this Third Amendment to Lease Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest herein may be created through the transfer
or possession of any counterpart other than the original executed counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by the Indenture Trustee on the signature page thereof.
- -------------------------------------------------------------------------------
<PAGE> 2
THIRD AMENDMENT TO LEASE AGREEMENT
(1994 737 B)
THIS THIRD AMENDMENT TO LEASE AGREEMENT (1994 737 B) dated as
of December 23, 1997 (this "Amendment") between STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity (as assignee of First Security Bank, National
Association (formerly known as First Security Bank of Utah, National
Association; the "Original Lessor")), except as expressly provided herein, but
solely as Owner Trustee under Trust Agreement (1994 737 B) (in such capacity,
"Lessor"), and UNITED AIR LINES, INC., a corporation organized and existing
pursuant to the laws of the State of Delaware ("Lessee"), amends that certain
Lease Agreement (1994 737 B) dated as of September 1, 1994 (the "Original
Lease") between Lessee and Original Lessor, as supplemented by Lease Supplement
No. 1 (1994 737 B) dated September 28, 1994 ("Lease Supplement No. 1") between
Original Lessor and Lessee, as amended by that certain First Amendment to Lease
Agreement (1994 737 B) dated January 26, 1996 (the "First Amendment") between
Original Lessor and Lessee, and as further amended by that certain Second
Amendment to Lease Agreement (1994 737 B) dated January 26, 1996 (the "Second
Amendment") between Original Lessor and Lessee (the Original Lease, as
supplemented by Lease Supplement No. 1 and as amended by the First Amendment
and the Second Amendment, is referred to herein collectively as the "Lease").
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment,
capitalized terms used herein shall have the meanings attributed thereto in the
Lease;
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor
the Aircraft more particularly described in Lease Supplement No. 1;
WHEREAS, a counterpart of the Original Lease, to which was
attached and made a part thereof a counterpart of Lease Supplement No. 1, was
recorded by the Federal Aviation Administration on November 1, 1994 and
assigned Conveyance No. II002366;
WHEREAS, a counterpart of the First Amendment was recorded by
the Federal Aviation Administration on March 7, 1996 and assigned Conveyance
No. HKOO5883;
WHEREAS, a counterpart of the Second Amendment was recorded by
the Federal Aviation Administration on March 7, 1996 and assigned Conveyance
No. HKOO5884; and
WHEREAS, pursuant to that certain Assignment and Assumption
Agreement (1994 737 B) dated as of December 11, 1997 between the Lessor and the
Original Lessor, the
<PAGE> 3
[Third Amendment to Lease Agreement (1994 737 B)]
Original Lessor assigned to the Lessor, and the Lessor assumed, all of the
obligations of the Original Lessor under the Operative Documents); and
WHEREAS, Lessor and Lessee desire to amend the Lease in
certain respects.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Amendment to Exhibits B, C, D and H. Exhibits B,
C, D and H to the Lease are hereby deleted in their entirety and replaced with
Exhibits B, C, D and H, respectively, to this Amendment (there being no
Exhibits A, E, F and G to this Amendment).
SECTION 2. Amendments to Section 1. Section 1 of the Lease
is hereby amended in the following manner:
(a) The following defined terms are hereby added to Section 1
in alphabetical order:
""Appraisers" means, collectively, Aircraft
Information Services, Inc., BK Associates, Inc. and
AvSolutions, Inc., or such other independent aircraft
appraiser as may be acceptable to Owner Participant and the
Indenture Trustee."
""Assignment and Assumption Agreements" means each of
(i) that certain Assignment and Assumption Agreement (1994 737
B) dated as of December 11, 1997, between the Owner Trustee
and the Original Owner Trustee and (ii) that certain
Assignment and Assumption Agreement (1994 737 B) dated as of
December 11, 1997 between the Original Indenture Trustee and
the Indenture Trustee."
""Basic Pass Through Trust Agreement" means the Pass
Through Trust Agreement dated as of December 23, 1997 between
Lessee and Pass Through Trustee, but does not include any Pass
Through Trust Supplement."
""Closing Date" means December 23, 1997."
""Equipment Note" or "Equipment Notes" has
the meaning set forth in the Trust Indenture."
""First Amendment to Lease Agreement" means that
certain First Amendment to Lease Agreement (1994 737 B) dated
January 26, 1996 by and between Lessee and Original Lessor."
2
<PAGE> 4
[Third Amendment to Lease Agreement (1994 737 B)]
""First Amendment to Participation Agreement" means
that certain First Amendment to Participation Agreement (1994
737 B) dated January 26, 1996 among Lessee, the Owner
Participant, the Original Owner Trustee, the Original Loan
Participants and the Original Indenture Trustee."
""First Amendment to Trust Agreement" means that
certain First Amendment to Trust Agreement (1994 737 B) dated
December 23, 1997 by and between the Owner Participant and
State Street Bank and Trust Company of Connecticut, National
Association."
""First Amendment to Trust Indenture" means that
certain First Amendment to Trust Indenture and Security
Agreement (1994 737 B) dated June 1, 1995 between Original
Owner Trustee and Original Indenture Trustee."
""Fundamental Documents" means, collectively, the
Operative Documents and the Pass Through Documents."
""Intercreditor Agreement" means that certain
Intercreditor Agreement among the Pass Through Trustees, the
Primary Liquidity Providers and the Subordination Agent, dated
as of December 23, 1997; provided that, for purposes of any
obligation of Lessee or Owner Trustee, no amendment,
modification or supplement to, or substitution or replacement
of, such Intercreditor Agreement shall be effective unless
consented to by Lessee or Owner Trustee, as applicable."
""Make-Whole Amount" has the meaning set forth in the
Trust Indenture."
""Note Purchase Agreement" has the meaning specified
therefor in the Trust Indenture."
""Noteholder" has the meaning set forth in the Trust
Indenture."
""Original Indenture" means the Trust Indenture and
Security Agreement (1994 737 B) dated as of September 1, 1994,
as supplemented by Trust Agreement and Trust Indenture and
Security Agreement Supplement (1994 737 B) dated September 28,
1994, as amended by that certain First Amendment to Trust
Indenture and Security Agreement (1994 737 B) dated as of June
1, 1995, that certain Second Amendment to Trust Indenture and
Security Agreement (1994 737 B) dated as of December 1, 1995
and that certain Third Amendment to Trust Indenture and
Security Agreement (1994 737 B) dated January 26, 1996, in
each case between the Original Owner Trustee and the Original
Indenture Trustee."
3
<PAGE> 5
[Third Amendment to Lease Agreement (1994 737 B)]
""Original Indenture Trustee" means State Street Bank
and Trust Company."
""Original Owner Trustee" means First Security Bank
of Utah, National Association, not in its individual capacity,
but solely as Owner Trustee under the Trust Agreement, except
as otherwise expressly stated."
""Owner Trustee Parent" means State Street Bank and
Trust Company, a Massachusetts trust company."
""Owner Trustee Parent Guaranty" means the guaranty
of the Owner Trustee's obligations under the Operative
Documents as delivered by the Owner Trustee Parent in
connection with the assumption by the Owner Trustee of the
Original Owner Trustee's obligations under the Trust
Agreement."
""Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to any of the Pass
Through Trust Agreements."
""Pass Through Documents" means the Pass Through
Trust Agreements, the Intercreditor Agreement, Registration
Rights Agreement, Note Purchase Agreement and the Primary
Liquidity Facilities."
""Pass Through Trust" means each of the four separate
pass through trusts created pursuant to the related Pass
Through Trust Agreement."
""Pass Through Trust Agreements" means each of the
four separate Pass Through Trust Supplements, together in each
case with the Basic Pass Through Trust Agreement, each dated
as of December 23, 1997 and entered into by and between the
Lessee and a Pass Through Trustee."
""Pass Through Trust Supplement" shall have the
meaning specified for the term "Trust Supplement" in the Basic
Pass Through Trust Agreement."
""Pass Through Trustee" means First Security Bank,
National Association in its capacity as trustee under each
Pass Through Trust Agreement, and such other Person that may
from time to time be acting as successor trustee under any
such Pass Through Trust Agreement."
""Primary Liquidity Facilities" has the meaning set
forth in the Trust Indenture."
""Primary Liquidity Providers" has the meaning set
forth in the Trust Indenture."
4
<PAGE> 6
[Third Amendment to Lease Agreement (1994 737 B)]
""Redemption Date" has the meaning set forth in the
Trust Indenture."
""Registration Rights Agreement" has the meaning
specified in the Intercreditor Agreement."
""Related Indemnitee" with respect to an Indemnitee,
means any director, officer, employee, agent, servant or
Affiliate thereof."
""Second Amendment to Lease Agreement " means that
certain Second Amendment to Lease Agreement (1994 737 B) dated
January 26, 1996 between Lessor and Lessee."
""Second Amendment to Participation Agreement" means
that certain Second Amendment to Participation Agreement (1994
737 B) dated as of December 23, 1997 among Lessee, the Owner
Participant, the Owner Trustee, the Indenture Trustee, the
Pass Through Trustees and the Subordination Agent."
""Second Amendment to Trust Indenture" means that
certain Second Amendment to Trust Indenture and Security
Agreement (1994 737 B) dated as of December 1, 1995 between
the Original Owner Trustee and the Original Indenture
Trustee."
""Series" has the meaning set forth in the Trust
Indenture."
""Series A" or "Series A Equipment Notes" has the
meaning set forth in the Trust Indenture."
""Series B" or "Series B Equipment Notes" has the
meaning set forth in the Trust Indenture."
""Series C" or "Series C Equipment Notes" has the
meaning set forth in the Trust Indenture."
""Series D" or "Series D Equipment Notes" has the
meaning set forth in the Trust Indenture."
""Subordination Agent" has the meaning set forth in
the Trust Indenture."
""Third Amendment to Lease" means that certain Third
Amendment to Lease Agreement (1994 737 B) dated as of December
23, 1997 between Lessor and Lessee."
5
<PAGE> 7
[Third Amendment to Lease Agreement (1994 737 B)]
""Third Amendment to Trust Indenture" means that
certain Third Amendment to Trust Indenture and Security
Agreement (1994 737 B) dated January 26, 1996 between Original
Owner Trustee and Original Indenture Trustee."
(b) The definition of "Additional Insured" is hereby amended
to be and read in its entirety as follows:
""Additional Insured" means Lessor, in its individual
capacity and as owner of the Aircraft, the Indenture Trustee,
the Owner Participant, Lessee in its capacity as sublessor
under any Sublease, each Pass Through Trustee (so long as it
is the holder of any Equipment Note), the Subordination Agent
(so long as it is the holder of any Equipment Note), each
Primary Liquidity Provider and each of their respective
Affiliates, successors and permitted assigns, and the
respective directors, officers, employees, servants and agents
of each of the foregoing."
(c) The definition of "Base Rate is hereby amended to be and
read in its entirety as follows:
""Base Rate" means the rate of interest announced
from time to time by The First National Bank of Chicago at its
principal office in Chicago, Illinois as its "corporate base
rate" (or its equivalent successor rate if the corporate base
rate is no longer used)."
(d) The definition of "Business Day" is hereby amended to be
and read in its entirety as follows:
""Business Day" means any day (x) other than a
Saturday or Sunday or a day on which commercial banks are
required or authorized to close in: Chicago, Illinois; New
York, New York; Frankfurt, Germany; the city and state in
which the principal place of business of the Owner Trustee is
located; and, so long as any Equipment Note is outstanding,
the city and state in which the Indenture Trustee, the
Subordination Agent or any Pass Through Trustee has its
principal place of business or receives and disburses funds
and (y) on which dealings are carried on in the London
interbank market."
(e) The definition of "Certificate" is hereby amended to be
and read in its entirety as follows:
""Certificate" means each "Equipment Note" as defined
in the Trust Indenture."
6
<PAGE> 8
[Third Amendment to Lease Agreement (1994 737 B)]
(f) The definition of "Corporate Trust Department" is hereby
amended by deleting the reference to "each Holder" contained therein
and inserting a reference to "each Pass Through Trustee" in lieu
thereof."
(g) The definition of "Debt Rate" is hereby amended to be and
read in its entirety as follows:
""Debt Rate" means at any time, the interest rate
equal to the weighted average of the "Applicable Rate" then in
effect with respect to each Equipment Note then outstanding."
(h) The definition of "Event of Loss" is hereby amended such
that clause (vi) shall be and read in its entirety as follows:
"(vi) the operation of or location of the Aircraft,
while under requisition for use by any government, in any area
excluded from coverage by any insurance policy in effect with
respect to the Aircraft required by the terms of Section 11,
unless in the case of a requisition by the government of the
United States or any government of registry or any agency or
instrumentality thereof, Lessee shall have obtained an
indemnity in lieu thereof from such government (provided that
in the case of any indemnity provided by a government other
than the government of the United States (or any agency or
instrumentality thereof), the Owner Participant, Lessor and
the Indenture Trustee (so long as the Lien of the Trust
Indenture shall not have been discharged in accordance with
the terms thereof) shall have received an opinion, in form and
substance reasonably satisfactory to Owner Participant, as to
the enforceability of such indemnity within 15 Business Days
of such requisition);"
(i) The definition of "Holder" is hereby amended to be and
read in its entirety as follows:
""Holder" means each "Noteholder" as defined in the
Trust Indenture."
(j) The definition of "Indemnitees" is hereby amended to be
and read in its entirety as follows:
""Indemnitees" means the Owner Participant, the Owner
Participant Guarantor, the Owner Trustee, in its individual
capacity and as trustee under the Trust Agreement, the Trust
Estate, the Indenture Estate, the Indenture Trustee, in its
individual capacity and as trustee under the Trust Indenture,
each Pass Through Trustee (so long as it is the holder of any
Equipment Note) (in its individual capacity and as Pass
Through Trustee), the Pass Through Trusts, each Primary
Liquidity Provider, each Noteholder and the Subordination
Agent
7
<PAGE> 9
[Third Amendment to Lease Agreement (1994 737 B)]
(so long as it is the holder of any Equipment Note) and each
of their respective Affiliates, successors, permitted assigns,
directors, officers, employees, servants and agents."
(k) The definition of "Lease Period Date" is hereby amended
to be and read in its entirety as follows:
""Lease Period Date" means, (A) with respect to the
Basic Term, each of (i) January 1, 1996, (ii) each July 1 and
January 1 which occurs after January 1, 1996 through and
including July 1, 1997, (iii) March 2, 1998 and each March 2,
June 2, September 2 and December 2 thereafter through and
including March 2, 2016 and (iv) the Basic Term Expiry Date
and (B) with respect to any Renewal Term, each March 28 and
September 28 which occurs after the Basic Term Expiry Date
(with respect to the initial Renewal Term) or the last day of
the preceding Renewal Term (with respect to any subsequent
Renewal Term), as the case may be, through and including the
last day of such Renewal Term."
(l) The definition of "Operative Documents" is hereby amended
to be and read in its entirety as follows:
""Operative Documents" means the Lease (including any
Lease Supplement); the Participation Agreement; the Second
Amendment to Participation Agreement; the Tax Indemnity
Agreement; the Trust Agreement; any Trust Supplement; the
Purchase Agreement; the Owner Trustee's Bill of Sale; the
Owner Trustee's FAA Bill of Sale; the Owner Trustee's Purchase
Agreement; an acceptance certificate covering the Aircraft in
the form agreed to by the Participants and Lessee (the
"Acceptance Certificate"); the Trust Indenture; the Equipment
Notes outstanding at the time of reference; the Owner
Participant Guaranty; and the Consent and Agreement."
(m) The definition of "Stipulated Loss Value Date" is hereby
amended to be and read in its entirety as follows:
""Stipulated Loss Value Date" means, notwithstanding
Section 3(b) of the initial Lease Supplement, the 2nd day of
each calendar month during the Basic Term and the 28th
calendar day of each calendar month during any Renewal Term."
(n) The definition of "Trust Indenture" is hereby amended to
be and read in its entirety as follows:
8
<PAGE> 10
[Third Amendment to Lease Agreement (1994 737 B)]
""Trust Indenture" means the Amended and Restated
Trust Indenture and Security Agreement (1994 737 B) dated as
of December 23, 1997 between the Owner Trustee and the
Indenture Trustee, as originally executed or as modified,
amended or supplemented in accordance with the provisions
thereof and the terms of the Participation Agreement,
including, without limitation, any Trust Supplement entered
into pursuant to the applicable provisions thereof."
(o) The definition of "Trust Office" is hereby amended by
deleting the words "each Holder" contained therein and inserting the
words "the Pass Through Trustee" in lieu thereof.
(p) The following defined terms are hereby deleted in their
entirety:
"Extraordinary Purchase Option Date"; "Failed
Refinancing Notice"; "Initial Interest Set-Up Date"; "Lending
Office"; "Qualifying Interest Rate"; "Qualifying Interest Rate
Spread"; "Qualifying Refinancing"; and "Refinancing Mandate
Request Letter"
SECTION 3. Amendments to Section 3. Section 3 of the Lease
is hereby amended in the following manner:
(a) The paragraph of Section 3(b) following the second
sentence of Section 3(b) is hereby amended to be and read in its
entirety as follows:
"Although the Basic Rent amounts set forth in Exhibit
B hereto have been computed on the assumption that the
aggregate amount of interest payable on all of the Equipment
Notes on each Lease Period Date during the Basic Term will be
the amount set forth in Exhibit B hereto opposite such Lease
Period Date under the column with the heading "Assumed
Interest Amount" (herein referred to as the "Assumed Interest
Amount" for such Lease Period Date), Lessor and Lessee
recognize that the actual aggregate amount of interest due and
payable on all Equipment Notes on any Lease Period Date may,
from time to time during the Basic Term, be greater or less
than the Assumed Interest Amount for such Lease Period Date
and that the basis upon which the actual amount of interest on
the Equipment Notes will be computed will be as provided in
the Trust Indenture. Accordingly, Basic Rent shall be
increased or decreased (but not below zero), as the case may
be, by the Rent Differential Amount (as defined herein). For
purposes hereof, "Rent Differential Amount" shall mean, as of
any Lease Period Date, the absolute value of the difference
between (i) the aggregate amount of interest actually due and
payable on such Lease Period Date on each Series of Equipment
Notes (or due and payable on the next following Business Day
if such date shall not constitute a Business Day) and (ii) the
Assumed Interest Amount for such Lease Period Date. If, as
9
<PAGE> 11
[Third Amendment to Lease Agreement (1994 737 B)]
of such date, the amount determined in accordance with clause
(i) of the immediately preceding sentence shall be greater
than the amount determined in accordance with clause (ii) of
such sentence, the amount of Basic Rent payable on such date
shall be increased by the Rent Differential Amount. If, as of
such date, the amount determined in accordance with such
clause (ii) shall exceed the amount determined in accordance
with such clause (i), the amount of Basic Rent due on such
date shall be decreased (but not below zero) by the Rent
Differential Amount."
(b) The first sentence of Section 3(c)(iv) is hereby
amended to be and read in its entirety as follows:
"(iv) Anything contained in the Participation
Agreement, this Lease or any other Operative Document to the
contrary notwithstanding, each installment of Basic Rent and
Interim Rent payable hereunder, whether or not adjusted in
accordance with this Section 3(c), together with the amount of
Supplemental Rent, if any, in respect of the date on which
such installment is payable, and each payment of Termination
Value, Stipulated Loss Value and EBO Percentage, whether or
not adjusted in accordance with this Section 3(c) or Section 8
of the Tax Indemnity Agreement, and all other amounts
excluding Excluded Payments payable simultaneously by Lessee
pursuant to this Lease, in each case, on the date on which
such payment is due, shall be in an amount at least sufficient
to pay in full, and shall be available to be applied by Lessor
in payment on account of, any payments then required to be
made on account of the principal amount (and Break Amount, if
any and/or Make-Whole Amount, if any) of and accrued and
unpaid interest on the Certificates then outstanding."
(c) The second sentence of Section 3(c)(iv) of the Lease is
hereby amended by adding the word "judicial" immediately prior to the
words "attachment or diversion of Rent" which appear therein.
(d) The second sentence of Section 3(d) is hereby amended to
be and read in its entirety as follows:
"Lessee shall also pay on behalf of Lessor as
Supplemental Rent (i) an amount equal to any amount payable by
the Lessor to the Indenture Trustee pursuant to the second
paragraph of Section 2.01 of the Trust Indenture or Section
9.06(a) of the Trust Indenture and (ii) an amount equal to any
amount payable by Lessor as Break Amount and/or Make-Whole
Amount as and when any such Break Amount and/or Make-Whole
Amount shall be due and payable; provided, however, that
Lessee shall have no obligation to pay to Lessor any Break
Amount and/or Make-Whole Amount payable due to or in
connection
10
<PAGE> 12
[Third Amendment to Lease Agreement (1994 737 B)]
with the occurrence of an Indenture Event of Default if no
Lease Event of Default has occurred and is then continuing."
(e) Section 3(e) is hereby amended to be and read in its
entirety as follows:
"(e) Payments in General. All payments of Rent
other than Excluded Payments payable to Lessor shall be made
directly by Lessee by wire transfer of immediately available
funds prior to 11:00 a.m., Chicago time, on the date of
payment in Dollars, to Lessor at its office at 225 Franklin
Street, Boston, Massachusetts 02110, Attention: Corporate
Trust Department (or such other office of Lessor in the
continental United States or such other account as Lessor
shall direct in a notice to Lessee at least 10 Business Days
prior to the date such payment of Rent is due); provided, that
so long as the Trust Indenture shall not have been fully
discharged, Lessor hereby directs and Lessee agrees, that all
Basic Rent (other than Excluded Payments) and all other
amounts which are required to be paid to or deposited with the
Owner Trustee hereunder (other than Excluded Payments) shall
be paid directly to the Indenture Trustee at the times and in
funds specified in this Section 3(e) at the offices of the
Indenture Trustee at First Security Bank, National
Association, 79 South Main Street, Salt Lake City, Utah 84111,
Attention: Corporate Trust Department (or such other office
of Indenture Trustee in the continental United States or such
other account as Indenture Trustee shall direct in a notice to
Lessee at least 10 Business Days prior to the date such
payment of Basic Rent is due). Excluded Payments shall by
paid in Dollars in immediately available funds to the Person
to whom payable at the address of such Person specified in
Schedule I of the Participation Agreement. Notwithstanding
anything to the contrary contained herein, if any date on
which a payment of Rent 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 interest at the then effective Debt Rate
shall accrue on the amount of such payment during such
extension."
SECTION 4. Amendment to Section 4. The parenthetical clause
contained in clause (v) of Section 4 of the Lease is hereby amended to be and
read in its entirety as follows:
"(if and so long as such citizenship is necessary
under the Transportation Code as in effect at such time or, if
it is not necessary, if and so long as the Owner Trustee's
citizenship would have any adverse effect on the Owner
Participant or Lessee or the Indenture Trustee (so long as the
Lien of the Indenture shall not have been discharged in
accordance with the terms thereof)"
11
<PAGE> 13
[Third Amendment to Lease Agreement (1994 737 B)]
SECTION 5. Amendment to Section 5. Clause (B) in the
parenthetical contained in clause (iii) of the third sentence of Section 5(a)
is hereby amended to be and read in its entirety as follows:
"(B) that are being diligently contested in good
faith by Lessee, so long as such contest does not interrupt
the normal use of the Aircraft and such contest does not
involve any material risk of criminal liability or any
unindemnified material risk of civil liability to Lessor in
its individual capacity, the Indenture Trustee (as long as the
Lien of the Trust Indenture shall not have been discharged in
accordance with the terms thereof) or the Owner Participant,
jeopardize the right, title and interest of Lessor in its
individual capacity, the Indenture Trustee (as long as the
Lien of the Trust Indenture shall not have been discharged in
accordance with the terms thereof) or the Owner Participant in
and to the Airframe and/or the Engines, or result in a claim,
loss or expense for which Lessor, the Owner Participant or the
Indenture Trustee is not indemnified and for which Lessee is
not then willing to indemnify Lessor in its individual
capacity, the Indenture Trustee (as long as the Lien of the
Trust Indenture shall not have been discharged in accordance
with the terms thereof) or the Owner Participant in a manner
reasonably satisfactory to the Lessor in its individual
capacity and the Owner Participant, provided that if Lessee
does not prevail in such contest then Lessee shall, at its
sole expense, cause the Aircraft to be promptly put in the
condition it would have been on the last day of the Term but
for this clause (B)),"
SECTION 6. Amendments to Section 7. Section 7 of the Lease
is hereby amended in the following manner:
(a) Section 7(a)(2) is hereby amended to be and read in its
entirety as follows:
"(2) Operation. Lessee will not (or permit any
Sublessee to) maintain, use, service, repair, overhaul or
operate the Aircraft in violation of any law or any rule,
regulation, treaty, order or certificate of any government or
governmental authority (domestic or foreign) having
jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft
issued by any such authority, except that, after Lessee shall
have provided Lessor with a certificate of its President, any
Vice President, the Treasurer or any Assistant Treasurer
stating all relevant facts pertaining thereto, Lessee or any
Sublessee may contest in good faith the validity or
application of any such law, rule, regulation, order,
certificate, license, registration or violation in any
reasonable manner which does not jeopardize the right, title
and interest of the Lessor in its individual capacity or, the
Owner Participant or the Indenture Trustee (so long as the
Lien of the Trust Indenture shall not have been discharged in
accordance with the terms thereof) in and to the Airframe
12
<PAGE> 14
[Third Amendment to Lease Agreement (1994 737 B)]
and/or the Engines, result in a claim, loss or expense for
which Lessor in its individual capacity or the Owner
Participant or the Indenture Trustee (so long as the Lien of
the Trust Indenture shall not have been discharged in
accordance with the terms thereof) is not indemnified and for
which Lessee is not then willing to indemnify Lessor in its
individual capacity or Owner Participant or the Indenture
Trustee (so long as the Lien of the Trust Indenture shall not
have been discharged in accordance with the terms thereof) in
a manner reasonably satisfactory to Lessor in its individual
capacity and the Owner Participant or otherwise materially
adversely affect Lessor in its individual capacity or the
Owner Participant, but only so long as such proceedings do not
involve any material risk of criminal liability or any
unindemnified material risk of civil liability to Lessor in
its individual capacity or the Owner Participant or the
Indenture Trustee (so long as the Lien of the Trust Indenture
shall not have been discharged in accordance with the terms
thereof) for which Lessor in its individual capacity or the
Owner Participant is not indemnified and for which Lessee is
not then willing to indemnify Lessor in its individual
capacity or the Owner Participant or the Indenture Trustee (so
long as the Lien of the Trust Indenture shall not have been
discharged in accordance with the terms thereof) in a manner
reasonably satisfactory to the Owner Trustee or the Owner
Participant, as the case may be. If the indemnities or
insurance specified in Section 11(f), or some combination
thereof, have not been obtained, Lessee will not operate the
Aircraft, or permit any Sublessee to operate the Aircraft, in
or to any area excluded from coverage by any insurance
required to be maintained by the terms of Section 11,
provided, however, that the failure of Lessee to comply with
the provisions of this sentence shall not give rise to an
Event of Default hereunder where such failure is attributable
to a hijacking, medical emergency, equipment malfunction,
weather conditions, navigational error or other isolated
extraordinary event beyond the control of Lessee and Lessee is
taking all reasonable steps to remedy such failure as soon as
is reasonably practicable."
(b) Section 7(a)(3) is hereby amended to be and read in its
entirety as follows:
"(3) Reregistration. At any time after the close
of the calendar year in which occurs the seventh anniversary
of the Delivery Date, Lessor shall, at the request and sole
expense of Lessee, cooperate with Lessee and take all actions
required to change the country of registration of the Aircraft
upon compliance by Lessee with all of the terms of Section
8(e) of the Participation Agreement and Section 7.02 of the
Trust Indenture."
(c) The lead-in paragraph of Section 7(b) of the Lease is
hereby amended to be and read in its entirety as follows:
13
<PAGE> 15
[Third Amendment to Lease Agreement (1994 737 B)]
"Lessee will not, without the prior written consent
of Lessor, sublease or otherwise in any manner deliver,
transfer or relinquish possession of the Airframe or any
Engine or install or permit any Engine to be installed on any
airframe other than the Airframe; provided that, so long as no
Section 14(a), (b), (f) or (g) Default or, in the case of
paragraph (viii) of this Section 7(b), no Section 14(d)
(solely with respect to Lessee's obligations under Section
7(a) or (b)(viii) hereof or Section 8 hereof) Default, or any
Event of Default shall have occurred and be continuing at the
time of such sublease, delivery, transfer or relinquishment of
possession or installation, and so long as the action to be
taken shall not deprive the Indenture Trustee of the perfected
lien of the Trust Indenture on the Airframe or any Engine and
Lessee and any Sublessee shall continue to comply with the
provisions of Sections 6, 7(a) and 11 hereof, Lessee may,
without the prior written consent of Owner Participant or any
other Person:"
(d) Clause (viii) of Section 7(b) is hereby amended to be and
read in its entirety as follows:
"(viii) so long as the Sublessee is not subject to a
proceeding or final order under applicable bankruptcy,
insolvency or reorganization laws on the date the Sublease is
entered into, Lessee may, at any time in its sole discretion,
enter into a sublease with (1) a U.S. Air Carrier, (2) after
the close of the calendar year in which there occurs the
seventh anniversary of the Delivery Date, any Permitted
Sublessee, or (3) after the close of the calendar year in
which there occurs the seventh anniversary of the Delivery
Date, any other Person approved in writing by the Owner
Participant, which approval shall not be unreasonably withheld
if in regard to this subclause (3) Lessor and the Indenture
Trustee receive an opinion of counsel reasonably acceptable to
the Owner Participant that the terms of the sublease and other
Operative Documents will be valid in the country where
Sublessee is domiciled and that such country would give effect
to the priority and validity of the Lien of the Trust
Indenture; that no Participant, the Lessor or the Indenture
Trustee (so long as the Lien of the Trust Indenture shall not
have been discharged in accordance with the terms thereof) is
required to register to do business in the Sublessee's country
of domicile; that there is no tort liability for owners or
financiers not in possession that is more extensive than under
United States law or any state law (it being understood that
if such opinion cannot be given
14
<PAGE> 16
[Third Amendment to Lease Agreement (1994 737 B)]
in a form satisfactory to the Owner Participant such opinion
will be waived if insurance reasonably satisfactory to the
Owner Participant and the Lessor, in its individual capacity,
is provided at Lessee's expense to cover such risk); that fair
compensation in a currency freely convertible into Dollars is
mandated if there is a requisition of use or title of the
Aircraft by the country in which the Sublessee is domiciled
(it being understood that if such opinion cannot be given in a
form reasonably satisfactory to the Owner Participant such
opinion will be waived if insurance reasonably satisfactory to
the Owner Participant, is provided at Lessee's expense to
cover such risk); that there exist no possessory rights in
favor of the Sublessee which upon Lessee's bankruptcy or other
Default hereunder (assuming the Sublessee is not bankrupt)
would prevent the return of the Aircraft in accordance with
the terms hereof or inhibit the Lessor's rights therein;
provided, however, (A) that no sublease, including all
permissible renewal periods, shall extend beyond the Basic
Term or any Renewal Term then in effect, unless Lessee shall
have irrevocably committed to purchase the Aircraft or renew
this Lease in accordance with the terms hereof at the end of
the Basic Term or Renewal Term, as the case may be, to a date
beyond the latest permissible expiration date of such
sublease, and (B) that, on the date of such sublease, the
United States and the country in which sublessee is domiciled
and principally located maintain diplomatic relations."
SECTION 7. Amendments to Section 9. Section 9 of the Lease
is hereby amended in the following manner:
(a) Section 9(b) is hereby amended to be and read in its
entirety as follows:
"So long as no Event of Default under Section 14(d)
hereunder (solely with respect to Lessee's obligations under
Section 7(a)(1) hereof and Section 8 hereof) shall have
occurred and be continuing, Lessee shall have the right to
terminate this Lease on the third Business Day prior to any
Lease Period Date occurring on or after the close of the
calendar year in which occurs the seventh anniversary of the
Delivery Date if Lessee shall have made a good faith
determination that the Aircraft is surplus to Lessee's
requirements or economically obsolete to Lessee. Lessee shall
give to Lessor and Indenture Trustee at least one hundred and
eighty (180) days revocable (except as provided below) advance
written notice of Lessee's intention to so terminate this
Lease (any such notice, a "Termination Notice") (i) specifying
the date on which Lessee intends to terminate this Lease in
accordance with this Section 9(b) (such specified date, a
"Termination Date") and (ii) attaching a certificate of the
Assistant Treasurer or any more senior officer of Lessee which
states that the Aircraft is surplus to Lessee's requirements
or economically obsolete to Lessee. The Termination Notice
shall become irrevocable twenty (20) days prior to the
Termination Date, except that, so long as the Subordination
Agent or any Pass Through Trustee is the registered holder of
any Equipment Note, the Termination Notice shall become
irrevocable twenty-six (26) days prior to the Termination
Date; provided, however, that if no sale of the Aircraft shall
have occurred on or prior to the Termination Date and if
Lessor shall not have elected to retain the Aircraft, Lessee's
Termination Notice shall be deemed withdrawn."
15
<PAGE> 17
[Third Amendment to Lease Agreement (1994 737 B)]
(b) Section 9(c) is hereby amended to be and read in its entirety as
follows:
"(c) Sale of the Aircraft. In the event that
Lessee shall have proposed to terminate this Lease under
Section 9(b), then during the period commencing with the date
of the Termination Notice until the proposed Termination Date,
Lessee, as non-exclusive agent for Lessor and at no expense to
Lessor, shall use reasonable efforts to obtain bids in Dollars
for the purchase of the Aircraft and, in the event it receives
any bid, Lessee shall, within five Business Days after receipt
thereof and at least ten Business Days prior to the proposed
Termination Date, advise Lessor in writing of the amount and
terms of such bid, and the name and address of the party or
parties (who shall not be Lessee or any Affiliate of Lessee or
any person with whom Lessee or any such Affiliate has an
arrangement or understanding regarding the future use of the
Aircraft by Lessee or any such Affiliate but who may be the
Owner Participant, any Affiliate thereof or any Person
contacted by the Owner Participant) submitting such bid.
After Lessee shall have advised Lessor of all bids received,
the Owner Participant, any Affiliate thereof or any Person
contacted by the Owner Participant may submit a further bid or
bids to Lessee not later than five Business Days prior to the
Termination Date proposed by Lessee (unless Lessee shall have
revoked the Termination Notice specifying such proposed
Termination Date). Subject to the next succeeding sentence,
on or before the Termination Date, subject to the release of
all mortgage and security interests with respect to the
Aircraft under the Trust Indenture: (1) Lessee shall deliver
the Aircraft, or cause the Aircraft to be delivered to the
highest bidder as determined below, in the same manner and in
the same condition and otherwise in accordance with all the
terms of this Lease as if redelivery were made to Lessor
pursuant to Section 5 hereof, and Lessee shall duly transfer
to Lessor title to any engine installed on the Airframe and
not owned by Lessor, all in accordance with the terms of
Section 5 hereof (but subject to the provisions of Section
5(e) hereof), (2) Lessor shall comply with the terms of the
Trust Indenture and shall, without recourse or warranty
(except as to the absence of Lessor Liens (including for this
purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens)), subject to prior or
concurrent payment by Lessee of all amounts due under clause
(3) of this sentence, sell the Aircraft for cash in Dollars to
the entity, if any, which shall have submitted the highest
bona fide bid (evaluated on a net cash basis) therefor, the
total selling price realized at such sale to be retained by
Lessor, and (3) Lessee shall simultaneously pay or cause to be
paid to Lessor in the manner provided in Section 3(e), (A) if
the proceeds of the sale of the Aircraft so sold, net of
reasonable out-of-pocket costs and expenses incurred by Lessor
and the Owner Participant in connection therewith, including,
without limitation, applicable sales or transfer taxes and
legal fees, are less than the Termination Value for the
Aircraft computed as of the Redemption Date
16
<PAGE> 18
[Third Amendment to Lease Agreement (1994 737 B)]
immediately succeeding the Termination Date, the difference in
Dollars, (B) all unpaid Basic Rent due on or prior to such
Redemption Date (other than Basic Rent payable in advance on
such Redemption Date, if any) and all unpaid Supplemental Rent
with respect to the Aircraft due on or prior to such
Redemption Date, and (C) Break Amount, if any, and Make-Whole
Amount, if any, due as of such Redemption Date on the
Certificates and upon receiving all such payments referred to
in clauses (2) and (3) above Lessor simultaneously will
transfer to Lessee, without recourse or warranty (except as to
the absence of Lessor Liens (including for this purpose Liens
that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and
interest in and to any Engines constituting part of the
Aircraft which were not sold with the Aircraft.
Notwithstanding the preceding sentence, Lessor may, if Lessee
has not already revoked the Termination Notice, elect to
retain title to the Aircraft. If Lessor so elects, Lessor
shall give to Lessee written notice of such election at least
ten Business Days prior to the Termination Date accompanied by
an irrevocable undertaking by the Owner Participant to make
available to Lessor for payment to the Indenture Trustee on
the Termination Date the amount required to pay in full the
unpaid principal of the Certificates outstanding on such
Redemption Date together with all other amounts due on such
Redemption Date thereunder less amounts to be paid by Lessee
as a result of the payment thereof as set forth in the second
following sentence. Upon receipt of notice of such an
election by Lessor and the accompanying undertaking by the
Owner Participant, Lessee shall cease its efforts to obtain
bids as provided above and shall reject all bids theretofore
or thereafter received. On the Termination Date, Lessor shall
(subject to the payment by Lessee of all Rent due on or prior
to such Redemption Date as set forth below) pay (or deposit,
in accordance with Article 10 of the Trust Indenture) in full
the unpaid principal amount of the Certificates outstanding on
such Redemption Date, plus interest accrued to, or to accrue
thereon to but excluding such Redemption Date, together with
all other amounts due thereunder less any amounts to be paid
by Lessee as a result of the payment thereof and, provided
that the Certificates are paid as aforesaid, Lessee shall
deliver the Airframe and Engines or engines to Lessor in
accordance with Section 5 and shall pay all Basic Rent due on
or prior to such Redemption Date (other than Basic Rent
payable in advance on such Redemption Date, if any) and all
unpaid Supplemental Rent due on or prior to such Redemption
Date, and Break Amount, if any, and Make-Whole Amount, if any,
on the Certificates as of such Redemption Date. If no sale
shall have occurred on the Termination Date for any reason
(including, without limitation, by reason of Lessee's
revocation of its Termination Notice) or Lessor has not, after
making its election referred to above, made the payment
contemplated by the preceding sentence and thereby caused this
Lease to terminate, this Lease shall continue in full force
and effect as to the Aircraft, Lessee shall be entitled to
keep any deposits or
17
<PAGE> 19
[Third Amendment to Lease Agreement (1994 737 B)]
other advances received from the proposed purchaser(s) of the
Aircraft (without in any way limiting any other rights or
remedies against such proposed purchaser(s) available to
Lessor or Lessee), Lessee shall pay the reasonable
out-of-pocket costs and expenses, including legal fees,
incurred by the Owner Participant, Indenture Trustee and
Lessor (unless such failure to terminate the Lease is a
consequence of the failure of Lessor or the Owner Participant
without due cause to make, or cause to be made, the payment
referred to in the immediately preceding sentence), if any, in
connection with preparation for such sale and Lessee may give
one or more additional Termination Notices, provided no more
than three such notices may be given during the Term and only
one such notice may be given during any 365 day period (not
counting, in either case, any Termination Notice for a
Termination Date on which this Lease does not terminate as a
consequence of the failure of Lessor or the Owner Participant
without due cause to make or cause to be made the payment
referred to in the immediately preceding sentence). In the
event of any such sale or such retention of the Aircraft by
Lessor and upon compliance by Lessee with the provisions of
this paragraph, the obligation of Lessee to pay Basic Rent or
any other amounts hereunder shall cease to accrue. Upon
payment of all amounts that may then be due hereunder, this
Lease shall terminate. Lessor may, but shall be under no duty
to, solicit bids, inquire into the efforts of Lessee to obtain
bids or otherwise take any action in connection with any such
sale other than to transfer (in accordance with the foregoing
provisions) to the purchaser named in the highest bid
certified by Lessee to Lessor all of Lessor's right, title and
interest in the Aircraft, against receipt of the payments
provided herein."
SECTION 8. Amendments to Section 10. Section 10 of the Lease
is hereby amended in the following manner:
(a) The introduction to Section 10(a) of the Lease is hereby
amended to be and read in its entirety as follows:
"SECTION 10. Loss, Destruction, Requisition, etc.
(a) Event of Loss with Respect to the Aircraft. Upon the
occurrence of an Event of Loss with respect to the Airframe or
the Airframe and the Engines and/or engines then installed
thereon, Lessee shall (1) forthwith (and in any event, within
fifteen days after such occurrence) give Lessor written notice
of such Event of Loss and (2) within 60 days after such
occurrence, give Lessor written notice of its election to
perform one of the following options, which, in the case of an
election of clause (i) below shall be irrevocable (it being
understood that the failure to give such notice shall be
deemed to be an election of the option set forth in clause (i)
below):
18
<PAGE> 20
[Third Amendment to Lease Agreement (1994 737 B)]
(b) Clause (i) of Section 10(a) is hereby amended to
be and read in its entirety as follows:
"(i) Not later than the earlier of (x) the Lease
Period Date next succeeding the 100th day following the
occurrence of such Event of Loss or (y) the first Lease Period
Date that is at least three Business Days following receipt by
the loss payee of the insurance proceeds in respect to such
Event of Loss (but not earlier than the first Business Day
next succeeding the 65th day following the occurrence of such
Event of Loss) (the applicable date being the "Loss Payment
Date"), Lessee shall, to the extent not paid to Lessor or
Indenture Trustee, as the case may be, as insurance proceeds,
pay or cause to be paid to Lessor as specified in Section 3(e)
hereof, (A) the Stipulated Loss Value of the Aircraft computed
as of the Stipulated Loss Value Date occurring on or
immediately following the date of such Event of Loss, plus (B)
if such Stipulated Loss Value Date is a Lease Period Date,
Basic Rent due on such Lease Period Date, plus (C) unpaid
Supplemental Rent with respect to the Aircraft due on or prior
to the date of payment, plus (D) Break Amount, if any, due on
the Certificates, plus (E) interest on such Stipulated Loss
Value at the Debt Rate from and including such Stipulated Loss
Value Date to, but not including, the date of any advance
payment in respect of Stipulated Loss Value as provided below,
and thereafter on the unpaid balance of such Stipulated Loss
Value from and including the date of such advance payment to,
but excluding, the date such Stipulated Loss Value is paid in
full; provided, however, that if any Lease Period Date shall
occur after the Stipulated Loss Value Date with respect to
which Stipulated Loss Value is determined but prior to the
date of such payment of the sum of the amounts specified in
clauses (A), (B), (C), (D) and (E) above, Lessee shall pay on
each such Lease Period Date an amount equal to the Basic Rent
that would have been due on such Lease Period Date if such
Event of Loss had not occurred, which amount shall be credited
as an advance against the amounts payable pursuant to clauses
(A), (B), (C), (D) and (E) above, or"
SECTION 9. Amendments to Section 11. Section 11 of the Lease
is hereby amended in the following manner:
(a) The first sentence of the second paragraph of Section
11(b) is hereby amended to be and read in its entirety as follows:
"All losses will be adjusted by Lessee with the
insurers giving due regard to Lessor's and, so long as the
Lien of the Trust Indenture shall not have been discharged in
accordance with its terms, the Indenture Trustee's interest,
provided, however, that during a period when a Section 14(a),
(b), (f) or (g) Default or an Event of Default has occurred
and is continuing, Lessee
19
<PAGE> 21
[Third Amendment to Lease Agreement (1994 737 B)]
shall not agree to any such adjustment without the consent of
the Owner Participant."
(b) Section 11(c) is hereby amended to be and read in its
entirety as follows:
"(c) Reports, etc. Lessee will furnish, or cause
to be furnished, to Lessor, the Indenture Trustee and the
Owner Participant, on or before the Delivery Date, and each
annual renewal of the applicable insurances during the Term, a
report, signed by AON Risk Services of Illinois, Inc. or any
other independent firm of insurance brokers reasonably
acceptable to Lessor which brokers may be in the regular
employ of Lessee (the "Insurance Broker"), describing in
reasonable detail the hull and liability insurance (and
property insurance for detached engines and parts) then
carried and maintained with respect to the Aircraft and
stating the opinion of such firm that (a) such insurance
complies with the terms hereof and (b) that such insurance
together with any self-insurance permitted hereby provides
coverage that are in substantially similar forms, are of such
types and have limits within the range of limits as are
customarily carried by U.S. carriers; provided, however, that
the opinion set forth in clause (b) shall not be required if
the Insurance Broker then generally does not provide such an
opinion or will provide such an opinion for material
additional cost; and provided further that all information
contained in the foregoing report shall not be made available
by Lessor, the Indenture Trustee or the Owner Participant to
anyone except (A) to prospective and permitted transferees of
Lessor's, the Owner Participant's or the Indenture Trustee's
interest or their respective counsel, independent certified
public accountants, independent insurance brokers or other
agents, who agree to hold such information confidential, (B)
to Lessor's, Owner Participant's or the Indenture Trustee's
counsel or independent certified public accountants,
independent insurance brokers or other agents who agree to
hold such information confidential, (C) as may be required by
any statute, court or administrative order or decree or
governmental ruling or regulation, or (D) as may be necessary
for purposes of protecting the interest of any such Person or
for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures
permitted by clauses (C) or (D) above shall be made only to
the extent necessary to meet the specific requirements or
needs of the Persons to whom such disclosures are hereby
permitted. Lessee will cause such Insurance Broker to agree
to advise Lessor, the Indenture Trustee and the Owner
Participant, in writing of any act or omission on the part of
Lessee of which it has knowledge and which might invalidate or
render unenforceable, in whole or in part, any insurance on
the Aircraft and to advise such Persons in writing at least 30
days (7 days in the case of war risk and allied perils
coverage) prior to the cancellation or material adverse change
of any insurance maintained pursuant to this Section 11,
provided that if the notice
20
<PAGE> 22
[Third Amendment to Lease Agreement (1994 737 B)]
period specified above is not reasonably obtainable, the
Insurance Broker shall provide for as long a period of prior
notice as shall then be reasonably obtainable. In addition,
Lessee will also cause such Insurance Broker to deliver to
Lessor, the Indenture Trustee and the Owner Participant, on or
prior to the date of expiration of any insurance policy
referenced in a previously delivered certificate of insurance,
a new certificate of insurance, substantially in the same form
as delivered by Lessee to such parties on the Delivery Date
except for the changes in the report or the coverage
consistent with the terms hereof. In the event that Lessee or
any Sublessee shall fail to maintain or cause to be maintained
insurance as herein provided, Lessor or the Indenture Trustee
may at its sole option, but shall be under no duty to, provide
such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor or the Indenture Trustee as Supplemental
Rent, for the cost thereof to Lessor or the Indenture Trustee,
as the case may be; provided, however, that no exercise by
Lessor or the Indenture Trustee, as the case may be, of said
option shall affect the provisions of this Lease, including
the provisions that failure by Lessee to maintain the
prescribed insurance shall constitute an Event of Default."
(c) Clause (A) of Section 11(h) is hereby amended to be and
read in its entirety as follows:
"(A) shall name the Additional Insureds as additional insureds
and, subject to Clause (H) of this Section 11(h), Lessor (or,
so long as the Lien of the Indenture shall remain in effect,
the Indenture Trustee) as loss payee, as their respective
interests may appear (but without imposing on any such party
liability to pay premiums with respect to such insurances),"
(d) Section 11(h) is hereby further amended by adding the
words ", in which case such proceeds shall be payable to Lessor (or,
so long as the Indenture shall remain in effect, the Indenture
Trustee)" immediately prior to the period at the end thereof.
SECTION 10. Amendment to Section 14. Paragraphs (a) through
(f) of Section 14 of the Lease are hereby amended to be and read in their
entirety as follows:
"(a) Lessee shall not have made a payment of Basic Rent,
Interim Rent, Stipulated Loss Value, Termination Value, EBO
Percentage, amounts payable pursuant to Section 9(c)(3)(A) or Section
19(b)(i), Break Amount or Make-Whole Amount, if any (other than any
Break Amount or Make-Whole Amount payable pursuant to the Note
Purchase Agreement) within 10 days after the same shall have become
due; or
(b) Lessee shall have failed to make a payment of
Supplemental Rent (other than Stipulated Loss Value, Termination
Value, EBO Percentage, amounts payable
21
<PAGE> 23
[Third Amendment to Lease Agreement (1994 737 B)]
pursuant to Section 9(c)(3)(A) or Section 19(b)(1), Break Amount,
Make-Whole Amount or any other amounts measured thereby or any amounts
payable pursuant to the Note Purchase Agreement) after the same shall
have become due and such failure shall continue for 15 days after
Lessee's receipt of written demand therefor by the party entitled
thereto (provided that any failure to pay any amount owed by Lessee
under the Tax Indemnity Agreement or any failure of Lessee to pay to
Lessor or the Owner Participant when due any Excluded Payments shall
not constitute an Event of Default unless written notice is given by
the Owner Participant to Lessee and the Indenture Trustee that such
failure shall constitute an Event of Default); or
(c) Lessee 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 11 hereof; or
(d) Lessee shall have failed to perform or observe in any
material respect (or caused to be performed and observed) any other
covenant or agreement to be performed or observed by it under any
Operative Document (other than the Note Purchase Agreement), and such
failure shall continue unremedied for a period of thirty days after
written notice thereof by Lessor or the Indenture Trustee; provided,
however, that if Lessee shall have undertaken to cure any such failure
and, notwithstanding the reasonable diligence of Lessee in attempting
to cure such failure, such failure is not cured within said thirty day
period but is curable with future due diligence, there shall exist no
Event of Default under this Section 14 so long as Lessee is proceeding
with due diligence to cure such failure and such failure is in fact
cured within one year; or
(e) any representation or warranty made by Lessee herein or
in the Participation Agreement or any document or certificate (other
than the Note Purchase Agreement) furnished by Lessee in connection
herewith or therewith or pursuant hereto or thereto (except the
representations and warranties set forth in Section 4 of the Tax
Indemnity Agreement) shall prove to have been incorrect in any
material respect at the time made and shall remain material at the
time in question; provided, however, such incorrectness shall
constitute a default hereunder only if such incorrectness shall
continue uncured for a period of thirty (30) days after the receipt by
Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(f) the commencement of an involuntary case or other
proceeding in respect of Lessee in an involuntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar
law in the United States or seeking the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of Lessee or for all or substantially all of its property,
or seeking the winding-up or liquidation of its affairs
22
<PAGE> 24
[Third Amendment to Lease Agreement (1994 737 B)]
and the continuation of any such case or other proceeding undismissed
or unstayed for a period of 90 consecutive days or an order for relief
under Chapter 11 of the Bankruptcy Code with respect to Lessee as
debtor or any other order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without
the consent of Lessee, a receiver, trustee or liquidator of Lessee, or
for all or substantially all of its property, or sequestering of all
or substantially all of the property of Lessee and any such order,
judgment or decree or appointment or sequestration shall be final or
shall remain in force undismissed, unstayed or unvacated for a period
of 90 consecutive days after the date of entry thereof; or"
SECTION 11. Amendment to Section 17. Section 17(d)(ii) of
the Lease is hereby amended to be and read in its entirety as follows:
"(ii) if to Lessor, at c/o State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110, Attn:
Corporate Trust Department, Telecopier (617) 664-5371 (or, if by
overnight courier, c/o State Street Bank and Trust Company), Two
International Place, Boston, Massachusetts 02110, Attn: Corporate
Trust Department, or to such other address or telex or telecopier
number as Lessor shall from time to time designate in writing to
Lessee; and"
SECTION 12. Amendment to Section 18. The last sentence of
Section 18(a) of the Lease is hereby amended to be and read in its entirety as
follows:
"Notwithstanding anything contained in this Section 18(a) to
the contrary, Lessee's right to deduct any amount pursuant to the
foregoing sentence shall be limited to amounts which would (absent
such deduction) be distributable under the Trust Indenture at the time
such payment is made to Owner Participant (and shall not include any
amounts distributable to Indenture Trustee in its individual capacity
or to the Noteholders); provided further, that neither the amount so
deducted at any one time nor the aggregate amount so applied at
different times shall reduce the amount of any installment or payment
of Rent (whether upon the termination of this Lease or otherwise)
payable by Lessee to an amount insufficient to pay in full the amounts
required to be paid on account of the principal of, Break Amount, if
any, Make-Whole Amount, if any, and any interest on the Equipment
Notes or otherwise owing to a Noteholder under the Trust Indenture."
SECTION 13. Amendment to Section 19. Clause (1) of the first
sentence of Section 19(b) of the Lease is hereby amended to be and read in its
entirety as follows:
"(1) on any Special Purchase Option Date for a purchase
price equal to the greater of the Fair Market Sales Value or the
Termination Value of the Aircraft on such date;"
23
<PAGE> 25
[Third Amendment to Lease Agreement (1994 737 B)]
SECTION 14. Amendment to Section 20. The last sentence of
Section 20 of the Lease is hereby amended by deleting the reference to "Section
6.08 or Article IX" which appears therein and inserting a reference to "The
Granting Clause or Article 11" in lieu thereof.
SECTION 15. Amendment to Section 22. The first sentence of
Section 22(a) of the Lease is hereby amended by adding the following proviso
immediately prior to the period at the end of such sentence:
"; provided, that any moneys held by the Indenture
Trustee or the Lessor pursuant to this Section 22(a) shall either be
(a) registered in the name of, payable to the order of, or specially
indorsed to, the Indenture Trustee or the Lessor, as the case may be,
or (b) held in an account established by and with an Eligible
Institution at the request of the Indenture Trustee or the Lessor, as
the case may be, which institution agrees, for all purposes of the
applicable Uniform Commercial Code ("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 Indenture Trustee
or the Lessor, as the case may be, shall be the "entitlement holder"
(as defined in Section 8-102(7) of the UCC) in respect of such
account, (d) the Eligible Institution will comply with all entitlement
orders issued by the Indenture Trustee or the Lessor, as the case may
be, to the exclusion of the Lessee, and (e) the "securities
intermediary jurisdiction" (under Section 8- 110(e) of the UCC) shall
be the State of Illinois, and "Eligible Institution" means the
corporate trust department of (a) First Security Bank, National
Association, 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."
SECTION 16. Ratification; References to Lease; Effective
Date. Except as amended hereby, the Lease continues and shall remain in full
force and effect in all respects. From and after the date of this Amendment,
each and every reference in the Lease to "this Lease", "this Agreement",
"herein", "hereof" or similar words and phrases referring to the Lease or any
word or phrase referring to a section or provision of the Lease is deemed for
all purposes to be a reference to the Lease or such section or provision as
amended pursuant to this Amendment. The amendments to the Lease contemplated
by this Amendment shall be effective from and after the date this Amendment is
filed for record with the FAA.
SECTION 17. Miscellaneous. Any provision of this Amendment
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
24
<PAGE> 26
[Third Amendment to Lease Agreement (1994 737 B)]
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. No term or provision of this Amendment may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by Lessor, Lessee and any assignee of Lessor's rights hereunder.
Nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. The section
headings in this Amendment are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof. THIS
AMENDMENT HAS BEEN DELIVERED IN THE STATE OF ILLINOIS AND SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. This Amendment may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all of such counterparts shall together constitute but one and
the same instrument.
* * *
25
<PAGE> 27
[Third Amendment to Lease Agreement (1994 737 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Third Amendment to Lease Agreement to be duly executed on the day and year
first above written.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee,
Lessor
By:
-------------------------------------
UNITED AIR LINES, INC.
Lessee
By:
-------------------------------------
Vice President and Treasurer
Approved and Consented to:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
-------------------------------------
Its:
----------------------------------
(1) Receipt of this original counterpart of the foregoing Third Amendment
to Lease Agreement is hereby acknowledged on this ____ day of December, 1997.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
-------------------------------------
Its:
---------------------------------
- -------------------------------
(1) This language contained in the original counterpart only.
26
<PAGE> 1
EXHIBIT 4.23
*
Doc. No. 1.04
Aircraft N398UA
-----------------------------------
TRUST AGREEMENT
(1994 737 B)
Dated as of September 1, 1994
between
MS FINANCING INC.,
Owner Participant
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Owner Trustee
-----------------------------------
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
-----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01. Authority to Execute Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
PURCHASE OF AIRCRAFT;
ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.01. Purchase of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.02. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.01. Distribution of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.02. Method of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.01. Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.02. Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5.03. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5.04. No Duties Except as Specified in Trust Agreement or Instructions . . . . . . . . . . . . . . . . . . . 9
SECTION 5.05. Satisfaction of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5.06. No Action Except Under Specified Documents or Instruction . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI
THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.01. Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.02. Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.03. No Representations or Warranties as to Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.04. No Segregation of Monies Required; No Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.05. Reliance Upon Certificates, Counsel and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.06. Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.07. Fees; Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.08. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
INDEMNIFICATION OF OWNER TRUSTEE BY OWNER PARTICIPANTS . . . . . . . . . . . . . . 14
SECTION 7.01. Owner Participants to Indemnify Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII
TRANSFER OF AN OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . . 17
SECTION 8.01. Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . 17
SECTION 9.01. Resignation of Owner Trustee; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 9.02. Co-Trustees and Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . 21
SECTION 10.01. Supplements and Amendments and Delivery Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 10.02. Discretion as to Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 10.03. Absence of Requirements as to Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 10.04. Distribution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 10.05. No Request Needed as to Lease Supplement and Trust Supplement . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.01. Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.02. Owner Participants Have No Legal Title in Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.03. Assignment, Sale, etc. of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.04. Trust Agreement for Benefit of Certain Parties Only . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.05. Citizenship of the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.08. Waivers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.10. Binding Effect, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.11. Headings; References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11.13. Performance by the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
iv
<PAGE> 6
TRUST AGREEMENT
This TRUST AGREEMENT (1994 737 B) dated as of September 1,
1994 between MS FINANCING INC., a Delaware corporation (the "Original Owner
Participant"), and FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a
national banking association (in its individual capacity, "First Security Bank
of Utah", and otherwise not in its individual capacity but solely as trustee
hereunder with its permitted successors and assigns called the "Owner
Trustee").
W I T N E S S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Certain Definitions. Unless the context shall
otherwise require and except as contained in this Section 1.01, the capitalized
terms used herein shall have the respective meanings assigned thereto in the
Lease (as hereinafter defined) for all purposes hereof. All definitions
contained in this Section 1.01 shall be equally applicable to both the singular
and plural forms of the terms defined. For all purposes of this Trust
Agreement the following terms shall have the following meanings:
"Excluded Payments" has the meaning ascribed to such term in
the Trust Indenture.
"Indenture Event of Default" has the meaning which the term
"Event of Default" has in the Trust Indenture.
"Lease" means that certain Lease Agreement, to be dated as
of the date hereof, and to be entered into by the Owner Trustee and
Lessee concurrently with the execution and delivery of this Trust
Agreement as said Lease Agreement may from time to time be
supplemented or amended, or the terms thereof waived or modified, to
the extent permitted by, and in accordance with, the terms of this
Trust Agreement. The term "Lease" shall also include each Lease
Supplement from time to time entered into pursuant to the terms of
the Lease.
"Lease Event of Default" has the meaning which the term
"Event of Default" has in the Lease.
"Majority in Interest of Owner Participants" at any time
means, subject to Section 11.05, the Owner Participant
<PAGE> 7
[Trust Agreement (1994 737 B)]
or Owner Participants which then hold more than 50% of the Ownership
Interests of all Owner Participants.
"Owner Participants" shall mean the Original Owner
Participant and each Subsequent Owner Participant, to the extent that
the same shall, at the relevant time, have an Ownership Interest.
"Ownership Interest" means, in the case of each Owner
Participant, the percentage of its undivided beneficial interest in
the Trust Estate created by this Trust Agreement, which percentage
shall be: (i) in the case of the Original Owner Participant (A) so
long as it shall be the sole Owner Participant, 100% and (B) if it
shall no longer be the sole Owner Participant, the percentage of such
undivided interest in the Trust Estate which it shall not have
transferred to any Subsequent Owner Participant; and (ii) in the case
of any Subsequent Owner Participant, the percentage of such undivided
interest in the Trust Estate specified in the agreement pursuant to
which such Subsequent Owner Participant becomes an Owner Participant
as provided in the definition of "Subsequent Owner Participant" which
it shall not have transferred to any Subsequent Owner Participant.
"Subsequent Owner Participant" means any corporation to
which the Original Owner Participant or any transferee from the
Original Owner Participant or any Subsequent Owner Participant shall
have transferred at any time after the Delivery Date all or any part
of the undivided right, title and interest originally held by the
Original Owner Participant in the Trust Estate, provided that any
such transfer: (i) shall be effected by a written agreement, in form
and substance reasonably satisfactory to the Owner Trustee in its
individual capacity, between such transferee and its transferor,
which shall (A) specify the percentage of the Ownership Interest of
such transferee so transferred to it and (B) provide that such
transferee thereby becomes a party to, and beneficiary of, this Trust
Agreement and an Owner Participant for all purposes hereof and that
such transferee assumes all of the obligations of its transferor
under this Trust Agreement to the extent of such transferee's
Ownership Interest; and (ii) so long as the Lease shall be in effect
or the Certificates remain unpaid, such transferee and its transferor
shall have complied with all of the terms of Section 8(l) of the
Participation Agreement.
"Trust Estate" means all estate, right, title and interest
of the Owner Trustee in and to the Aircraft, the Lease, any Lease
Supplement, the Purchase Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's Bill of Sale, and the Owner Trustee's
FAA Bill of Sale, including, without limitation, all amounts of Basic
Rent and Supplemental Rent including without limitation insurance
proceeds (other than
2
<PAGE> 8
[Trust Agreement (1994 737 B)]
insurance proceeds payable to or for the benefit of the Owner
Trustee, First Security Bank of Utah in its individual capacity, the
Owner Participant, the Holders, or the Indenture Trustee) and
requisition, indemnity or other payments of any kind for or with
respect to the Aircraft (except amounts owing to the Owner
Participants, to the Indenture Trustee, to First Security Bank of
Utah, in its individual capacity, or to a Holder, or to any of their
respective Affiliates, directors, officers, employees, servants and
agents, pursuant to Section 7 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any
Excluded Payment.
"Trust Office" has the meaning ascribed to such term in the
Lease.
"Trust Supplement" means a supplement to the Trust Agreement
and Trust Indenture in substantially the form of Exhibit A to the
Trust Indenture.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. The Original
Owner Participant hereby authorizes and directs the Owner Trustee to, and the
Owner Trustee agrees for the benefit of the Owner Participants that it will,
execute and deliver the Operative Documents and any other agreements,
instruments or documents to which the Owner Trustee is a party in the
respective forms thereof which are delivered from time to time by the Original
Owner Participant to the Owner Trustee for execution and delivery and, subject
to the terms hereof, to exercise its rights (upon instructions received from
the Owner Participants) and perform its duties under said Operative Documents
in accordance with the terms thereof.
SECTION 2.02. Declaration of Trust. The Owner Trustee
hereby declares that it will hold the Trust Estate upon the trusts hereinafter
set forth for the use and benefit of the Owner Participants, subject, however,
to the provisions of and the Lien created by the Trust Indenture and to the
provisions of the Lease and the Participation Agreement.
3
<PAGE> 9
[Trust Agreement (1994 737 B)]
ARTICLE III
PURCHASE OF AIRCRAFT;
ISSUANCE OF CERTIFICATES
SECTION 3.01. Purchase of Aircraft. The Original Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participants that it will, on the
Delivery Date, subject to due compliance with the terms of Section 3.02 hereof:
(a) purchase the Aircraft pursuant to the Owner Trustee's
Purchase Agreement;
(b) accept from Lessee the delivery of the Owner Trustee's
Bill of Sale and the Owner Trustee's FAA Bill of Sale;
(c) execute and deliver a Lease Supplement covering the
Aircraft;
(d) execute and deliver a Trust Supplement covering the
Aircraft;
(e) execute, issue and deliver to the Original Loan
Participant Certificates in the amounts and otherwise as provided in
Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred
to in Section 4(a)(vi) of the Participation Agreement, together with
all other agreements, documents and instruments referred to in
Section 4 of the Participation Agreement to which the Owner Trustee
is to be a party;
(g) effect the registration of the Aircraft in the name of
the Owner Trustee by filing or causing to be filed with the FAA: (i)
the Owner Trustee's FAA Bill of Sale; (ii) an application for
registration of the Aircraft in the name of the Owner Trustee
(including without limitation an affidavit from the Owner Trustee in
compliance with the provisions of 14 C.F.R. Section 47.7(c)(2)(ii));
and (iii) this Trust Agreement; and
(h) execute and deliver all such other instruments,
documents or certificates and take all such other actions in
accordance with the directions of the Original Owner Participant, as
the Original Owner Participant may deem necessary or advisable in
connection with the transactions contemplated hereby, the taking of
any such action by the Owner Trustee in the presence of the Original
Owner Participant or its counsel to evidence, conclusively, the
direction of the Original Owner Participant.
SECTION 3.02. Conditions Precedent. The rights and
obligations of the Owner Trustee to take the actions required by Section 3.01
hereof with respect to the Aircraft shall be subject to the following
conditions precedent: (a) the Original Owner Participant shall have made the
full amount of its Commitment set forth in Schedule II to the Participation
Agreement available to the Owner Trustee, in immediately available funds, in
accordance with Sections 1
4
<PAGE> 10
[Trust Agreement (1994 737 B)]
and 2 of the Participation Agreement; and (b) the Original Owner Participant
shall have notified the Owner Trustee that the terms and conditions of Section
4 of the Participation Agreement, insofar as they relate to conditions
precedent to performance by the Original Owner Participant of its obligations
thereunder, shall have been either fulfilled to the satisfaction of or waived
by the Original Owner Participant. The Original Owner Participant shall, by
instructing the Owner Trustee to release the funds then held by the Owner
Trustee as provided in Section 2 of the Participation Agreement, be deemed to
have found satisfactory to it, or waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01. Distribution of Payments. (a) Payments to
Indenture Trustee. Until the Trust Indenture shall have been discharged
pursuant to Section 10.01 thereof, all Basic Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excluded Payments) payable to the Owner Trustee (other than payments
received from the Indenture Trustee) shall be payable directly to the Indenture
Trustee (and any of the same which are received by the Owner Trustee shall upon
receipt be paid over to the Indenture Trustee without deduction, set-off or
adjustment of any kind) for distribution in accordance with the provisions of
Article III of the Trust Indenture; provided, however, that any payments
received by the Owner Trustee from (i) the Lessee with respect to the Owner
Trustee's fees and disbursements, or (ii) the Owner Participant pursuant to
Article VII shall not be paid over to the Indenture Trustee but shall be
retained by the Owner Trustee and applied toward the purpose for which such
payments were made.
(b) Payments to Owner Trustee; Other Parties. After the
Trust Indenture shall have been discharged pursuant to Section 10.01 thereof,
any payment of the type referred to in Section 4.01(a) hereof (other than
Excluded Payments) received by the Owner Trustee, any payments received from
the Indenture Trustee other than as specified in Section 4.01(d) hereof and any
other amount received as part of the Trust Estate and for the application or
distribution of which no provision is made herein, shall be distributed
forthwith upon receipt by the Owner Trustee in the following order of priority:
first, so much of such payment as shall be required to reimburse the Owner
Trustee for any expenses not otherwise reimbursed as to which the Owner Trustee
is entitled to be so reimbursed pursuant to the provisions hereof shall be
retained by the Owner Trustee; second, so much of the remainder for which
provision as to the application thereof is contained in the Lease or any of the
other Operative Documents shall be applied and distributed in accordance with
the terms of the Lease or such other Operative Document; and
5
<PAGE> 11
[Trust Agreement (1994 737 B)]
third, the balance, if any, shall be paid ratably to each Owner Participant in
proportion to such Owner Participant's Ownership Interest.
(c) Certain Distributions to Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participants pursuant to the Trust Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to each Owner Participant in
proportion to such Owner Participant's Ownership Interest and in accordance
with the provisions of Article III of the Trust Indenture; provided, however,
that any payments received by the Owner Trustee from (i) the Lessee with
respect to the Owner Trustee's fees and disbursements, or (ii) the Owner
Participant pursuant to Article VII shall not be paid over to the Indenture
Trustee but shall be retained by the Owner Trustee and applied toward the
purpose for which such payments were made.
(d) Excluded Payments. Any Excluded Payments received by
the Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excluded Payments are payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement (as directed by the Owner Participant)
or the Lease.
SECTION 4.02. Method of Payments. The Owner Trustee shall
make distributions or cause distributions to be made to each Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be distributed shall not have been received by the Owner Trustee
by 12:00 noon, New York time), the amount to be distributed to such account or
accounts of such Owner Participant as such Owner Participant may designate from
time to time in writing to the Owner Trustee. Notwithstanding the foregoing,
the Owner Trustee will, if so requested by such Owner Participant in writing,
pay any or all amounts payable to such Owner Participant pursuant to this
Article IV either (i) by crediting such amount or amounts to an account or
accounts maintained by such Owner Participant with First Security Bank of Utah
in its individual capacity in immediately available funds, (ii) by payment at
the Trust Office of the Owner Trustee, in immediately available funds, or (iii)
by mailing an official bank check or checks in such amount or amounts payable
to such Owner Participant at such address as such Owner Participant shall have
designated in writing to the Owner Trustee.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01. Notice of Event of Default. If the Owner
Trustee shall have knowledge of a Lease Event of Default or Indenture Event of
Default (or an event which with the
6
<PAGE> 12
[Trust Agreement (1994 737 B)]
passage of time or the giving of notice or both would constitute a Lease Event
of Default or an Indenture Event of Default), First Security Bank of Utah will
cause the Owner Trustee to give to the Indenture Trustee, the Owner Participant
and Lessee prompt telephonic or telex notice thereof followed by prompt
confirmation thereof by certified mail, postage prepaid. The notice shall set
forth in reasonable detail the facts or circumstances known to it with respect
to such Lease Event of Default or Indenture Event of Default. Subject to the
terms of Section 5.03 hereof, the Owner Trustee shall take such action or shall
refrain from taking such action, not inconsistent with the provisions of the
Trust Indenture, with respect to such Lease Event of Default, Indenture Event
of Default or other event as the Owner Trustee shall be directed in writing by
a Majority in Interest of Owner Participants. For all purposes of this Trust
Agreement, the Lease and the other Operative Documents, in the absence of
actual knowledge by a responsible officer of the Trust Office of the Owner
Trustee in his or her capacity as such, the Owner Trustee shall not be deemed
to have knowledge of a Lease Event of Default, Indenture Event of Default or
other event referred to in this Section 5.01 unless notified in writing by the
Indenture Trustee, one or more of the Owner Participants or the Lessee.
SECTION 5.02. Action Upon Instructions. Subject to the
terms of Sections 5.01 and 5.03 hereof, upon the written instructions at any
time and from time to time of a Majority in Interest of Owner Participants, the
Owner Trustee will take such of the following actions, not inconsistent with
the provisions of the Trust Indenture, as may be specified in such
instructions: (i) give such notice or direction or exercise such right, remedy
or power hereunder or under any of the Operative Documents to which the Owner
Trustee is a party or in respect of all or any part of the Trust Estate, or
take such other action, as shall be specified in such instructions (including
entering into agreements referred to in clause (i) of the definition of
"Subsequent Owner Participant"); (ii) take such action to preserve or protect
the Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Documents to be satisfactory to the
Owner Trustee, it being understood that without written instructions of a
Majority in Interest of Owner Participants, the Owner Trustee shall not approve
any such matter as satisfactory to it; and (iv) subject to the rights of the
Lessee under the Operative Documents, after the expiration or earlier
termination of the Lease, convey all of the Owner Trustee's right, title and
interest in and to the Aircraft for such amount, on such terms and to such
purchaser or purchasers as shall be designated in such instructions, or retain,
lease or otherwise dispose of, or from time to time take such other action with
respect to, the Aircraft on such terms as shall be designated in such
instructions.
SECTION 5.03. Indemnification. The Owner Trustee shall not
be required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof unless the Owner Trustee shall have
been indemnified by the Owner Participants, in manner and form satisfactory to
the Owner Trustee, against any liability, cost or expense
7
<PAGE> 13
[Trust Agreement (1994 737 B)]
(including reasonable counsel fees and disbursements) which may be incurred in
connection therewith; and, if a Majority in Interest of Owner Participants
shall have directed the Owner Trustee to take any such action or refrain from
taking any action, each Owner Participant agrees to furnish such indemnity as
shall be required (severally and ratably according to their respective
Ownership Interests) and, in addition to the extent not otherwise paid pursuant
to the provisions of the Lease or of the Participation Agreement, to pay
(severally and ratably according to their respective Ownership Interests) the
reasonable compensation of the Owner Trustee for the services performed or to
be performed by it pursuant to such direction and any reasonable fees and
disbursements of counsel or agents employed by the Owner Trustee in connection
therewith. The Owner Trustee shall not be required to take any action under
Section 5.01 or 5.02 hereof if the Owner Trustee shall reasonably determine, or
shall have been advised by counsel, that such action is contrary to the terms
of any of the Operative Documents to which the Owner Trustee is a party, or is
otherwise contrary to law.
SECTION 5.04. No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with any of the Operative
Documents to which the Owner Trustee is a party, except as expressly required
by the terms of any of the Operative Documents to which the Owner Trustee is a
party, or (to the extent not inconsistent with the provisions of the Trust
Indenture) as expressly provided by the terms hereof or in a written
instruction from a Majority in Interest of Owner Participants received pursuant
to the terms of Section 5.01 or 5.02 and no implied duties or obligations shall
be read into this Trust Agreement against the Owner Trustee. First Security
Bank of Utah agrees that it will, in its individual capacity and at its own
cost or expense (but without any right of indemnity in respect of any such cost
or expense under Section 7.01 hereof), promptly take such action as may be
necessary to duly discharge and satisfy in full all Lessor Liens attributable
to it in its individual capacity which it is required to discharge pursuant to
Section 8(g) of the Participation Agreement and otherwise comply with the terms
of said Section binding upon it.
SECTION 5.05. Satisfaction of Conditions Precedent.
Anything herein to the contrary notwithstanding, the Owner Trustee shall comply
with the provisions of Section 3.01 hereof upon the satisfaction of all the
applicable conditions precedent specified in Section 3.02 hereof and in Section
4 of the Participation Agreement.
SECTION 5.06. No Action Except Under Specified Documents or
Instruction. The Owner Trustee agrees that it will not manage, control, use,
sell, dispose of or otherwise deal with the Aircraft or any other part of the
Trust Estate except (i) as expressly required by the terms of any of the
Operative Documents to which the Owner Trustee is a party, (ii) as expressly
provided by the terms hereof, or (iii) as expressly
8
<PAGE> 14
[Trust Agreement (1994 737 B)]
provided in written instructions from a Majority in Interest of Owner
Participants pursuant to Section 5.01 or 5.02 hereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. First
Security Bank of Utah accepts the trusts hereby created and agrees to perform
the same but only upon the terms hereof applicable to it. The Owner Trustee
also agrees to receive and disburse all monies received by it constituting part
of the Trust Estate upon the terms hereof. First Security Bank of Utah shall
not be answerable or accountable under any circumstances, except (a) for its
own willful misconduct or gross negligence, (b) for performance of the terms of
the last sentence of Section 5.04 hereof and the first sentence of Section 5.01
hereof, (c) for its or the Owner Trustee's failure to use ordinary care to
disburse funds, (d) for any Tax based on or measured by any fees, commissions
or compensation received by it for acting as trustee in connection with any of
the transactions contemplated by the Operative Documents and (e) for
liabilities that may result from the inaccuracy of any representation or
warranty of it (or from the failure by it to perform any covenant) in Section
6.03 hereof, in Section 4 of the Lease or in Sections 8(b), 8(c) and 8(p) of
the Participation Agreement.
SECTION 6.02. Absence of Certain Duties. Except in
accordance with written instructions furnished pursuant to Section 5.02 hereof
and except as provided in, and without limiting the generality of, Sections
3.01 and 5.04 hereof and the last sentence of Section 9.01(b) hereof, neither
the Owner Trustee nor First Security Bank of Utah shall have any duty (i) to
see to any recording or filing of any Operative Document or of any supplement
to any thereof or to see to the maintenance of any such recording or filing or
any other filing of reports with the Federal Aviation Administration or other
governmental agencies, except that First Security Bank of Utah in its
individual capacity agrees to comply with the Federal Aviation Administration
reporting requirements set forth in 14 CFR Section 47.45 and 14 CFR Section
47.51, and the Owner Trustee shall, to the extent that information for that
purpose is timely supplied by Lessee pursuant to any of the Operative
Documents, complete and timely submit (and furnish each Owner Participant with
a copy of) any and all reports relating to the Aircraft which may from time to
time be required by the Federal Aviation Administration or any government or
governmental authority having jurisdiction, (ii) to see to any insurance on the
Aircraft or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, other than to forward to the Owner
Participant copies of all reports and other written information which the Owner
Trustee receives from Lessee pursuant to Section 11(c) of the Lease, (iii) to
see to the payment or discharge of any tax, assessment or other governmental
charge or any lien or encumbrance of
9
<PAGE> 15
[Trust Agreement (1994 737 B)]
any kind owing with respect to, assessed or levied against any part of the
Indenture Estate or the Trust Estate, except as provided in Section 8(g) of the
Participation Agreement, or (iv) to inspect Lessee's books and records with
respect to the Aircraft at any time permitted pursuant to the Lease.
Notwithstanding the foregoing, the Owner Trustee will furnish to the Indenture
Trustee and each of the Owner Participants, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and other instruments furnished to the Owner Trustee under
the Lease or any other Operative Document to which a responsible officer of the
Owner Trustee reasonably believes have not been delivered to said parties.
SECTION 6.03. No Representations or Warranties as to
Certain Matters. NEITHER THE OWNER TRUSTEE NOR FIRST SECURITY BANK OF UTAH
MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART THEREOF, OR ANY
OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT WHATSOEVER,
except that First Security Bank of Utah in its individual capacity warrants
that on the Delivery Date the Owner Trustee shall have received whatever title
was conveyed to it by Lessee and that the Aircraft shall during the Term of the
Lease be free of Lessor Liens attributable to First Security Bank of Utah in
its individual capacity, or (b) any representation or warranty as to the
validity, legality or enforceability of this Trust Agreement or any Operative
Document to which the Owner Trustee is a party, or any other document or
instrument, or as to the correctness of any statement contained in any thereof
except to the extent that any such statement is expressly made herein or
therein by such party as a representation by First Security Bank of Utah in its
individual capacity or by the Owner Trustee, as the case may be, and except
that First Security Bank of Utah in its individual capacity hereby represents
and warrants that this Trust Agreement has been, and (assuming due
authorization, execution and delivery by the Original Owner Participant of this
Trust Agreement) the Operative Documents to which it or the Owner Trustee is a
party have been (or at the time of execution and delivery of any such
instrument by it or the Owner Trustee hereunder or pursuant to the terms of the
Participation Agreement that such an instrument will be) duly executed and
delivered by one of its officers who is or will be, as the case may be, duly
authorized to execute and deliver such instruments on behalf of itself or the
Owner Trustee, as the case may be, and that (assuming the due authorization,
execution and delivery of the Trust Agreement by the Original Owner
Participant) the Trust Agreement constitutes the legal, valid and binding
obligation of First Security Bank of Utah or the Owner Trustee, as the case may
be, enforceable against First Security Bank of Utah or the Owner Trustee, as
the case may be, in accordance with its terms.
SECTION 6.04. No Segregation of Monies Required; No
Interest. Monies received by the Owner Trustee hereunder need not be
segregated in any manner except to the
10
<PAGE> 16
[Trust Agreement (1994 737 B)]
extent required by law, and may be deposited under such general conditions as
may be prescribed by law, and the Owner Trustee shall not, except as provided
in Section 22 of the Lease, be liable for any interest thereon.
SECTION 6.05. Reliance Upon Certificates, Counsel and
Agents. The Owner Trustee shall incur no liability to anyone in acting in
reliance upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper reasonably
believed by it in good faith to be genuine and reasonably believed by it to be
signed by the proper party or parties. Unless other evidence in respect
thereof is specifically prescribed herein, any request, direction, order or
demand of the Owner Participants or Lessee mentioned herein or in any of the
Operative Documents to which the Owner Trustee is a party shall be sufficiently
evidenced by written instruments signed by a person purporting to be the
Chairman of the Board, the President or any Vice President and in the name of
any such Owner Participant or Lessee, as the case may be. The Owner Trustee
may accept a copy of a resolution of the Board of Directors or Executive
Committee of Lessee, certified by the Secretary or an Assistant Secretary of
Lessee as duly adopted and in full force and effect, as conclusive evidence
that such resolution has been duly adopted by said Board or Committee and that
the same is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Owner Trustee
may for all purposes hereof rely on a certificate signed by a person purporting
to be the Chairman of the Board, the President or any Vice President of Lessee,
as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon. In the administration of trusts
hereunder, the Owner Trustee 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 Trust Estate, consult with counsel, accountants
and other skilled persons to be selected and employed by it. The Owner Trustee
shall not be liable for anything done, suffered or omitted in good faith by it
in accordance with the advice or opinion of any such counsel, accountants or
other skilled persons and the Owner Trustee shall not be liable for the
negligence of any such counsel, accountant or other skilled person appointed by
it with due care hereunder.
SECTION 6.06. Not Acting in Individual Capacity. In acting
hereunder, the Owner Trustee acts solely as trustee and not in its individual
capacity except as otherwise expressly provided herein; and, except as may be
otherwise expressly provided in this Trust Agreement, the Lease, the
Participation Agreement and the Trust Indenture, all persons having any claim
against the Owner Trustee by reason of the transactions contemplated hereby
shall look only to the Trust Estate for payment or satisfaction thereof.
SECTION 6.07. Fees; Compensation. The Owner Trustee shall
be entitled to receive compensation, reasonable as regards its responsibilities
hereunder, together with
11
<PAGE> 17
[Trust Agreement (1994 737 B)]
reimbursement within three (3) months of its request for all reasonable
expenses incurred or made by it in accordance with any of the provisions of
this Trust Agreement or any other Operative Document (including the reasonable
compensation and the expenses of its counsel, accountants or other skilled
persons and of all other persons not regularly in its employ). If a Lease Event
of Default or Indenture Event of Default shall occur and be continuing or if
the Lease or the Trust Indenture is declared to be in default, the Owner
Trustee shall be entitled to receive compensation, reasonable as regards its
additional responsibilities hereunder, and payment or reimbursement for its
expenses as provided above. Pursuant to Section 7(c) of the Participation
Agreement and subject to Section 16 thereof, Lessee shall be required to pay
the reasonable fees and expenses of the Owner Trustee comprising the
compensation and reimbursement of expenses to which the Owner Trustee is
entitled under this Section 6.07. Except as otherwise expressly provided in
this Trust Agreement and the other Operative Documents, neither the Owner
Participants nor the Trust Estate shall have any liability for any such fees
and expenses; provided, however, the Owner Participants shall be liable for
such additional compensation of the Owner Trustee if the same is attributable
to an Indenture Event of Default not resulting from a Lease Event of Default
(the Owner Trustee having no right to additional compensation if the same is
attributable to an Indenture Event of Default caused solely by the Owner
Trustee in its individual capacity); and further provided that the Owner
Trustee shall have a Lien upon the Trust Estate for any such fee not paid by
Lessee as contemplated by Section 7 of the Participation Agreement and such
Lien shall entitle the Owner Trustee to priority as to payment thereof over
payment to any other Person under this Trust Agreement but shall at all times
be subordinated to the lien of the Trust Indenture.
SECTION 6.08. Tax Returns. The Owner Trustee shall be
responsible for the keeping of all appropriate books and records relating to
the receipt and disbursement of all monies under this Trust Agreement or any
agreement contemplated hereby. The Owner Participants shall be responsible for
causing to be prepared and filed all income tax returns required to be filed by
the Owner Participants. The Owner Trustee shall be responsible for causing to
be prepared, at the request of the Owner Participants, all income tax returns
required to be filed with respect to the trust created hereby and shall execute
and file such returns. Each Owner Participant, upon request, will furnish the
Owner Trustee and the Owner Trustee will furnish each Owner Participant with
all such information as may be reasonably required from any such party in
connection with the preparation of such income tax returns. The Owner Trustee
will give to any Owner Participant, upon request, such periodic information
concerning receipts and disbursements by it with respect to the Trust Estate as
would be helpful to such Owner Participant in preparing its tax returns.
12
<PAGE> 18
[Trust Agreement (1994 737 B)]
ARTICLE VII
INDEMNIFICATION OF OWNER TRUSTEE BY OWNER PARTICIPANTS
SECTION 7.01. Owner Participants to Indemnify Owner
Trustee. The Owner Participants hereby severally agree, each in proportion to
its Ownership Interest, whether or not any of the transactions contemplated
hereby shall be consummated, to assume liability for, and hereby indemnify,
protect, save and keep harmless First Security Bank of Utah in its individual
capacity and its successors, assigns, legal representatives, agents and
servants, from and against any and all liabilities, obligations, losses,
damages, penalties, taxes (excluding any taxes payable by First Security Bank
of Utah in its individual capacity on or measured by any compensation received
by First Security Bank of Utah in its individual capacity for its services
hereunder), claims, actions, suits, costs, expenses or disbursements
(including, without limitation, reasonable legal fees and expenses, and
including without limitation any liability of an owner, any strict liability
and any liability without fault) of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against First Security Bank of Utah in its
individual capacity (whether or not also indemnified against by Lessee under
the Lease or under the Participation Agreement or also indemnified against by
any other person, but only to the extent not otherwise paid or reimbursed by
such other person) in any way relating to or arising out of this Trust
Agreement or any of the Operative Documents or the enforcement of any of the
terms of any thereof, or in any way relating to or arising out of the
manufacture, purchase, acceptance, nonacceptance, rejection, ownership,
delivery, lease, possession, use, operation, condition, sale, return or other
disposition of the Aircraft (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent, trademark or
copyright infringement), or in any way relating to or arising out of the
administration of the Trust Estate or the action or inaction of the Owner
Trustee or First Security Bank of Utah in its individual capacity hereunder,
except (a) in the case of willful misconduct or gross negligence on the part of
the Owner Trustee or First Security Bank of Utah in its individual capacity in
the performance or nonperformance of its duties hereunder or under any of the
other Operative Documents to which the Owner Trustee is a party, (b) those
resulting from the inaccuracy of any representation or warranty of First
Security Bank of Utah in its individual capacity (or from the failure of First
Security Bank of Utah in its individual capacity to perform any of its
covenants) in Section 6.03 hereof, in Section 4 of the Lease, in Sections 8(b),
8(c) or 8(p) of the Participation Agreement or elsewhere in any of the other
Operative Documents, (c) as may result from a breach by First Security Bank of
Utah in its individual capacity of its covenant in the last sentence of Section
5.04 hereof, (d) in the case of the failure to use ordinary care on the part of
the Owner Trustee or First Security Bank of Utah in its individual capacity in
the disbursement of funds or (e) those claims arising under any circumstances
or upon any terms where Lessee would not have been required to indemnify the
Owner Trustee in its individual capacity pursuant to Section 7(b) or 7(c) of
the Participation Agreement (disregarding, for this purpose,
13
<PAGE> 19
[Trust Agreement (1994 737 B)]
Sections 7(b)(ii)(3) (to the extent that such disposition referred to therein
results from the Owner Trustee's acting in accordance with written instructions
of the Owner Participants), 7(b)(ii)(8), 7(c)(2) (to the extent that such
failure referred to therein results from the Owner Trustee's acting in
accordance with written instructions of the Owner Participants), 7(c)(4) (to
the extent that such disposition referred to therein results from the Owner
Trustee's acting in accordance with written instructions of the Owner
Participants), 7(c)(6), 7(c)(8) and 7(c)(10) of the Participation Agreement and
disregarding, for this purpose, those claims arising or resulting from any
action taken by or inaction of the Owner Trustee in accordance with written
instructions of the Owner Participants); provided, however, that the exception
set forth in clause (a) of this Section 7.01 shall not apply to any action
taken or omission made by the Owner Trustee pursuant to and in accordance with
written directions given to the Owner Trustee by the Owner Participants. The
indemnities contained in this Section 7.01 extend to First Security Bank of
Utah only in its individual capacity and shall not be construed as indemnities
of the Indenture Estate or the Trust Estate (except to the extent, if any, that
First Security Bank of Utah in its individual capacity has been reimbursed by
the Indenture Estate or the Trust Estate for amounts covered by the indemnities
contained in this Section 7.01). The indemnities contained in this Section
7.01 shall survive the termination of this Trust Agreement. In addition, if
necessary, First Security Bank of Utah in its individual capacity shall be
entitled to indemnification from the Trust Estate, subject to the Lien of the
Trust Indenture, for any liability, obligation, loss, damage, penalty, tax,
claim, action, suit, cost, expense or disbursement indemnified against pursuant
to this Section 7.01 to the extent not reimbursed by Lessee, the Owner
Participants or others, but without releasing any of them from their respective
agreements of reimbursement; and to secure the same First Security Bank of Utah
in its individual capacity shall have a lien on the Trust Estate, subject to
the lien of the Trust Indenture, which shall be prior to any interest therein
of the Owner Participants. The payor of any indemnity under this Article VII
shall be subrogated to any right of the person indemnified in respect of the
matter as to which such indemnity was paid.
ARTICLE VIII
TRANSFER OF AN OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interests. All provisions of
Section 8(l) of the Participation Agreement shall (with the same force and
effect as if set forth in full in this Section 8.01) be applicable to any
assignment, conveyance or other transfer by any Owner Participant of any of its
right, title or interest in and to the Participation Agreement, the Trust
Estate or this Trust Agreement. If there is more than one Owner Participant,
no assignment, conveyance or other transfer by an Owner Participant of any of
its right, title or interest in and to this Trust Agreement or the Trust Estate
shall be valid unless each other Owner Participant's prior written consent is
given to such assignment, conveyance or other transfer.
14
<PAGE> 20
[Trust Agreement (1994 737 B)]
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of Owner Trustee; Appointment of
Successor. (a) Resignation or Removal. The Owner Trustee or any successor
Owner Trustee (i) shall resign if required to do so pursuant to Section 8(b) of
the Participation Agreement and (ii) may resign at any time without cause by
giving at least 60 days' prior written notice to each Owner Participant, the
Indenture Trustee and Lessee, such resignation to be effective upon the
acceptance of appointment by the successor Owner Trustee under Section 9.01(b)
hereof. In addition, a Majority in Interest of Owner Participants may at any
time remove the Owner Trustee without cause by a notice in writing delivered to
the Owner Trustee, all other Owner Participants, the Indenture Trustee and
Lessee, such removal to be effective upon the acceptance of appointment by the
successor Owner Trustee under Section 9.01(b) hereof. In the case of the
resignation or removal of the Owner Trustee, a Majority in Interest of Owner
Participants may appoint a successor Owner Trustee by an instrument signed by
such Owner Participants, such successor to be approved by Lessee (which
approval shall not be unreasonably withheld). If a successor Owner Trustee
shall not have been appointed within 30 days after such notice of resignation
or removal, the Owner Trustee, any Owner Participant, Lessee or the Indenture
Trustee may apply to any court of competent jurisdiction to appoint a successor
Owner Trustee to act until such time, if any, as a successor shall have been
appointed as above provided. Any successor Owner Trustee so appointed by such
court shall immediately and without further act be superseded by any successor
Owner Trustee appointed as above provided.
(b) Execution and Delivery of Documents, etc. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named the Owner Trustee herein; but nevertheless, upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers
and trusts of such predecessor Owner Trustee, and such predecessor Owner
Trustee shall duly assign, transfer, deliver and pay over to such successor
Owner Trustee all monies or other property then held by such predecessor Owner
Trustee upon the trusts herein expressed. Upon the appointment of any
successor Owner Trustee hereunder, the predecessor Owner Trustee will execute
such documents as are provided to it by such successor Owner Trustee and will
take such further actions as are requested of it by such successor Owner
Trustee as are reasonably required to cause registration of the Aircraft
included in the Trust Estate to be transferred upon
15
<PAGE> 21
[Trust Agreement (1994 737 B)]
the records of the Federal Aviation Administration, or other governmental
authority having jurisdiction, into the name of the successor Owner Trustee.
(c) Qualifications. Any successor Owner Trustee, however
appointed, shall be a "citizen of the United States" within the meaning of
Section 40102(a)(15) of the Transportation Code and shall also be a bank or
trust company organized under the laws of the United States or any state
thereof having a combined capital and surplus of at least $50,000,000 (or the
obligations and liabilities of which, whether now in existence or hereafter
incurred, are fully and unconditionally guaranteed by an affiliate company
organized under the laws of the United States or any state thereof having a
combined capital and surplus of at least $50,000,000), if there be such an
institution willing, able and legally qualified to perform the duties of the
Owner Trustee hereunder upon reasonable or customary terms. No such successor
trustee shall (i) be located in a jurisdiction which creates adverse
consequences for the Lessee (unless such circumstances would be created by
substantially all jurisdictions where major banking or trust institutions are
located) or (ii) charge fees for its services as an Owner Trustee in excess of
the then prevailing market rates for such services (unless the Owner
Participants agree that they and not the Lessee shall be liable for such
excess).
(d) Merger, etc. Any corporation into which First Security
Bank of Utah may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which First Security Bank of Utah shall be a party, or any corporation to which
substantially all the corporate trust business of First Security Bank of Utah
may be transferred, shall, subject to the terms of Section 9.01(c) hereof, be
the Owner Trustee hereunder without further act.
SECTION 9.02. Co-Trustees and Separate Trustees. If at any
time it shall be necessary or prudent in order to conform to any law of any
jurisdiction in which all or any part of the Trust Estate is located, or make
any claim or bring any suit with respect to the Trust Estate or the Lease, or
in the event that the Owner Trustee shall have been requested to do so by the
Owner Participants or the Owner Trustee being advised by counsel shall
determine that it is so necessary or prudent in the interest of the Owner
Participants or the Owner Trustee, or the Owner Trustee shall have been
directed to do so by a Majority in Interest of Owner Participants, the Owner
Trustee and each Owner Participant shall execute and deliver an agreement
supplemental hereto and all other instruments and agreements necessary or
proper to constitute another bank or trust company or one or more persons (any
and all of which shall be a "citizen of the United States" as defined in
Section 40102(a)(15) of the Transportation Code) approved by the Owner Trustee
and a Majority in Interest of Owner Participants, either to act as co-trustee,
jointly with the Owner Trustee, or to act as separate trustee hereunder (any
such co-trustee or separate trustee being herein sometimes referred to as an
"additional trustee"). In the event the Owner Participants shall not have
joined in the execution of such agreements supplemental
16
<PAGE> 22
[Trust Agreement (1994 737 B)]
hereto within ten days after the receipt of a written request from the Owner
Trustee so to do, or in case a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee may act under the
foregoing provisions of this Section 9.02 without the concurrence of the Owner
Participants; and the Owner Participants hereby appoint the Owner Trustee their
agent and attorney-in-fact to act for them under the foregoing provisions of
this Section 9.02 in either of such contingencies.
Every additional trustee hereunder shall, to the extent
permitted by law, be appointed and act, and the Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(A) All powers, duties, obligations and rights conferred
upon the Owner Trustee in respect of the custody, control and
management of monies, the Aircraft or documents authorized to be
delivered hereunder or under the Participation Agreement shall be
exercised solely by the Owner Trustee;
(B) All other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred or
imposed upon and exercised or performed by the Owner Trustee and such
additional trustee jointly, except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (including the holding of title to the Trust Estate) the
Owner Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations
shall be exercised and performed by such additional trustee;
(C) No power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised
hereunder by such additional trustee, except jointly with, or with
the consent in writing of, the Owner Trustee;
(D) No trustee hereunder shall be personally liable by
reason of any action or omission of any other trustee hereunder;
(E) A Majority in Interest of Owner Participants, at any
time, by an instrument in writing may remove any such additional
trustee. In the event that the Owner Participants shall not have
joined in the execution of any such instrument within ten days after
the receipt of a written request from the Owner Trustee so to do, the
Owner Trustee shall have the power to remove any such additional
trustee without the concurrence of the Owner Participants; and the
Owner Participants hereby appoint the Owner Trustee their agent and
attorney-in-fact for them in such connection in such contingency; and
17
<PAGE> 23
[Trust Agreement (1994 737 B)]
(F) No appointment of, or action by, any additional trustee
will relieve the Owner Trustee of any of its obligations under, or
otherwise affect any of the terms of, the Trust Indenture or affect
the interests of the Indenture Trustee or the Holders of the
Certificates in the Indenture Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments and Delivery
Thereof. (a) Supplement and Amendments. This Trust Agreement may not be
amended, supplemented or otherwise modified except by an instrument in writing
signed by the Owner Trustee and a Majority in Interest of Owner Participants.
Subject to Section 10.02 hereof and Section 10(B) of the Participation
Agreement, the Owner Trustee will execute any amendment, supplement or other
modification of this Trust Agreement or of any other Operative Documents to
which the Owner Trustee is a party which it is requested to execute by a
Majority in Interest of Owner Participants, except that the Owner Trustee shall
not execute any such amendment, supplement or other modification which, by the
express provisions of any of the above documents, requires the consent of any
other party unless such consent shall have been obtained; and provided that,
without the prior written consent of each Owner Participant, (i) no such
supplement, amendment or modification shall (A) modify any of the provisions of
this Section 10.01, the definition of "Majority in Interest of Owner
Participants" in Section 1.01 hereof or Article IV hereof, (B) reduce, modify
or amend any indemnities in favor of any Owner Participant as set forth in
Section 7 of the Participation Agreement or in the Tax Indemnity Agreement, (C)
reduce the amount or extend the time of payment of Basic Rent, Supplemental
Rent, Termination Value or Stipulated Loss Value for the Aircraft as set forth
in the Lease and (ii) no such supplement, amendment or modification shall
require any Owner Participant to invest or advance funds or shall entail any
additional personal liability or the surrender of any indemnification, claim or
individual right on the part of any Owner Participant with respect to any
agreement or obligation.
(b) Delivery of Amendments and Supplements to Certain
Parties. A signed copy of each amendment or supplement referred to in Section
10.01(a) hereof shall be delivered by the Owner Trustee to the Indenture
Trustee and the Lessee.
SECTION 10.02. Discretion as to Execution of Documents.
Prior to executing any document required to be executed by it pursuant to the
terms of Section 10.01 hereof, the Owner Trustee shall be entitled to receive
an opinion of its counsel to the effect that the execution of such document is
authorized hereunder. If in the opinion of the Owner Trustee any
18
<PAGE> 24
[Trust Agreement (1994 737 B)]
such document adversely affects any right, duty, immunity or indemnity in favor
of the Owner Trustee hereunder or under any other Operative Document to which
the Owner Trustee is a party, the Owner Trustee may in its discretion decline
to execute such document.
SECTION 10.03. Absence of Requirements as to Form. It shall
not be necessary for any written request furnished pursuant to Section 10.01
hereof to specify the particular form of the proposed documents to be executed
pursuant to such Section, but it shall be sufficient if such request shall
indicate the substance thereof.
SECTION 10.04. Distribution of Documents. Promptly after
the execution by the Owner Trustee of any document entered into pursuant to
Section 10.01 hereof, the Owner Trustee shall mail, by certified mail, postage
prepaid, a conformed copy thereof to each Owner Participant, but the failure of
the Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
SECTION 10.05. No Request Needed as to Lease Supplement and
Trust Supplement. No written request pursuant to Section 10.01 hereof shall be
required to enable the Owner Trustee to enter into the Lease Supplement
covering the Aircraft with Lessee pursuant to the terms of the Lease and
Section 3.01(c) hereof and the Trust Supplement pursuant to the terms of the
Trust Indenture and Section 3.01(d) hereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Termination of Trust Agreement. This Trust
Agreement and the trusts created hereby shall be of no further force or effect
upon the earlier of (a) both the final discharge of the Trust Indenture
pursuant to Section 10.01 thereof, the termination of the Lease pursuant to its
terms and the sale or other final disposition by the Owner Trustee of all
property constituting part of the Trust Estate and the final distribution by
the Owner Trustee of all monies or other property or proceeds constituting part
of the Trust Estate in accordance with Article IV hereof, provided that at such
time Lessee shall have fully complied with all of the terms of the Lease and
the Participation Agreement or (b) twenty-one years less one day after the
death of the last survivor of all of the descendants of the grandparents of
David C. Rockefeller living on the date of the earliest execution of this Trust
Agreement by any party hereto, but if this Trust Agreement and the trusts
created hereby shall be or become authorized under applicable law to be valid
for a period commencing on the 21st anniversary of the death of such last
survivor (or, without limiting the generality of the foregoing, if legislation
shall become effective providing for the validity of this Trust Agreement and
the trusts created hereby for a period in gross
19
<PAGE> 25
[Trust Agreement (1994 737 B)]
exceeding the period for which this Trust Agreement and the trusts created
hereby are hereinabove stated to extend and be valid), then this Trust
Agreement and the trusts created hereby shall not terminate under this
subsection (b) but shall extend to and continue in effect, but only if such
nontermination and extension shall then be valid under applicable law, until
the day preceding such date as the same shall, under applicable law, cease to
be valid; otherwise this Trust Agreement and the trusts created hereby shall
continue in full force and effect in accordance with the term hereof, subject
to the Owner Participant's right to revoke such trusts and cause the Trust
Estate (subject to the Lien of the Trust Indenture) to be distributed.
SECTION 11.02. Owner Participants Have No Legal Title in
Trust Estate. The Owner Participants shall not have legal title to any part of
the Trust Estate. No transfer, by operation of law or otherwise, of any right,
title and interest of the Owner Participant in and to the Trust Estate
hereunder shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any successors or transferees of the Owner Participants to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
SECTION 11.03. Assignment, Sale, etc. of Aircraft. Any
assignment, sale, transfer or other conveyance of the Aircraft by the Owner
Trustee made pursuant to the terms hereof or of the Lease or the Participation
Agreement shall bind the Owner Participants and shall be effective to transfer
or convey all right, title and interest of the Owner Trustee and the Owner
Participants in and to the Aircraft. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.04. Trust Agreement for Benefit of Certain
Parties Only. Except for the terms of Section 8(l) of the Participation
Agreement incorporated in Article VIII hereof and except as otherwise provided
in Article IX hereof and Section 11.01 hereof, nothing herein, whether
expressed or implied, shall be construed to give any person other than the
Owner Trustee and the Owner Participants any legal or equitable right, remedy
or claim under or in respect of this Trust Agreement; but this Trust Agreement
shall be held to be for the sole and exclusive benefit of the Owner Trustee and
the Owner Participants.
SECTION 11.05. Citizenship of the Owner Participant. If at
any time there shall be more than one Owner Participant, then any Owner
Participant who shall cease to be a "citizen of the United States" as defined
in Section 40102(a)(15) of the Transportation Code, shall have no voting or
similar rights hereunder and shall have no right to direct, influence or limit
the exercise of, or to prevent the direction or influence of, or place any
limitation on the exercise of, the Owner Trustee's authority or to remove the
Owner Trustee.
20
<PAGE> 26
[Trust Agreement (1994 737 B)]
SECTION 11.06. Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Trust
Agreement on the day that such writing is delivered or, if sent by registered
or certified mail, three Business Days after being deposited in the mails
addressed to the intended recipient thereof in accordance with the provisions
of this Section 11.06. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 11.06,
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telecopier numbers) as follows: (A) if to
Lessee, the Owner Trustee, the Indenture Trustee or the Original Owner
Participant, to the respective addresses set forth on Schedule I to the
Participation Agreement, or (B) if to a Subsequent Owner Participant, addressed
to such Subsequent Owner Participant at such address as such Subsequent Owner
Participant shall have furnished by notice to the parties hereto or (C) if to
any Holder, addressed to such Holder at its address as set forth in the
Certificate register maintained pursuant to Section 2.07 of the Trust
Indenture.
SECTION 11.07. Severability. Subject to Section 11.12
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08. Waivers, etc. No term or provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing entered into in compliance with the terms of Article X
hereof; and any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
SECTION 11.09. Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10. Binding Effect, etc. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Owner Trustee and its successors and assigns, and the Owner Participants,
their successors and, to the extent permitted by Article VIII hereof, their
assigns. Any request, notice, direction, consent, waiver or other instrument or
action by an Owner Participant shall bind its successors and assigns. Any
Owner Participant which shall cease to have any Ownership Interest shall
thereupon cease to be a party hereto or an Owner Participant for any reason and
shall have no further obligations hereunder.
SECTION 11.11. Headings; References. The headings of the
various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
21
<PAGE> 27
[Trust Agreement (1994 737 B)]
SECTION 11.12. Governing Law. THIS TRUST AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
SECTION 11.13. Performance by the Owner Participant. Any
obligation of the Owner Trustee in its individual capacity or as Owner Trustee
hereunder or under any other Operative Document or other document contemplated
herein, may be performed by any Owner Participant and any such performance
shall not be construed as a revocation of the trust created hereby.
* * *
22
<PAGE> 28
[Trust Agreement (1994 737 B)]
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MS FINANCING INC.
By:
-------------------------------
Title:
----------------------------
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
By:
-------------------------------
Title:
----------------------------
23
<PAGE> 1
EXHIBIT 4.24
*
Aircraft N398UA
------------------------
FIRST AMENDMENT TO TRUST AGREEMENT
(1994 737 B)
Dated December 23, 1997
between
MS FINANCING INC.,
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
------------------------
United Air Lines, Inc.
1994 737 B Equipment Trust
One Boeing 737-322 Aircraft
------------------------
<PAGE> 2
FIRST AMENDMENT TO TRUST AGREEMENT (1994 737 B)
THIS FIRST AMENDMENT TO TRUST AGREEMENT (1994 737 B) dated
December 23, 1997 (this "Amendment") between MS FINANCING INC., a Delaware
corporation (the "Owner Participant"), and STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, "State Street Bank and Trust Company of Connecticut,
National Association", and otherwise not in its individual capacity but solely
as trustee hereunder with its permitted successors and assigns called the
"Owner Trustee") as assignee of FIRST SECURITY BANK, NATIONAL ASSOCIATON
(formerly known as First Security Bank of Utah, National Association)
("Original Owner Trustee"), amends that certain Trust Agreement (1994 737 B)
dated as of September 1, 1994 (the "Trust Agreement") between the Owner
Participant and the Original Owner Trustee.
W I T N E S S E T H:
WHEREAS, a counterpart of the Trust Agreement was attached to the
Original Indenture (as defined in the Third Amendment to Lease (1994 737 B)
dated as of September 1, 1994 between United Air Lines, Inc., as lessee
("Lessee") and the Owner Trustee) which was recorded with the Federal Aviation
Administration on November 1, 1994 and assigned Conveyance No. II002365; and
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
(1994 737 B) dated as of December 11, 1997 between the Owner Trustee and the
Original Owner Trustee, the Original Owner Trustee assigned to the Owner
Trustee, and the Owner Trustee assumed, all of the obligations of the Original
Owner Trustee under the Operative Documents; and
WHEREAS, in connection with a refinancing of the Equipment Notes the
parties hereto desire to amend the Trust Agreement in certain respects; and
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Trust Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Amendment to Article I. Section 1.01 of the Trust
Agreement is hereby amended in the following manner:
(a) The definition of "Indenture Event of Default" is hereby
amended to be and read in its entirety as follows:
<PAGE> 3
[First Amendment to Trust Agreement (1994 737B)]
""Indenture Event of Default" has the meaning
ascribed such term in the Trust Indenture."
SECTION 2. Amendment to Article IV. Section 4.01(a) of the
Trust Agreement is hereby amended by deleting the reference to "Article III"
which appears therein and inserting a reference to "Article 3" in lieu thereof.
SECTION 3. Amendments to Articles VI and VII. Sections 6.01,
6.02, 6.03 and 7.01 of the Trust Agreement are hereby amended by deleting the
words "First Security Bank of Utah" each time such words appear therein and
inserting the words "State Street Bank and Trust Company of Connecticut,
National Association" in lieu thereof.
SECTION 4. Amendments to Article XI. Article XI of the Trust
Agreement is hereby amended in the following manner:
(a) Section 11.01 is hereby amended to be and read in its
entirety as follows:
"Section 11.01. Termination. This Trust Agreement
and the trusts created hereby shall be of no further force or
effect upon the earlier of (a) both the final discharge of the
Trust Indenture pursuant to Section 10.01 thereof, the
termination of the Lease pursuant to its terms and the sale or
other final disposition by the Owner Trustee of all property
constituting part of the Trust Estate and the final
distribution by the Owner Trustee of all monies or other
property or proceeds constituting part of the Trust Estate in
accordance with Article IV hereof, provided that at such time
Lessee shall have fully complied with all of the terms of the
Lease and the Participation Agreement or (b) twenty-one years
less one day after the death of the last survivor of all of
the descendants of the grandparents of David C. Rockefeller
living on the date of the earliest execution of this Trust
Agreement by any party hereto, but if this Trust Agreement and
the trust created hereby shall be or become authorized under
applicable law to be valid for a period commencing on the 21st
anniversary of the death of such last survivor (or, without
limiting the generality of the foregoing, if legislation shall
become effective providing for the validity of this Trust
Agreement and the trusts created hereby for a period in gross
exceeding the period for which this Trust Agreement and the
trusts created hereby are hereinabove stated to extend and be
valid), then this Trust Agreement and the trusts created
hereby shall not terminate under this subsection (b) but shall
extend to and continue in effect, but only if such
non-termination and extension shall then be valid under
applicable law, until the day preceding such date as the same
shall, under applicable law, cease to be valid. This Trust
Agreement and the trusts created hereby shall terminate and
the Trust Estate shall be distributed to the
2
<PAGE> 4
[First Amendment to Trust Agreement (1994 737B)]
Owner Participant, and this Trust Agreement shall be of no
further force and effect, upon the election of the Owner
Participant by notice to the Owner Trustee to revoke the
trusts created hereby; provided, however, that until the Lien
of the Trust Indenture on the Trust Estate shall have been
discharged pursuant to the terms thereof and until payment in
full of the principal of, Break Amount, if any, Make-Whole
Amount, if any, and interest on the Equipment Notes and all
other Secured Obligations owed to Noteholders under the Trust
Indenture, no such revocation shall be effective without the
consent of the Indenture Trustee."
(b) Section 11.04 of the Trust Agreement is hereby amended by
adding the words ", Section 5.01" immediately preceding the words "and
Section 11.01" and immediately following the words "Article IX
hereof".
(c) Section 11.12 of the Trust Agreement is hereby amended by
deleting the phrase "STATE OF UTAH" contained therein and inserting
the phrase "STATE OF CONNECTICUT" in lieu thereof.
SECTION 5. Ratification; Effective Date. Except as amended
hereby, the Trust Agreement as heretofore supplemented continues and shall
remain in full force and effect in all respects. From and after the date of
this Amendment, each and every reference in the Trust Agreement, as amended
hereby, to "this Agreement", "herein", "hereof" or similar words and phrases
referring to the Trust Agreement or any word or phrase referring to a section
or provision of the Trust Agreement is deemed for all purposes to be a
reference to the Trust Agreement or such section or provision as amended
pursuant to this Amendment. The amendments to the Trust Agreement
contemplated by this Amendment shall be effective from and after the date the
Third Amendment to Lease is filed for record with the FAA.
SECTION 6. Miscellaneous. This Amendment may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee and its successors and assigns, and the Owner Participant, its
successors and, to the extent permitted by Article VIII of the Trust Agreement,
its assigns. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner Participant shall bind its successors and
assigns. The headings of the various Sections herein are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. This Amendment shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Connecticut, including all
matters of construction, validity and performance.
* * *
3
<PAGE> 5
[First Amendment to Trust Agreement (1994 737B)]
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Trust Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
MS FINANCING INC.
By:
--------------------------------------
Title:
-----------------------------------
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION
By:
--------------------------------------
Title:
-----------------------------------
4
<PAGE> 1
EXHIBIT 4.25
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.
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
NOT INDIVIDUALLY BUT SOLELY
AS OWNER TRUSTEE
SERIES A EQUIPMENT NOTE DUE DECEMBER 2, 2015 ISSUED IN CONNECTION
WITH THE BOEING MODEL 737-322 AIRCRAFT BEARING UNITED STATES
REGISTRATION NUMBER N398UA.
No. 1994 737 B-A1 Date: December 23, 1997
Original Principal Amount Maturity Date
- ------------------------- --------------
$10,750,000 December 2, 2015
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not individually but solely as
Owner Trustee (herein, in such capacity, the "Owner Trustee") for value
received, hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent as nominee for the Pass Through Trustee under the
Intercreditor Agreement, or registered assigns, the principal sum of Ten
Million Seven Hundred Fifty Thousand Dollars ($10,750,000) in installments, one
such installment to be due and payable on each Payment Date, each such
installment to be in an amount equal to the amount set forth in Schedule I
hereto, together with interest on the unpaid principal amount hereof from time
to time outstanding from and including the date hereof until such principal
amount is paid in full. Interest shall accrue with respect to each Interest
Period at the Applicable Rate (calculated on the basis of a year consisting of
360 days and the actual number of days elapsed) in effect for such Interest
Period and shall be payable in arrears on each Interest Payment Date and on the
date this Equipment Note is paid in full. Interest shall be payable with
respect to the first but not the last day of each Interest Period.
Notwithstanding the foregoing, the final payment made on this Equipment Note
shall be in an amount sufficient to discharge in full the unpaid principal
amount and all accrued and unpaid interest on, and any other amounts due under,
this Equipment Note. Notwithstanding anything to the contrary
<PAGE> 2
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, interest
at the then Applicable Rate shall accrue on the amount of such payment during
such extension.
For purposes hereof, the term "Indenture" means the Amended
and Restated Trust Indenture and Security Agreement (1994 737 B), dated as of
December 23, 1997 between the Owner Trustee and First Security Bank, National
Association (the "Indenture Trustee"), 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 Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (calculated on the basis of a year of 360 days and the actual
number of days elapsed) on any overdue principal amount, any overdue Break
Amount, if any, 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).
The interest rate borne by this Equipment Note shall be
subject to adjustments to the extent, and under the circumstances, specified by
the Note Purchase Agreement and the Registration Rights Agreement as more
particularly set forth in the third paragraph of Section 2.01 of the Indenture.
All payments of principal, Break Amount, if any, Make-Whole
Amount, if any, interest and other amounts, if any, to be made by the Owner
Trustee hereunder and under the Indenture shall be made only from the income
and proceeds from the Indenture Estate and only to the extent that the
Indenture Trustee shall have sufficient income or proceeds from the Indenture
Estate to make such payments. Each holder hereof, by its acceptance of this
Equipment Note, agrees that it will look solely to the income and proceeds from
the Indenture Estate to the extent available for distribution to the holder
hereof as above provided and that, none of the Owner Trustee, the Indenture
Trustee and the Owner Participant is or shall be personally liable or liable in
any manner extending to any assets other than the Indenture Estate to the
holder hereof for any amounts payable or for any liability under this Equipment
Note or the Indenture or, except as provided in Section 2.09 of the Indenture,
under the Participation Agreement or the other Operative Documents; provided,
however, that, nothing herein contained shall limit, restrict or impair the
right of the Indenture Trustee, subject always to the terms and provisions of
the Indenture, to accelerate the maturity of this Equipment Note upon an
Indenture Event of Default under the Indenture, to bring suit and obtain a
judgment against the Owner Trustee on this Equipment Note for purposes of
realizing upon the Indenture Estate and to exercise all rights and remedies
provided under the Indenture or otherwise realize upon the Indenture Estate.
2
<PAGE> 3
This Equipment Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Equipment
Note has been executed on behalf of the Owner Trustee by the manual or
facsimile signature of an authorized officer of the Owner Trustee, and
authenticated by the Indenture Trustee by the manual signature of an authorized
officer or signatory of the Indenture Trustee, in each case as specified in
Section 2.02 of the Indenture.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Owner Trustee
pursuant to the terms of the Indenture. Reference is made to the Indenture and
all supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its Corporate Trust Department) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties thereby conveyed, pledged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner Trustee, the Indenture
Trustee and the Noteholders of the Equipment Notes, and the terms upon which
the Equipment Notes are, and are to be, executed and delivered, as well as for
a statement of the terms and conditions of the trust created by the Indenture,
to all of which terms and conditions in the Indenture each Noteholder hereof
agrees by its acceptance of this Equipment Note.
This Equipment Note is subject to redemption as provided in
Article 6 of the Indenture but not otherwise.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Equipment Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
As provided in the Indenture, in certain circumstances this
Equipment Note is transferable, and upon surrender of this Equipment Note for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Noteholder or his attorney
duly authorized in writing, one or more new Equipment Notes of the same
maturity and type and of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
The Equipment Notes are issuable only as registered Equipment
Notes. As provided in the Indenture and subject to certain limitations therein
set forth, Equipment Notes are exchangeable for a like aggregate principal
amount of Equipment Notes of the same series, maturity and type and of
authorized denominations, as requested by the Noteholder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer or
exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
3
<PAGE> 4
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner Trustee, the Indenture Trustee, the Paying Agent and
the Registrar may deem and treat the person in whose name this Equipment Note
is registered as the absolute owner hereof for the purpose of receiving payment
of the principal of and interest on this Equipment Note and for all other
purposes whatsoever whether or not this Equipment Note be overdue, and neither
the Owner Trustee, the Indenture Trustee, the Paying Agent nor the Registrar
shall be affected by notice to the contrary.
The Noteholder of this Equipment Note, by accepting the same,
(a) agrees to and shall be bound by such provisions and each other provision
applicable to it in the Indenture, the Participation Agreement, the Note
Purchase Agreement and each other Fundamental Document, (b) authorizes and
directs the Indenture Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Indenture Trustee its attorney-in-fact for such
purpose.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS EQUIPMENT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF
THE STATE OF ILLINOIS.
* * *
4
<PAGE> 5
IN WITNESS WHEREOF, the Owner Trustee has caused this
Equipment Note to be duly executed in its corporate name by its officer duly
authorized as of the date hereof.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity but sole
as Owner Trustee
By:
-----------------------------------
Name:
Title:
5
<PAGE> 6
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the
within-mentioned Indenture.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
------------------------------------
Authorized officer and signatory
6
<PAGE> 7
SCHEDULE I
AMORTIZATION SCHEDULE
Payment Date Principal Amount (Expressed as a
- ------------ Percentage of Original Principal Amount)
----------------------------------------
* * *
7
<PAGE> 1
EXHIBIT 4.26
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.
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
NOT INDIVIDUALLY BUT SOLELY
AS OWNER TRUSTEE
SERIES B EQUIPMENT NOTE DUE DECEMBER 2, 2014 ISSUED IN CONNECTION
WITH THE BOEING MODEL 737-322 AIRCRAFT BEARING UNITED STATES
REGISTRATION NUMBER N398UA.
No. 1994 737 B-B1 Date: December 23, 1997
Original Principal Amount Maturity Date
$2,570,000 December 2, 2014
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not individually but solely as
Owner Trustee (herein, in such capacity, the "Owner Trustee") for value
received, hereby promises to pay to FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent as nominee for the Pass Through Trustee under the
Intercreditor Agreement, or registered assigns, the principal sum of Two
Million Five Hundred Seventy Thousand Dollars ($2,570,000) in installments, one
such installment to be due and payable on each Payment Date, each such
installment to be in an amount equal to the amount set forth in Schedule I
hereto, together with interest on the unpaid principal amount hereof from time
to time outstanding from and including the date hereof until such principal
amount is paid in full. Interest shall accrue with respect to each Interest
Period at the Applicable Rate (calculated on the basis of a year consisting of
360 days and the actual number of days elapsed) in effect for such Interest
Period and shall be payable in arrears on each Interest Payment Date and on the
date this Equipment Note is paid in full. Interest shall be payable with
respect to the first but not the last day of each Interest Period.
Notwithstanding the foregoing, the final payment made on this Equipment Note
shall be in an amount sufficient to discharge in full the unpaid principal
amount and all accrued and unpaid interest on, and any other amounts due under,
this Equipment Note. Notwithstanding anything to the contrary
<PAGE> 2
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, interest
at the then Applicable Rate shall accrue on the amount of such payment during
such extension.
For purposes hereof, the term "Indenture" means the Amended
and Restated Trust Indenture and Security Agreement (1994 737 B), dated as of
December 23, 1997 between the Owner Trustee and First Security Bank, National
Association (the "Indenture Trustee"), 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 Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (calculated on the basis of a year of 360 days and the actual
number of days elapsed) on any overdue principal amount, any overdue Break
Amount, if any, 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).
The interest rate borne by this Equipment Note shall be
subject to adjustments to the extent, and under the circumstances, specified by
the Note Purchase Agreement and the Registration Rights Agreement as more
particularly set forth in the third paragraph of Section 2.01 of the Indenture.
All payments of principal, Break Amount, if any, Make-Whole
Amount, if any, interest and other amounts, if any, to be made by the Owner
Trustee hereunder and under the Indenture shall be made only from the income
and proceeds from the Indenture Estate and only to the extent that the
Indenture Trustee shall have sufficient income or proceeds from the Indenture
Estate to make such payments. Each holder hereof, by its acceptance of this
Equipment Note, agrees that it will look solely to the income and proceeds from
the Indenture Estate to the extent available for distribution to the holder
hereof as above provided and that, none of the Owner Trustee, the Indenture
Trustee and the Owner Participant is or shall be personally liable or liable in
any manner extending to any assets other than the Indenture Estate to the
holder hereof for any amounts payable or for any liability under this Equipment
Note or the Indenture or, except as provided in Section 2.09 of the Indenture,
under the Participation Agreement or the other Operative Documents; provided,
however, that, nothing herein contained shall limit, restrict or impair the
right of the Indenture Trustee, subject always to the terms and provisions of
the Indenture, to accelerate the maturity of this Equipment Note upon an
Indenture Event of Default under the Indenture, to bring suit and obtain a
judgment against the Owner Trustee on this Equipment Note for purposes of
realizing upon the Indenture Estate and to exercise all rights and remedies
provided under the Indenture or otherwise realize upon the Indenture Estate.
2
<PAGE> 3
This Equipment Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Equipment
Note has been executed on behalf of the Owner Trustee by the manual or
facsimile signature of an authorized officer of the Owner Trustee, and
authenticated by the Indenture Trustee by the manual signature of an authorized
officer or signatory of the Indenture Trustee, in each case as specified in
Section 2.02 of the Indenture.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Owner Trustee
pursuant to the terms of the Indenture. Reference is made to the Indenture and
all supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its Corporate Trust Department) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties thereby conveyed, pledged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner Trustee, the Indenture
Trustee and the Noteholders of the Equipment Notes, and the terms upon which
the Equipment Notes are, and are to be, executed and delivered, as well as for
a statement of the terms and conditions of the trust created by the Indenture,
to all of which terms and conditions in the Indenture each Noteholder hereof
agrees by its acceptance of this Equipment Note.
This Equipment Note is subject to redemption as provided in
Article 6 of the Indenture but not otherwise.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Equipment Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
As provided in the Indenture, in certain circumstances this
Equipment Note is transferable, and upon surrender of this Equipment Note for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Noteholder or his attorney
duly authorized in writing, one or more new Equipment Notes of the same
maturity and type and of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
The Equipment Notes are issuable only as registered Equipment
Notes. As provided in the Indenture and subject to certain limitations therein
set forth, Equipment Notes are exchangeable for a like aggregate principal
amount of Equipment Notes of the same series, maturity and type and of
authorized denominations, as requested by the Noteholder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer or
exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
3
<PAGE> 4
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner Trustee, the Indenture Trustee, the Paying Agent and
the Registrar may deem and treat the person in whose name this Equipment Note
is registered as the absolute owner hereof for the purpose of receiving payment
of the principal of and interest on this Equipment Note and for all other
purposes whatsoever whether or not this Equipment Note be overdue, and neither
the Owner Trustee, the Indenture Trustee, the Paying Agent nor the Registrar
shall be affected by notice to the contrary.
The indebtedness evidenced by this Equipment Note is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of the Secured Obligations (as
defined in the Indenture) in respect of Series A Equipment Notes and this
Equipment Note is issued subject to such provisions. The Noteholder of this
Equipment Note, by accepting the same, (a) agrees to and shall be bound by such
provisions and each other provision applicable to it in the Indenture, the
Participation Agreement, the Note Purchase Agreement and each other Fundamental
Document, (b) authorizes and directs the Indenture Trustee on its behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Indenture
Trustee its attorney-in-fact for such purpose.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS EQUIPMENT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF
THE STATE OF ILLINOIS.
* * *
4
<PAGE> 5
IN WITNESS WHEREOF, the Owner Trustee has caused this
Equipment Note to be duly executed in its corporate name by its officer duly
authorized as of the date hereof.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity but solely as
Owner Trustee
By:
-----------------------------------------
Name:
Title:
5
<PAGE> 6
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the
within-mentioned Indenture.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
-----------------------------------------
Authorized officer and signatory
6
<PAGE> 7
SCHEDULE I
AMORTIZATION SCHEDULE
Payment Date Principal Amount (Expressed as a
Percentage of Original Principal Amount)
* * *
7
<PAGE> 1
EXHIBIT 4.27
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
(1997 747-1)
Dated as of December 23, 1997
Among
UNITED AIR LINES, INC.,
Owner,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Subordination Agent
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
----------------------
United Air Lines, Inc.
One Boeing 747-422 Aircraft
----------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Certain Definitions...................................................................................2
SECTION 2. Purchase of Equipment Notes...........................................................................2
SECTION 3. Equipment Notes.......................................................................................3
SECTION 4. Conditions............................................................................................4
(a) Conditions Precedent.......................................................................4
(b) Conditions Precedent to the Obligations of Owner...........................................7
SECTION 5. Owner's Representations, Warranties and Indemnities...................................................8
SECTION 6. Representations, Warranties and Covenants............................................................16
SECTION 7. Notices; Consent to Jurisdiction.....................................................................23
SECTION 8. Miscellaneous........................................................................................24
</TABLE>
SCHEDULES
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
SCHEDULE III - Description of Pass Through Trust Agreements
<PAGE> 3
PARTICIPATION AGREEMENT
(1997 747-1)
THIS PARTICIPATION AGREEMENT (1997 747-1) dated as of December 23, 1997
among (i) UNITED AIR LINES, INC., a Delaware corporation (the "Owner"), (ii)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not
in its individual capacity, except as otherwise provided herein, but solely as
trustee under each of the Pass Through Trust Agreements (as defined below),
(iii) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association,
in its individual capacity and as Indenture Trustee (the "Indenture Trustee")
under the Indenture and (iv) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity but solely as
subordination agent and trustee (the "Subordination Agent") under the
Intercreditor Agreement (as defined below).
WITNESSETH:
WHEREAS, Owner is the owner of the Boeing Model 747-422 aircraft more
particularly described in the initial Indenture Supplement dated the Closing
Date for which it desires to obtain financing;
WHEREAS, pursuant to the Trust Indenture and Mortgage (1997 747-1) dated
as of December 23, 1997 between Owner and the Indenture Trustee, Owner proposes
to issue up to four Series of Equipment Notes in the form set forth in Exhibit A
to the Indenture, which Equipment Notes are to be secured by the mortgage and
security interest in the Aircraft created pursuant to the Indenture by the Owner
in favor of the Indenture Trustee;
WHEREAS, the Series A, Series B and Series C Equipment Notes will be
issued on the Closing Date to the Subordination Agent as nominee for the Pass
Through Trustee for the applicable Pass Through Trust as evidence of the Owner's
indebtedness to each such Pass Through Trustee;
WHEREAS, Owner has the option to issue Series D Equipment Notes at any
time on or after the Closing Date to such holder as may be identified in a
supplement to this Participation Agreement;
WHEREAS, pursuant to the Basic Pass Through Trust Agreement and each of
the supplements thereto set forth in Schedule III hereto (the "Pass Through
Trust Agreements"), on the Closing Date a separate grantor trust (collectively,
the "Pass Through Trusts" and, individually, a "Pass Through Trust") will be
created to facilitate certain of the transactions
<PAGE> 4
[Participation Agreement (1997 747-1)]
contemplated hereby, including, without limitation, the issuance and sale of
credit enhanced pass through certificates pursuant thereto (collectively, the
"Pass Through Certificates") to provide a portion of the financing of the
Aircraft;
WHEREAS, the proceeds from the issuance and sale of the Pass Through
Certificates will be applied by the Pass Through Trustee to purchase from the
Owner, on behalf of each Pass Through Trust, the Series A, Series B and Series C
Equipment Notes, respectively, issued under the Indenture and bearing the same
interest rate as the Pass Through Certificates issued by such Pass Through
Trust;
WHEREAS, concurrently with the execution and delivery of this Agreement,
(i) Kreditanstalt fur Wiederaufbau (the "Primary Liquidity Provider"), has
entered into two revolving credit agreements (each, a "Primary Liquidity
Facility") and Credit Suisse Financial Products (collectively, the "Above-Cap
Liquidity Provider") has entered into certain irrevocable interest rate cap
agreements (the "Above-Cap Liquidity Facility"), in each case for the benefit of
the holders of the Pass Through Certificates of the United Airlines 1997-1A Pass
Through Trust ((the "Class A Trust") and the United Airlines 1997-1B Pass
Through Trust (the "Class B Trust")), with the Subordination Agent, as agent for
the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the
Pass Through Trustee, the Primary Liquidity Provider and the Subordination Agent
entered into the Intercreditor Agreement, dated as of the date hereof (the
"Intercreditor Agreement"); and
WHEREAS, certain terms are used herein as defined in Section 1(a) hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions. The terms "Owner," "Pass Through
Trustee," "Subordination Agent," "Primary Liquidity Provider" and the "Indenture
Trustee" shall have the further meanings attributed thereto in the Indenture
referred to above and, except as otherwise defined in this Agreement, terms used
herein in capitalized form shall have the meanings attributed thereto in the
Indenture referred to above. Unless the context otherwise requires, any
reference herein to any of the Operative Documents refers to such document as it
may be amended from time to time in accordance with its terms and the terms of
each other agreement restricting the amendment thereof.
SECTION 2. Purchase of Equipment Notes. (a) Subject to the satisfaction
or waiver of the conditions set forth herein, on the date hereof or on such
other date agreed to by the parties hereto (the "Closing Date"):
2
<PAGE> 5
[Participation Agreement (1997 747-1)]
(i) the Pass Through Trustee for each Pass Through Trust shall pay
to the Owner the purchase price set forth on Schedule II hereto of the
Equipment Note being issued to such Pass Through Trust;
(ii) the Owner shall issue, pursuant to Article 2 of the
Indenture, to the Subordination Agent, as nominee for the Pass Through
Trustee for each of the Pass Through Trusts, an Equipment Note of the
maturity and principal amount and bearing the interest rate set forth on
Schedule II hereto opposite the name of such Pass Through Trust.
(b) Owner shall have the option to elect at any time on or after the
Closing Date to issue Series D Equipment Notes on the terms specified herein and
in the Indenture. In the event Owner elects to issue such Series D Equipment
Notes, Owner will arrange for the purchase of such Equipment Notes by lender(s)
other than the Pass Through Trusts (such lender or lenders being herein referred
to as the "Initial Series D Noteholders") and, on or prior to the Issuance Date
with respect to such Series, Schedule II hereto and Exhibit B-4 to the Indenture
shall be supplemented to incorporate appropriate information regarding such
Initial Series D Noteholders and such Series D Notes and, upon receipt by Owner
of the purchase price therefor and subject to appropriate conditions precedent,
Owner shall issue, pursuant to Article 2 of the Indenture, the Series D
Equipment Notes to the Initial Series D Noteholders.
(c) The closing (the "Closing") of the issuance of the Series A,
Series B and Series C Equipment Notes described in this Agreement shall take
place at the offices of Vedder, Price, Kaufman & Kammholz, 222 N. LaSalle St.,
Chicago, Illinois, at 10:00 a.m. (Chicago time) on the Closing Date, or at such
other place as the parties hereto may agree.
(d) All payments pursuant to this Section 1 shall be made in
immediately available funds to such accounts and at such banks as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
(e) In order to facilitate the transactions contemplated hereby, the
Owner has entered into the Purchase Agreement dated as of December 18, 1997
among the Owner and the several initial purchasers (the "Initial Purchasers")
named therein (the "Initial Purchaser Purchase Agreement"), and, subject to the
terms and conditions hereof, the Owner will enter into each of the Pass Through
Trust Agreements and will undertake to perform certain administrative and
ministerial duties under such Pass Through Trust Agreements.
SECTION 3. Equipment Notes. The Equipment Notes issued from time to time
hereunder shall be payable as to principal in accordance with the terms of the
Indenture, shall provide for a floating rate of interest per annum and shall
contain the terms and provisions provided for the Equipment Notes in the
Indenture. On the applicable Issuance Date with respect to each Series, the
Owner shall execute, and the Indenture Trustee shall authenticate and
3
<PAGE> 6
[Participation Agreement (1997 747-1)]
deliver to the applicable Noteholder, an Equipment Note of such Series in the
principal amount and bearing the interest rate and margin set forth opposite the
name of such Noteholder on Schedule II hereto. Subject to the terms hereof, of
the Pass Through Agreements and of the other Operative Agreements, all such
Equipment Notes shall be dated and authenticated as of the applicable Issuance
Date (and shall bear interest therefrom), shall be registered in such names as
shall be specified by the Noteholder and shall be paid in the manner and at such
places as are set forth in the Indenture.
SECTION 4. Conditions. (a) Conditions Precedent. The obligations of each
Pass Through Trustee to make the payment described in Section 2(a)(i), are
subject to the satisfaction (or waiver) prior to or on the Closing Date of the
following conditions precedent:
(i) No change shall have occurred after the date of the execution and
delivery of this Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial authorities
which, in the opinion of each Pass Through Trustee, would make it a
violation of law or regulations for the Pass Through Trustees to make the
payments described in Section 2(a), to execute, deliver and perform the
Operative Documents, to acquire the Equipment Notes or to realize the
security afforded by the Indenture.
(ii) The Owner shall have tendered the Equipment Notes to the
Indenture Trustee for authentication, and the Indenture Trustee shall have
authenticated such Equipment Notes and shall have tendered the Equipment
Notes to the Subordination Agent on behalf of the applicable Pass Through
Trustee in accordance with Section 1.
(iii) The Pass Through Trustees shall have received duly authorized
and validly executed counterparts or conformed copies of the following
documents in form and substance satisfactory to such Pass Through Trustees
and all such documents shall be in full force and effect:
(1) this Agreement;
(2) the Indenture;
(3) the initial Indenture Supplement covering the Aircraft and
dated the Closing Date;
(4) the Consent and Agreement;
(5) each of the Pass Through Trust Agreements;
(6) the Intercreditor Agreement;
4
<PAGE> 7
[Participation Agreement (1997 747-1)]
(7) the Primary Liquidity Facility for each of the Class A and
Class B Trusts;
(8) the Above-Cap Liquidity Facility for each of the Class A and
Class B Trusts;
(9) the Registration Rights Agreement;
(10) the Bills of Sale; and
(11) the Note Purchase Agreement.
(iv) A Uniform Commercial Code financing statement or statements
covering all the security interests created by or pursuant to the Granting
Clause of the Indenture shall have been executed and delivered by the Owner
and the Indenture Trustee, and such financing statement or statements shall
have been duly filed with the Secretary of State of the State of Illinois
and any other places necessary or advisable.
(v) Each Pass Through Trustee shall have received the following, in
each case in form and substance satisfactory to it:
(1) a certified copy of the Restated Certificate of Incorporation
and By-Laws of Owner and a copy of resolutions of the board of directors
of Owner or the executive committee thereof, certified by the Secretary
or an Assistant Secretary of Owner, duly authorizing the execution,
delivery and performance by Owner of this Agreement, the Indenture and
each other document required to be executed and delivered by Owner in
accordance with the provisions hereof and thereof;
(2) a certificate of Owner as to the Person or Persons authorized
to execute and deliver this Agreement, the Indenture and any other
documents to be executed on behalf of Owner in connection with the
transactions contemplated hereby and as to the signature of such person
or persons;
(3) a copy of the Purchase Agreement solely to the extent the same
relates to warranties or other rights assigned to the Indenture Trustee
pursuant to the Indenture, certified by the Secretary or an Assistant
Secretary of Owner as being a true and accurate copy of the same; and
(4) a copy of the organizational documents, by-laws and general
authorizing resolutions of the boards of directors (or executive
5
<PAGE> 8
[Participation Agreement (1997 747-1)]
committees) or other satisfactory evidence of authorization of the
Indenture Trustee, certified as of the Closing Date by the Secretary or
an Assistant Secretary of the Indenture Trustee, which authorize the
execution, delivery and performance by the Indenture Trustee of all of
the Operative Documents to which it is a party, together with such other
documents and evidence with respect to the Indenture Trustee as any Pass
Through Trustee may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the
taking of all corporate proceedings in connection therewith and
compliance with the conditions herein set forth.
(vi) On the Closing Date, (A) the representations and warranties of
Owner contained in Section 5 of this Agreement shall be true and accurate
as though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in which
case such representations and warranties shall have been true and accurate
on and as of such earlier date), and (B) no event shall have occurred and
be continuing, or would result from the purchase, sale, lease or mortgage
of the Aircraft, which constitutes (or would, with the passage of time or
the giving of notice or both, constitute) an Indenture Event of Default;
and each Pass Through Trustee shall have received a certificate signed by
the President or any Vice President of Owner, dated the Closing Date,
addressed to the Pass Through Trustees certifying as to the matters set
forth in clauses (A) and (B) above.
(vii) The Pass Through Trustees shall have received an opinion
addressed to such parties from (a) Charles F. McErlean, Jr., Assistant
General Counsel for Owner, (b) Vedder, Price, Kaufman & Kammholz, special
counsel to the Owner and (c) Mayer, Brown & Platt, special counsel to the
Owner, in each case in form and substance reasonably satisfactory to such
parties.
(viii) The Pass Through Trustees shall have received an opinion
addressed to such parties and Owner from Milbank, Tweed, Hadley & McCloy,
special counsel for the Primary Liquidity Provider, and Cleary, Gottlieb,
Steen & Hamilton, special counsel for the Above-Cap Liquidity Provider, in
each case in form and substance reasonably satisfactory to the Pass Through
Trustees.
(ix) The Pass Through Trustees shall have received an opinion
addressed to such parties and Owner from Lytle Soule & Curlee, special
counsel in Oklahoma City, Oklahoma, in form and substance reasonably
satisfactory to the Pass Through Trustees.
(x) The Pass Through Trustees shall have received an opinion addressed
to such parties and Owner from Ray, Quinney & Nebeker, special counsel for
6
<PAGE> 9
[Participation Agreement (1997 747-1)]
the Indenture Trustee and the Pass Through Trustees, in form and substance
reasonably satisfactory to the Pass Through Trustees.
(xi) The Pass Through Trustees shall have received an independent
insurance broker's report, and certificates of insurance, in form and
substance reasonably satisfactory to such parties, as to the due compliance
with the terms of Section 4.03 of the Indenture relating to insurance with
respect to the Aircraft.
(xii) The Pass Through Trustees shall have received a report from each
of the Appraisers as to the fair market value of the Aircraft, in form and
substance satisfactory to the Pass Through Trustees and the Owner.
(xiii) The conditions precedent to the transactions specified in the
Note Purchase Agreement and the Initial Purchaser Purchase Agreement shall
have been satisfied (or waived) in accordance with the terms thereof.
(xiv) The FAA Bill of Sale, the Indenture and the Indenture Supplement
shall have been duly filed with the FAA.
Promptly upon the recording of the Indenture and the Indenture Supplement
covering the Aircraft pursuant to the Federal Aviation Act, Owner will cause
Lytle Soule & Curlee, special counsel in Oklahoma City, Oklahoma, to deliver to
the Pass Through Trustees an opinion as to the due and valid registration of the
Aircraft in the name of the Owner, the due recording by the FAA of the FAA Bill
of Sale, the Indenture and the Indenture Supplement and the lack of any
intervening filings with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Owner. It is agreed that
the obligations of Owner to participate in the transactions contemplated hereby
and to enter into the Operative Documents to which it is a party are all subject
to the fulfillment to the satisfaction (or waiver) of Owner prior to or on the
Closing Date of the following conditions precedent:
(i) Those documents described in Section 4(a)(iii) shall have been
duly authorized, executed and delivered by the respective party or parties
thereto (other than Owner) in the manner specified in Section 4(a)(iii),
shall each be satisfactory in form and substance to Owner, shall be in full
force and effect on the Closing Date, and an executed counterpart of each
thereof (other than the Equipment Notes) shall have been delivered to Owner
or its counsel.
(ii) Owner shall have received a copy of the general authorizing
resolutions of the boards of directors (or executive committees) or other
satisfactory evidence of authorization of the Indenture Trustee, the Pass
Through Trustees, the Subordination Agent and the Primary Liquidity
Providers, certified as of the Closing
7
<PAGE> 10
[Participation Agreement (1997 747-1)]
Date by the Secretary or an Assistant Secretary of such parties,
respectively, which authorize the execution, delivery and performance by
the Indenture Trustee, the Pass Through Trustees, the Subordination Agent
and the Primary Liquidity Providers of all the Fundamental Documents to
which it is a party, together with such other documents and evidence with
respect to the Indenture Trustee, the Pass Through Trustees, the
Subordination Agent and the Primary Liquidity Providers as Owner or its
counsel may reasonably request in order to establish the consummation of
the transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein set forth.
(iii) The representations and warranties of the Indenture Trustee, the
Pass Through Trustees and the Subordination Agent contained in Section 8
hereof shall be true and accurate as of the Closing Date as though made on
and as of such date except to the extent that such representations and
warranties relate solely to an earlier date (in which event such
representations and warranties shall have been true and accurate on and as
of such earlier date) and Owner shall have received a certificate signed by
the Chairman of the Board, the President, any Vice President or any
Assistant Vice President or other authorized representative of the
Indenture Trustee, the Pass Through Trustees and the Subordination Agent,
respectively, certifying as to the foregoing matters with respect to the
Indenture Trustee, the Pass Through Trustees and the Subordination Agent,
respectively.
(iv) Owner shall have received the opinions set forth in Sections
4(a)(viii), 4(a)(ix) and 4(a)(x), in each case addressed to Owner and dated
the Closing Date and otherwise in form and substance satisfactory to Owner.
(v) Owner shall have received a copy of the reports required to be
delivered pursuant to Section 4(a)(xii).
(vi) No change shall have occurred after the date of the execution and
delivery of this Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory authorities which, in the
opinion of Owner, would make it a violation of law or regulations for Owner
to enter into any transaction contemplated by the Operative Documents.
SECTION 5. Owner's Representations, Warranties and Indemnities. (a)
Representations and Warranties. Owner represents and warrants to the Indenture
Trustee, the Pass Through Trustees and the Primary Liquidity Provider that as of
the Closing Date:
(i) Owner is a corporation duly organized and validly existing in good
standing pursuant to the laws of the State of Delaware; is a Citizen of the
United States and a Certificated Air Carrier; has its chief executive
office (as such term is defined
8
<PAGE> 11
[Participation Agreement (1997 747-1)]
in Article 9 of the Uniform Commercial Code) at 1200 East Algonquin Road,
Elk Grove Township, Illinois 60007; is duly qualified to do business as
foreign corporation in each jurisdiction in which its operations or the
nature of its business requires, except where the failure to be so
qualified would not have a material adverse effect on the ability of Owner
to perform its obligations under the Owner Documents (as defined below);
holds all material licenses, certificates, permits and franchises from the
appropriate agencies of the United States of America and/or all other
governmental authorities having jurisdiction, necessary to authorize Owner
to engage in all transport and to carry on scheduled passenger service, in
each case as presently conducted; and has the corporate power and authority
to conduct its business as it is presently being conducted, and to enter
into and perform its obligations under this Agreement, the Indenture, the
initial Indenture Supplement, the Equipment Notes, the Pass Through Trust
Agreements and all other documents executed by Owner in connection herewith
or therewith (collectively, the "Owner Documents");
(ii) the execution, delivery and performance by Owner of the Owner
Documents have been duly authorized by all necessary corporate action on
the part of Owner, do not require any stockholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of
Owner except such as have been duly obtained, and none of the execution,
delivery and performance by Owner of such Owner Documents contravenes any
law, judgment, governmental rule, regulation or order binding on Owner or
the certificate of incorporation or by-laws of Owner or contravenes the
provisions of, or constitutes a default under, or results in the creation
of any Lien (other than Permitted Liens) upon the property of Owner under:
(x) its certificate of incorporation or bylaws; or (y) any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank
loan or credit agreement or other agreement or instrument to which Owner is
a party or by which it or its properties may be bound or affected, unless
such contravention, default or Lien pertains to an agreement of the type
listed in clause (y) of this Section and, individually or in the aggregate,
would be reasonably unlikely to have a material adverse effect on the
ability of the Owner to perform its obligations under the Owner Documents;
(iii) neither the execution and delivery by Owner of the Owner
Documents nor the performance by Owner of its obligations thereunder
require the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of any
federal, state, local or foreign government authority or agency, except for
(A) the registration of the Exchange Certificates (as defined in each Pass
Through Trust Agreement), if any, pursuant to the provisions of the Pass
Through Trust Agreements, under the Securities Act of 1933, as amended, and
under the securities laws of any state in which the Exchange Certificates
may be offered for sale if the laws of such state require such action, (B)
the qualification of the Pass Through Trust Agreements under the Trust
Indenture Act of 1939, as amended, which qualification will
9
<PAGE> 12
[Participation Agreement (1997 747-1)]
be duly obtained upon the effectiveness of any Registration Statement (as
defined in the Registration Rights Agreement) pursuant to an order of the
Securities and Exchange Commission, (C) the registrations and filings
referred to in Section 5(a)(v), (D) authorizations, consents, approvals,
actions, notices and filings required to be obtained, taken, given or made
the failure of which to obtain, take, give or make would not be reasonably
likely to have a material adverse effect on the financial condition,
properties or results of operations of the Owner, (E) any normal periodic
and other reporting requirements under the applicable rules and regulations
of the FAA to the extent required to be given or obtained only after the
Closing Date, and (F) the recordings with the FAA described in the opinion
referred to in Section 4(a)(ix);
(iv) each of the Owner Documents has been duly executed and delivered
by Owner and constitutes legal, valid and binding obligations of Owner
enforceable against Owner in accordance with the terms thereof;
(v) except for (A) the filing for recording pursuant to the Federal
Aviation Act of the Indenture and the Indenture Supplement attached thereto
and made a part thereof, and (B) the filing of financing statements (and
continuation statements at periodic intervals) with respect to the security
and other interests created by such documents under the Uniform Commercial
Code of Illinois, no further action, including any filing or recording of
any document is necessary or advisable in order to perfect the security
interest in favor of the Indenture Trustee in the Owner's interest in the
Aircraft in any applicable jurisdiction in the United States and, on the
Closing Date, after giving effect to such filings, the Owner Trustee will
have a duly perfected first priority security interest in all of Owner's
right, title and interest in and to the Aircraft, subject only to Permitted
Liens;
(vi) there has not occurred any event which constitutes an Indenture
Default or an Indenture Event of Default which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss with respect to the Airframe or any Engine;
(vii) the Owner has good and marketable title to the Aircraft, free
and clear of all Liens, other than Permitted Liens, and the FAA Bill of
Sale conveying title to the Owner has been duly filed with the FAA;
(viii) neither Owner nor anyone acting on behalf of Owner has offered
any interest in any Pass Through Certificate or any Equipment Note in a
manner which would violate the Securities Act of 1933, as amended, the
regulations thereunder, administrative and judicial interpretation thereof
or the securities laws, rules or regulations of any state;
10
<PAGE> 13
[Participation Agreement (1997 747-1)]
(ix) the Aircraft has been duly certified by the FAA as to type and
airworthiness and such certification remains in full force and effect;
(x) neither Owner nor any subsidiary of Owner is an "investment
company" or a company "controlled by an investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(xi) except for the proceedings described in the discussion of Legal
Proceedings in Owner's Annual Report on Form 10-K for the year ended
December 31, 1996 and subsequently filed Form 10-Qs filed prior to the
Closing Date, there are no pending or, to the knowledge of Owner,
threatened actions or proceedings before any court or administrative agency
which individually (or in the aggregate in the case of any group of related
lawsuits) is expected to have a material adverse effect on the ability of
Owner to perform its obligations under the Owner Documents or that seek to
set aside, restrain, enjoin or prevent the consummation of this Agreement,
the other Fundamental Documents or the transactions contemplated hereby or
thereby;
(xii) none of the proceeds from the issuance of the Equipment Notes
will be used directly or indirectly by Owner to purchase or carry any
"margin stock" as such term is defined in Regulation G or U of the Board of
Governors of the Federal Reserve System;
(xiii) the Indenture Trustee is entitled to the protection of Section
1110 of the United States Bankruptcy Code in connection with its rights to
take possession of the Airframe and the Engines in the event of a case
under Chapter 11 of the United States Bankruptcy Code in which the Owner is
the debtor;
(xiv) no Person acting on behalf of Owner is or will be entitled to
any broker's fee, commission or finders fee in connection with the
transactions contemplated hereby, other than the fees payable by Owner in
connection with the sale of the Pass Through Certificate; and
(xv) the statements of financial position of Owner as of December 31,
1996 and September 30, 1997 and the related statements of earnings and cash
flow of Owner for the year and six months then ended, fairly present the
financial condition of Owner as at such dates and the results of operations
and cash flow of Lessee for the periods ended on such dates, in accordance
with generally accepted accounting principles consistently applied (except
as may be stated in the notes thereto), and subject in the case of the
September 30, 1997 statements, to normal year-end audit adjustments, and
since September 30, 1997, there has been no material adverse change in such
condition or operations, except for such matters timely disclosed in press
releases issued by UAL Corporation or Owner or in public filings, effective
as of the date hereof, with the
11
<PAGE> 14
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, by UAL Corporation, or Lessee.
(b) General Indemnity. Owner hereby agrees to indemnify, on an
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless and shall pay on demand each of them from (whether or not the
transactions contemplated herein or in any of the other Operative Documents or
the Pass Through Trust Agreements are consummated), any and all Expenses imposed
on, incurred by or asserted against any Indemnitee, in any way relating to or
arising out of (A) the Fundamental Documents, any Permitted Lease and each Pass
Through Trust Agreement (and any amendments thereto), or the enforcement of any
of the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
possession, use, non-use, operation, maintenance, modification, alteration,
condition, sale, replacement, substitution, disposition, registration,
reregistration or airworthiness of the Aircraft (or any portion thereof)
including, without limitation, latent or other defects, whether or not
discoverable, strict tort liability and any damage to property or the
environment, death or injury to any person and any claim for patent, trademark
or copyright infringement; or (D) the offer, sale, holding, transfer or delivery
of the Equipment Notes or the Pass Through Certificates, whether before, on or
after the applicable Issuance Date (the indemnity in this clause (D) to extend
also to any person who controls an Indemnitee, its successors, assigns,
employees, directors, officers, servants and agents within the meaning of
Section 15 of the Securities Act of 1933, as amended); or (E) any breach of, or
failure to perform or observe, or any other noncompliance with, any covenant or
agreement or other obligation to be performed by Owner under any Fundamental
Document to which it is a party or the falsity of any representation or warranty
of the Owner in any Fundamental Document; provided, with respect to an
Indemnitee, that the foregoing indemnity shall not extend to any Expense to the
extent resulting from or arising out of one or more of the following:
(1) any representation or warranty by such Indemnitee or any
Related Indemnitee thereof in the Operative Documents or in any other
Fundamental Document being incorrect; or
(2) the failure by such Indemnitee or any Related Indemnitee
thereof to perform or observe any agreement, covenant or condition in
any of the Fundamental Documents; or
(3) the willful misconduct or the gross negligence of such
Indemnitee or any Related Indemnitee thereof (other than gross
negligence imputed to such Indemnitee or any Related Indemnitee
thereof solely by reason of its interest in the Aircraft); or
12
<PAGE> 15
[Participation Agreement (1997 747-1)]
(4) a disposition (voluntary or involuntary) by such
Indemnitee of all or any part of its interest in any Equipment Note or
any of all or any part of its interest in the Operative Documents or
the other Fundamental Documents, other than during the continuance of
an Indenture Event of Default or in connection with the exercise of
remedies under any Fundamental Documents or pursuant to the exercise
by Owner of its option to redeem or refinance the Equipment Notes; or
(5) other than to the extent provided in the succeeding
paragraph, any Tax; or
(6) in the case of the Indenture Trustee in its individual
capacity, any Expense to the extent attributable to the failure of the
Indenture Trustee to distribute funds received and distributable by it
in accordance with the Indenture, (B) in the case of the Subordination
Agent in its individual capacity, any Expense to the extent
attributable to the failure of the Subordination Agent to distribute
funds received and distributable by it in accordance with the
Intercreditor Agreement, or (C) in the case of any Pass Through
Trustee in its individual capacity, any Expense to the extent
attributable to the failure of such Pass Through Trustee to distribute
funds received and distributable by it in accordance with the Pass
Through Trust Agreement to which it is a party; or
(7) other than during the continuation of an Indenture Event
of Default, the authorization or giving or withholding of any future
amendments, supplements, waivers or consents by such Indemnitee or any
Related Indemnitee thereof with respect to any of the Fundamental
Documents unless such amendments, supplements, waivers or consents are
requested by Owner or are required pursuant to the terms of the
Fundamental Documents (unless the same results from the actions of
such Indemnitee or Related Indemnitee); or
(8) except to the extent attributable to acts or events
occurring on or prior thereto, acts or events which occur after the
termination of the Indenture in accordance with Section 10.01 thereof;
or
(9) any Expense to the extent attributable to the offer or
sale by such Indemnitee or any Related Indemnitee of any interest in
the Aircraft, any Equipment Note, any Pass Through Certificate or any
similar interest in violation of the Securities Act, other applicable
federal, state or foreign securities laws or any other law, in each
case, on or prior to the applicable Issuance Date or on or prior to
the date on which registered Pass Through Certificates are issued, as
13
<PAGE> 16
[Participation Agreement (1997 747-1)]
contemplated by the Registration Rights Agreement, in exchange for the
initial Pass Through Certificates; or
(10) any Expense or other amount which such Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees shall not
be paid by or be reimbursed by Owner; or
(11) any Expense that is an ordinary and usual operating or
overhead expense; or
(12) any Expense resulting from any Lien on the Aircraft
which such Indemnitee or any of its Related Indemnitees is required to
discharge under the Operative Documents; or
(13) if such Indemnitee shall be a Noteholder or any Related
Indemnitee, for any Expense incurred by or asserted against such
Indemnitee as a result of any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code.
For purposes of this Section 5(b), a Person shall be considered a
"Related Indemnitee" with respect to an Indemnitee if such Person is a director,
officer, employee, agent, servant or Affiliate thereof or, if such Indemnitee is
a Pass Through Trustee, the Subordination Agent or the Indenture Trustee or a
director, officer, employee, agent, servant or Affiliate of any thereof, a
Person shall be considered a "Related Indemnitee" with respect to any such
Person if such Person is a Pass Through Trustee, the Subordination Agent or the
Indenture Trustee or a director, officer, employee, agent, servant or Affiliate
of any thereof.
Notwithstanding clause 5(b)(5) above, Owner further agrees that any
payment or indemnity pursuant to this Section 5(b) in respect of any "Expenses"
shall be in an amount which, after deduction of all Taxes required to be paid by
such recipient with respect to such payment or indemnity under the laws of any
federal, state or local government or taxing authority in the United States, or
under the laws of any taxing authority or governmental subdivision of a foreign
country, or any territory or possession of the United States or any
international authority, shall be equal to the excess, if any, of (A) the amount
of such Expense over (B) the current net reduction in Taxes actually realized by
such recipient resulting from the accrual or payment of such Expense.
Nothing in this Section 5(b) shall be construed as a guaranty by Owner
of payments due pursuant to the Pass Through Certificates or of the residual
value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice
14
<PAGE> 17
[Participation Agreement (1997 747-1)]
give notice of such claim to Owner; provided that the failure to provide such
notice shall not release Owner from any of its obligations to indemnify
hereunder except to the extent that such failure results in an additional
Expense to Owner (in which case Owner shall not be responsible for such
additional Expense) or materially impairs the Owner's ability to contest such
claim; provided further that no payment by Owner to an Indemnitee pursuant to
this Section 5(b) shall be deemed to constitute a waiver or release of any right
or remedy which the Owner may have against such Indemnitee for any actual
damages as a result of the failure by such Indemnitee to give Owner such notice.
Owner shall be entitled, at its sole cost and expense, acting through counsel
reasonably acceptable to the respective Indemnitee, (A) in any judicial or
administrative proceeding that involves solely a claim for one or more Expenses,
to assume responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for one or more Expenses and other
claims related or unrelated to the transactions contemplated by the Operative
Documents, to assume responsibility for and control of such claim for Expenses
to the extent that the same may be and is severed from such other claims (and
such Indemnitee shall use reasonable efforts to obtain such severance), and (C)
in any other case, to be consulted by such Indemnitee with respect to judicial
proceedings subject to the control of such Indemnitee and to be allowed, at
Owner's sole expense, to participate therein. Notwithstanding any of the
foregoing to the contrary, Owner shall not be entitled to assume responsibility
for and control of any such judicial or administrative proceedings if (i) an
Indenture Event of Default shall have occurred and be continuing, (ii) if such
proceedings will involve a material risk of the sale, forfeiture or loss of, or
the creation of any Lien (other than a Permitted Lien) on, the Aircraft, the
Indenture Estate or any part thereof unless Owner shall have posted a bond or
other security reasonably satisfactory to the relevant Indemnitees in respect to
such risk or (iii) if such proceedings could, in the reasonable judgment of the
Indemnitee, entail any risk of criminal liability. The Indemnitee may
participate at its own expense and with its own counsel in any judicial
proceeding controlled by Owner pursuant to the preceding provisions; provided,
that such Indemnitee's participation does not, in the reasonable opinion of the
independent counsel appointed by the Owner or its insurers to conduct such
proceedings, interfere with the defense of such case.
The Indemnitee shall supply Owner, at Owner's expense, with such
information reasonably requested by Owner as is necessary or advisable for Owner
to control or participate in any proceeding to the extent permitted by this
Section 5(b). In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense (i) unless (x) the Indemnitee has given
Owner at least 30 days' prior written notice of the nature and scope of the
proposed settlement or compromise and (y) such Indemnitee has received Owner's
prior written consent (except during the continuance of an Indenture Event of
Default when such consent shall not be required (but the notice specified in
clause (x) shall nonetheless be required)), which consent shall not be
unreasonably withheld or delayed, or (ii) unless such Indemnitee waives its
right to be indemnified with respect to such Expense under this Section 5(b).
15
<PAGE> 18
[Participation Agreement (1997 747-1)]
The Owner shall supply the Indemnitee with such information reasonably
requested by the Indemnitee as is necessary or advisable for the Indemnitee to
control or participate in any proceeding to the extent permitted by this Section
5(b).
Upon payment of any Expense pursuant to this Section 5(b), Owner,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Indenture. The
Indemnitee agrees to give such further assurances or agreements and to cooperate
with Owner to permit Owner to pursue such claims, if any, to the extent
reasonably requested by Owner.
In the event that Owner shall have paid an amount to an Indemnitee
pursuant to this Section 5(b), and such Indemnitee subsequently shall be
reimbursed in respect of such indemnified amount from any other person, such
Indemnitee shall promptly pay Owner an amount equal to the sum of (I) the amount
of such reimbursement, including interest received attributable thereto, net of
taxes required to be paid by such Indemnitee as a result of any reimbursement
including interest received attributable thereto and (II) any tax benefit
realized by such Indemnitee as a result of any payment to Owner hereunder;
provided, however, that (x) such amount attributable to (I) above shall not be
in excess of the amount of such Expense payment made by Owner plus interest
received attributable thereto and (y) any amount which is payable to Owner by
any Person pursuant to this Section 5(b) shall not be paid to Owner if an
Indenture Default under Section 8.01(a), (e) or (f) of the Indenture or an
Indenture Event of Default shall have occurred and be continuing or if any
payment is due and owing by Owner to such Person hereunder or under any other
Operative Document. Any such amount shall be held by such Person (the Owner
hereby granting a security interest in such amount to such Person) and, during
the continuance of such Indenture Default or Indenture Event of Default, or an
Indenture Event of Default, shall be applied against Owner's obligations
hereunder to such Person as and when due. At such time as there shall not be
continuing any such Indenture Event of Default or Indenture Default or there
shall not be due and owing any such payment, such amount shall be paid to Owner
to the extent not previously applied in accordance with the immediately
preceding sentence.
Owner's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Owner pursuant to any provision of this Agreement may
proceed directly against Owner without first seeking to enforce any other right
of indemnification.
(c) Withholding. If Owner advises the Indenture Trustee and the
relevant Noteholder in writing that interest on its Equipment Notes is subject
to United States withholding tax, then the Indenture Trustee shall withhold as
provided in Section 2.10 of the Indenture.
16
<PAGE> 19
[Participation Agreement (1997 747-1)]
SECTION 6. Representations, Warranties and Covenants.
(a) So long as the Lien of the Indenture shall not have been
discharged and no Indenture Default under Section 8.01(a), (e) or (f) of the
Indenture or any Indenture Event of Default shall have occurred or be
continuing, the Owner may, at its own cost and expense and without the consent
of the Indenture Trustee or any other Person, cause such Aircraft to be
appropriately re-registered in the name of the Owner (or, if appropriate, in the
name of any Permitted Lessee as "lessee") under the laws of (i) any country
listed on Exhibit F to the Indenture with which the United States then maintains
normal diplomatic relations or, if Taiwan, the United States then maintains
diplomatic relations at least as good as those in effect on the Closing Date (a
"Scheduled Country"), or (ii) any other country, in each case subject to the
provisions hereof.
Prior to any such re-registration under the laws of a Scheduled
Country, the Indenture Trustee shall have received a favorable opinion of
counsel addressed to it to the effect that (i) the laws of the new country of
registration will recognize the Owner's right of ownership with respect to the
Aircraft and will give effect to the Lien and security interest created by the
Indenture and (ii) the Indenture and the Indenture Trustee's Lien and right to
repossession thereunder is valid and enforceable under the laws of such country.
Prior to any such re-registration under the laws of any country other
than the U.S. or a Scheduled Country, the Indenture Trustee shall have received
a favorable opinion of counsel in the new jurisdiction of registry covering the
matters set forth in the preceding paragraph and to the effect that (A) the
terms (including, without limitation, the governing-law, service-of- process and
jurisdictional-submission provisions thereof) of the Indenture are legal, valid,
binding and enforceable in such jurisdiction, (B) that it is not necessary for
the Indenture Trustee to register or qualify to do business in such
jurisdiction, (C) that there is no tort liability of the lender of an aircraft
not in possession thereof under the laws of such jurisdiction other than tort
liability which might have been imposed on such lender under the laws of the
United States or any state thereof (it being understood that, such opinion shall
be waived if insurance reasonably satisfactory to Indenture Trustee is provided,
at Owner's expense, to cover such risk), and (D) (unless Owner shall have agreed
to provide insurance covering the risk of requisition of use or title of the
Aircraft by the government of such jurisdiction so long as the Aircraft is
registered under the laws of such jurisdiction) that the laws of such
jurisdiction require fair compensation by the government of such jurisdiction
payable in currency freely convertible into Dollars for the loss of use or title
of the Aircraft in the event of the requisition by such government of such use
or title.
In connection with any such re-registration, the Owner shall, at its
cost and to the extent permitted by the laws of such country, cause the
interests of the Indenture Trustee in the Aircraft to be duly registered or
recorded under the laws of such country and at all times thereafter to remain so
duly registered or recorded unless and until changed as provided herein,
17
<PAGE> 20
[Participation Agreement (1997 747-1)]
and shall cause to be done at all times all other acts (including the filing,
recording and delivery of any document or instrument and the payment of any sum)
necessary or, by reference to prudent industry practice in such country,
advisable in order to establish the Indenture Trustee's interest in and to such
Aircraft as against the Owner, any Permitted Lessee or any third parties in such
jurisdiction.
The Indenture Trustee shall execute and deliver all such documents as
the Owner may reasonably request and otherwise cooperate with the Owner for the
purpose of effecting, continuing or (as provided in this Section 6(a)) changing
the registration of the Aircraft.
The Owner shall pay all reasonable fees and expenses on an after-tax
basis of the Indenture Trustee in connection with any change of registry of the
Aircraft.
(b) First Security Bank, National Association, in its individual
capacity, covenants and agrees that it shall not cause or permit to exist any
Lien, arising as a result of (i) claims against the Indenture Trustee, the
Subordination Agent or any Pass Through Trustee not related to its interest in
the Aircraft or the administration of the Indenture Estate pursuant to the
Indenture, (ii) acts of the Indenture Trustee, the Subordination Agent or any
Pass Through Trustee not permitted by, or failure of the Indenture Trustee, the
Subordination Agent or any Pass Through Trustee to take any action required by,
the Fundamental Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee, the Subordination Agent or any Pass Through Trustee
relating to Taxes or Expenses which are excluded from the indemnification
provided by Section 5(b) pursuant to said Section 5(b), or (iv) claims against
the Indenture Trustee, the Subordination Agent or any Pass Through Trustee
arising out of the transfer by any such party of all or any portion of its
interest in the Aircraft, the Indenture Estate or the Fundamental Documents
other than a transfer of the Aircraft pursuant to Article 5 or 8 of the
Indenture.
(c) FSB, in its individual capacity and as Indenture Trustee,
Subordination Agent and Pass Through Trustee as provided below, represents to
the Owner and the Primary Liquidity Provider as follows:
(i) it is a Citizen of the United States, that it will notify promptly
all parties to this Agreement if in its reasonable opinion its status as a
Citizen of the United States is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full corporate
power, authority and legal right under the laws of the United States of
America to enter into and perform its obligations under the Fundamental
Documents to which it is a party (the "FSB Documents") and, in its capacity
as Indenture Trustee and Pass Through
18
<PAGE> 21
[Participation Agreement (1997 747-1)]
Trustee, respectively, to authenticate the Equipment Notes and the Pass
Through Certificates;
(iii) the FSB Documents, and the authentication of the Equipment Notes
and the Pass Through Certificates have been duly authorized by all
necessary corporate action on the part of FSB, the Indenture Trustee, the
Subordination Agent and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Equipment Notes and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSB or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSB, the
Indenture Trustee, the Subordination Agent or the Pass Through Trustee is a
party or by which it or its properties may be bound or affected;
(iv) each of the FSB Documents has been duly executed (or, in the case
of the Equipment Notes and the Pass Through Certificates, authenticated)
and delivered by FSB, the Indenture Trustee, the Subordination Agent and
the relevant Pass Through Trustee, as it shall be a party thereto in any
such capacity, and, assuming that each such agreement is the legal, valid
and binding obligation of each other party thereto (other than FSB, the
Indenture Trustee, the Subordination Agent and the relevant Pass Through
Trustee), is the legal, valid and binding obligation of FSB, the Indenture
Trustee, the Subordination Agent and the relevant Pass Through Trustee, as
it shall be a party thereto in any such capacity, enforceable against it in
accordance with its terms;
(v) neither the execution (or, in the case of the Equipment Notes and
the Pass Through Certificates, the authentication) and delivery by FSB, the
Indenture Trustee, the Subordination Agent or any Pass Through Trustee, as
it is a party in any such capacity to any of the FSB Documents, nor the
consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Indenture, by the Pass Through Trust
Agreements, by the Equipment Notes or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSB;
(vi) there are no Taxes payable by FSB, the Indenture Trustee, the
Subordination Agent or any Pass Through Trustee imposed by the State of
Utah or any political subdivision or taxing authority thereof in connection
with the execution (or, in the case of the Equipment Notes and the Pass
Through Certificates, the authentication) and delivery by it as a party in
any such capacity to any FSB Document or the performance by it as a party
in any such capacity of any FSB Document (other than
19
<PAGE> 22
[Participation Agreement (1997 747-1)]
franchise or other taxes based on or measured by any fees or compensation
received by FSB, the Indenture Trustee, the Subordination Agent or any Pass
Through Trustee, as the case may be, for services rendered in connection
with the transactions contemplated thereby), and there are no Taxes payable
by FSB, the Indenture Trustee, the Subordination Agent or any Pass Through
Trustee imposed by the State of Utah or any political subdivision thereof
in connection with the acquisition, possession or ownership by any Pass
Through Trustee of any of the Equipment Notes (other than franchise or
other taxes based on or measured by any fees or compensation received by a
Pass Through Trustee for services rendered in connection with the
transactions contemplated by the respective Pass Through Trust Agreement);
(vii) there are no pending or threatened actions or proceedings
against any of FSB, the Indenture Trustee, the Subordination Agent or the
Pass Through Trustees before any court or administrative agency which
individually (or in the aggregate in the case of any group of related
lawsuits) purports to affect the legality, validity or enforceability of,
or which is reasonably likely to materially adversely affect the ability of
FSB, the Indenture Trustee, the Subordination Agent or the Pass Through
Trustees to perform its obligations as a party in any such capacity under
any FSB Document;
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSB nor any Pass Through Trustee has directly or indirectly
offered any Equipment Note or Pass Through Certificate for sale to any
Person, or solicited any offer to acquire any Equipment Note or Pass
Through Certificate from any Person, and neither FSB nor any Pass Through
Trustee has authorized anyone to act on its behalf to offer directly or
indirectly any Equipment Note or Pass Through Certificate for sale to any
Person, or to solicit any offer to acquire any Equipment Note or Pass
Through Certificate from any Person, and no Pass Through Trustee is in
default under any respective Pass Through Trust Agreement;
(ix) on the Closing Date there shall be no Liens attributable to FSB
in respect of all or any part of the Collateral; and
(x) the Equipment Notes to be acquired by the Subordination Agent are
being acquired by it for the account of the applicable Pass Through
Trustee, for investment and not with a view to any resale or distribution
thereof, except that, subject to the restrictions on transfer set forth in
each Pass Through Trust Agreement, the disposition by it of its Equipment
Notes shall at all times be within its control.
(d) So long as the Lien of the Indenture shall not have been discharged
in accordance with the terms thereof, the Owner will not consolidate with or
merge into any other corporation or convey, transfer or lease substantially all
of its assets to any Person unless:
20
<PAGE> 23
[Participation Agreement (1997 747-1)]
(i) the corporation formed by such consolidation or into which Owner
is merged or the Person which acquires by conveyance, transfer or lease
substantially all of the assets of Owner as an entirety (the "Successor")
shall be a Citizen of the United States and shall be a Certificated Air
Carrier;
(ii) the Successor shall execute and deliver to the Indenture Trustee
a duly authorized, valid, binding and enforceable agreement in form and
substance reasonably satisfactory to the Indenture Trustee containing an
assumption by such Successor of the due and punctual performance and
observance of each covenant and condition of the Owner Documents to be
performed or observed by Owner;
(iii) immediately after giving effect to such transaction, no
Indenture Event of Default shall have occurred and be continuing;
(iv) Owner shall have delivered to the Indenture Trustee a certificate
signed by the President or any Vice President and by the Secretary or an
Assistant Secretary of Owner, and an opinion of counsel (which may be
Owner's General Counsel) reasonably satisfactory to the Indenture Trustee,
each stating that such consolidation, merger, conveyance, transfer or lease
and the assumption agreement mentioned in clause (ii) above comply with
this Section 6(d) and that all conditions precedent herein provided for in
this Section 6(d) relating to such transaction have been complied with; and
(v) the Successor shall make such filings and recordings with the FAA
pursuant to the Transportation Code, as shall be necessary or desirable to
evidence such consolidation, merger, conveyance, transfer or lease with or
to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Owner as an entirety in accordance with
this Section 6(d), the Successor shall succeed to, and be substituted for, and
may exercise every right and power of, Owner under the Owner Documents with the
same effect as if such Successor had been named as Owner herein and therein.
Nothing contained herein shall permit any lease or other arrangement for the
use, operation or possession of the Aircraft except in compliance with the
applicable provisions of the Indenture.
(e) So long as the Lien of the Indenture shall not have been discharged
in accordance with the terms thereof, the Owner covenants and agrees with the
Indenture Trustee as follows:
(i) Owner shall at all times remain a U.S. Air Carrier;
21
<PAGE> 24
[Participation Agreement (1997 747-1)]
(ii) Owner will give the Indenture Trustee timely written notice, but
in any event within 30 days prior to the expiration of the period of time
specified under applicable law to prevent the lapse of any perfection of
any relocation of its chief executive office (as such term is defined in
Article 9 of the Uniform Commercial Code) from its then present location
and will promptly take such action as is required by clause (iv) below as a
result of such relocation;
(iii) Owner will cause to be done, executed, acknowledged and
delivered all and every such further acts, conveyances and assurances as
the Indenture Trustee shall reasonably require for accomplishing the
purposes of this Agreement and the other Fundamental Documents; provided
that any instrument or other document so executed by Owner will not expand
any obligations or limit any rights of Owner in respect of the transactions
contemplated by any Fundamental Documents; and
(iv) Owner, at its expense, will cause the Indenture and all
supplements and amendments to the Indenture to be promptly filed and
recorded, or filed for recording, to the extent permitted under the Federal
Aviation Act, or required under any other applicable law.
(f) So long as the Lien of the Indenture shall not have been
discharged in accordance with the terms thereof, Owner covenants and agrees that
it will furnish to the Indenture Trustee:
(i) Quarterly Statements - As soon as practicable after the end of the
first, second, and third quarterly fiscal periods in each fiscal year of
Owner, and in any event within 60 days thereafter, duplicate copies of:
(1) a consolidated balance sheet of Owner as at the end of such
quarter setting forth in comparative form the amount for the end of the
corresponding period of the preceding fiscal year,
(2) consolidated statements of income and retained earnings of
Owner for such quarterly period, setting forth in comparative form the
amount for the corresponding period of the preceding fiscal year, and
(3) consolidated statements of cash flow of Owner for the
portion of the fiscal year ending with said quarter, setting forth in
comparative form the amount for the corresponding period of the
preceding fiscal year; and
(ii) Annual Statements - As soon as practicable after the end of each
fiscal year, and in any event within 120 days thereafter, duplicate copies
of:
22
<PAGE> 25
[Participation Agreement (1997 747-1)]
(1) a consolidated balance sheet of Owner as at the end of such
year, and
(2) consolidated statements of income and retained earnings and
of cash flow of Owner for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the
previous fiscal year and accompanied by an auditor's report of a firm of
independent certified public accountants of recognized national standing
(which report may be adverse, qualified or disclaim an opinion).
(g) So long as the Lien of the Indenture shall not have been
discharged, Owner covenants and agrees that it will perform its obligations
under Section 2 Refinancing of the Note Purchase Agreement, in accordance with
the terms of, and subject to the provisions of, such Section.
(h) The parties hereto agree that in any case where Owner is
required to deliver legal opinions to any party pursuant to any Operative
Document, such legal opinions may in all cases be subject to such exceptions,
assumptions, qualifications and/or reservations for that relevant jurisdiction
that are considered acceptable in international aircraft finance transactions,
but shall nonetheless be considered sufficient to satisfy Owner's obligations to
deliver such legal opinions.
SECTION 7. Notices; Consent to Jurisdiction. (a) All notices,
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or certified mail
or by prepaid courier), or by prepaid courier service, and shall be deemed to be
given for purposes of this Agreement on the day that such writing is delivered
or received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 7(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 7(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Owner, the Indenture Trustee, the Pass Through
Trustees or the Subordination Agent, to the respective addresses set forth on
Schedule I hereto or (B) if to any subsequent Noteholder addressed to such
Noteholder at its address set forth in the Register maintained pursuant to
Section 2.03 of the Indenture.
(b) Each party to this Agreement (including each Noteholder)
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Fundamental
23
<PAGE> 26
[Participation Agreement (1997 747-1)]
Documents or any of the transactions contemplated hereby or thereby or any
document referred to herein or therein, may be instituted in the Circuit Court
of the State of Illinois, Cook County or the United States District Court for
the Northern District of Illinois and that they hereby waive the right to trial
by jury in any such proceeding; provided, however, that the foregoing provisions
shall not apply to third party tort claims (but shall apply to an indemnity
claim with respect to such tort claim) and that the foregoing shall not apply to
any right a Party may have to seek removal of such legal suit, action or
proceeding to federal court or to seek consolidation of any separate legal
suits, actions or proceedings brought by any one or more of the other Parties in
the same or different jurisdictions. The agreement set forth in this Section
7(b) is given solely for the benefit of the Parties and such agreement is not
intended to and shall not inure to the benefit of any other person.
SECTION 8. Miscellaneous. (a) Each of the Pass Through Trustees
and, by its acceptance of an Equipment Note, each subsequent Noteholder
covenants and agrees that it shall not unreasonably withhold its consent to any
consent requested of the Indenture Trustee under the terms of the Indenture.
(b) The representations, warranties, indemnities and agreements of
Owner, the Indenture Trustee, the Pass Through Trustee, the Subordination Agent
and the Noteholders provided for in this Agreement, and Owner's, Indenture
Trustee's, the Pass Through Trustees', the Subordination Agent's and the
Noteholders' obligations under any and all thereof, shall survive the issuance
of the Equipment Notes and the Pass Through Certificates or the transfer of any
interest by any Noteholder in any Equipment Note or the Indenture Estate and the
expiration or other termination of this Agreement or any other Fundamental
Document.
(c) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Owner and the
Indenture Trustee. The terms of this Agreement shall be binding upon, and inure
to the benefit of and shall be enforceable by, Owner, the Pass Through Trustee,
the Subordination Agent, the Indenture Trustee, the Primary Liquidity Provider
and the Noteholders. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Agreement
is being delivered in the State of Illinois.
* * *
24
<PAGE> 27
[Participation Agreement (1997 747-1)]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
UNITED AIR LINES, INC.,
Owner
By:
-----------------------------------------
Vice President and Treasurer
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
-----------------------------------------
Title:
--------------------------------------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, in
its capacity as Pass Through
Trustee under each of the Pass Through Trust
Agreements
By:
-----------------------------------------
Title:
--------------------------------------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Subordination Agent
By:
-----------------------------------------
Title:
--------------------------------------
25
<PAGE> 28
[Participation Agreement (1997 747-1)]
SCHEDULE I
NAMES AND ADDRESSES
OWNER:
- ------
Address for Notices:
If by U.S. Mail
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attn: Vice President and Treasurer
Telecopy: (847) 700-7117
If by Overnight Delivery Service
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
Attn: Vice President and Treasurer
Telecopy: (847) 700-7117
PASS THROUGH TRUSTEE:
- ---------------------
Address for Notices:
First Security Bank,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
<PAGE> 29
[Participation Agreement (1997 747-1)]
SUBORDINATION AGENT:
- --------------------
Address for Notices:
First Security Bank,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Address for Payments:
First Security Bank, National Association
ABA # 124-0000-12
Acct# 051-0922115
Attn: Corporate Trust Department
Ref: 1997-747-1
I-2
<PAGE> 30
[Participation Agreement (1997 747-1)]
SCHEDULE II
EQUIPMENT NOTES, NOTEHOLDERS
AND ORIGINAL PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
Noteholders Equipment Notes Original Principal Amount
----------- --------------- -------------------------
<S> <C> <C>
1997-1A Pass Through Trust Three-Month LIBOR + .22% $64,961,000
Equipment Notes due
December 2, 2002
1997-1B Pass Through Trust Three-Month LIBOR + .325% $15,534,000
Equipment Notes due
December 2, 2002
1997-1C Pass Through Trust Three-Month LIBOR + .22% $2,362,000
Equipment Notes due
December 2, 2002
</TABLE>
<PAGE> 31
[Participation Agreement (1997 747-1)]
SCHEDULE III
DESCRIPTION OF PASS THROUGH TRUST AGREEMENTS
United Air Lines, Inc. 1997-1A Pass Through Trust Agreement
United Air Lines, Inc. 1997-1B Pass Through Trust Agreement
United Air Lines, Inc. 1997-1C Pass Through Trust Agreement
<PAGE> 1
EXHIBIT 4.28
*
================================================================================
TRUST INDENTURE AND MORTGAGE
(1997 747-1)
Dated as of December 23, 1997
between
UNITED AIR LINES, INC.,
Owner
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
----------------------------------
Equipment Notes Covering
One Boeing 747-422 Aircraft
Bearing U.S. Registration No. N193UA
-----------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS...................................................................................1
GRANTING CLAUSE............................................................................1
HABENDUM CLAUSE............................................................................3
ARTICLE 1
DEFINITIONS................................................................................5
1.01. Definitions................................................................5
ARTICLE 2
THE EQUIPMENT NOTES.......................................................................19
2.01. Equipment Notes; Title and Terms..........................................19
2.02. Execution and Authentication..............................................21
2.03. Registrar and Paying Agent................................................21
2.04. Transfer and Exchange.....................................................22
2.05. Noteholder Lists; Ownership of Equipment Notes............................22
2.06. Mutilated, Destroyed, Lost or Stolen Equipment Notes......................23
2.07. Cancellation..............................................................23
2.08. Payment on Equipment Notes................................................23
2.09. Termination of Interest in the Indenture Estate...........................24
2.10. Withholding Taxes.........................................................24
2.11. Subordination.............................................................26
2.12. Certain Agreements Regarding Primary Liquidity Facilities.................26
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION OF FUNDS............................................27
3.01. Basic Distributions.......................................................27
3.02. Event of Loss; Optional Redemption........................................29
3.03. Payments After Indenture Event of Default.................................30
3.04. Certain Payments..........................................................33
3.05. Other Payments............................................................33
ARTICLE 4
COVENANTS OF OWNER........................................................................33
4.01. Registration, Maintenance and Operation; Possession and
Permitted Leases; Insignia..............................................33
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.02. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.............................................................38
4.03. Insurance...................................................................40
4.04. Inspection..................................................................45
ARTICLE 5
EVENT OF LOSS...............................................................................46
5.01. (a) Event of Loss with Respect to the Aircraft.........................46
(b) Event of Loss with Respect to an Engine............................49
(c) Application of Payments from Governmental Authorities
for Requisition of Title, etc......................................50
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft...............51
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft...........51
(f) Application of Payments During Existence of Certain Indenture
Defaults and Events of Default.....................................52
5.02. Liens.......................................................................52
ARTICLE 6
REDEMPTION OF EQUIPMENT NOTES...............................................................52
6.01. Redemption of Equipment Notes upon Certain Events...........................52
6.02. Notice of Redemption to Noteholders.........................................53
6.03. Deposit of Redemption Price.................................................53
6.04. Equipment Notes Payable on Redemption Date..................................53
ARTICLE 7
MATTERS CONCERNING UNCLAIMED MONIES.........................................................54
7.01. Repayment of Monies for Equipment Note Payments Held
by the Indenture Trustee..................................................54
ARTICLE 8
DEFAULTS AND REMEDIES.......................................................................54
8.01. Indenture Events of Default.................................................54
8.02. Acceleration; Rescission and Annulment......................................56
8.03. Other Remedies Available to Indenture Trustee...............................57
8.04. Waiver of Existing Defaults.................................................59
8.05. Control by Majority.........................................................59
8.06. Rights of Noteholders to Receive Payment....................................60
8.07. Indenture Trustee May File Proofs of Claim..................................60
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 9
INDENTURE TRUSTEE..........................................................................60
9.01. Duties of Indenture Trustee................................................60
9.02. Rights of Indenture Trustee................................................60
9.03. Individual Rights of Indenture Trustee.....................................61
9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments........61
9.05. Notice of Defaults.........................................................62
9.06. Compensation and Indemnity.................................................62
9.07. Replacement of Indenture Trustee...........................................63
9.08. Successor Indenture Trustee, Agents by Merger, etc.........................64
9.09. Eligibility; Disqualification..............................................64
9.10. Trustee's Liens............................................................64
ARTICLE 10
TERMINATION OF TRUST INDENTURE ............................................................65
10.01. Termination of Trust Indenture.............................................65
ARTICLE 11
AMENDMENTS AND WAIVERS.....................................................................66
11.01. Amendments to this Agreement Without Consent of Noteholders...............67
11.02. Amendments to this Agreement with Consent of Noteholders..................68
11.03. Revocation and Effect of Consents.........................................69
11.04. Notation on or Exchange of Equipment Notes................................69
11.05. Indenture Trustee Protected...............................................69
11.06. Amendments, Waivers, etc. of Other Operative Documents....................69
ARTICLE 12
MISCELLANEOUS..............................................................................69
12.01. Notices...................................................................69
12.02. GOVERNING LAW.............................................................71
12.03. Execution in Counterparts.................................................71
SIGNATURES.................................................................................72
</TABLE>
Exhibit A Form of Equipment Notes
Exhibit B-1 Description of Series A Equipment Notes
Exhibit B-2 Description of Series B Equipment Notes
Exhibit B-3 Description of Series C Equipment Notes
Exhibit B-4 Description of Series D Equipment Notes, if any
Exhibit C Certain Economic Terms
Exhibit D Form of Indenture Supplement
Exhibit E Schedule of Countries Authorized for Domicile of Permitted Lessee
Exhibit F Schedule of Countries for Aircraft Registration
iii
<PAGE> 5
TRUST INDENTURE AND MORTGAGE (1997 747-1)
This TRUST INDENTURE AND MORTGAGE (1997 747-1) dated as of
December 23, 1997 is between UNITED AIR LINES, INC., a Delaware corporation
("Owner"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, as Indenture Trustee hereunder (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, all capitalized terms used and not otherwise defined
herein shall have the respective meanings set forth or referred to in Article 1
hereof;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner of the Equipment Notes, and
(ii) to provide for the assignment, mortgage and pledge by the Owner to the
Indenture Trustee, as part of the Indenture Estate hereunder, among other
things, of certain of the Owner's right, title and interest in and to the
Aircraft and certain payments and other amounts received hereunder or thereunder
in accordance with the terms hereof, as security for, among other things, the
Owner's obligations to the Indenture Trustee, for the ratable benefit and
security of the Noteholders, subject to Section 2.11 and Article 3 hereof;
WHEREAS, all things have been done to make the Equipment
Notes, when executed by the Owner and authenticated and delivered by the
Indenture Trustee hereunder, the valid, binding and enforceable obligations of
the Owner; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner and the Indenture Trustee, 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 principal of, Break Amount, if any,
Make-Whole Amount, if any, and interest on, and all other amounts due with
respect to, all Equipment Notes from time to time outstanding hereunder, all
other amounts due hereunder and to secure the performance and observance by the
Owner of all the agreements, covenants and provisions contained herein and in
the other Fundamental Documents to which it is a party, for the benefit of the
Noteholders and each of the Indenture Indemnitees, and the prompt payment of any
and all amounts from time to time owing hereunder and under the
<PAGE> 6
[Trust Indenture and Mortgage (1997 747-1)]
Participation Agreement by the Owner to the Noteholders and the Indenture
Indemnitees, and for the uses and purposes and subject to the terms and
provisions hereof, and in consideration of the premises and of the covenants
herein contained, and of the acceptance of the Equipment Notes by the
Noteholders, and of 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 Indenture Trustee, its successors and assigns, for the
security and benefit of the Noteholders and the Indenture Indemnitees from time
to time, a first priority security interest in and first priority mortgage lien
on all estate, right, title and interest of the Owner in, to and under the
following described property, rights, interests and privileges whether now or
hereafter acquired and subject to the Lien hereof (which collectively, including
all property hereafter specifically subjected to the lien of this Agreement by
any instrument supplemental hereto, are herein called the "Indenture Estate"):
(1) the Airframe and Engines (each such Engine having 750 or
more rated take-off horsepower or the equivalent thereof) as the same
is now and will hereafter be constituted, whether now or hereafter
acquired and subjected to the Lien hereof, 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 and all substitutions or
replacements therefor, as provided in this Agreement, together with all
Parts of whatever nature which are from time to time included in the
"Airframe" or the "Engines", whether now or hereafter acquired and
subjected to the Lien hereof, and all renewals, substitutions,
replacements, additions, improvements, accessories and accumulations
with respect to any of the foregoing, and all records, logs and other
related materials with respect to any of the foregoing as may be
required to be maintained by the FAA;
(2) The Purchase Agreement to the extent the same relates 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),
the Consent and Agreement and the Bills of Sale, together in each case
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 to the terms and conditions of the
Consent and Agreement;
2
<PAGE> 7
[Trust Indenture and Mortgage (1997 747-1)]
(3) without limiting the generality of the foregoing, all
requisition proceeds with respect to the Aircraft or any Part thereof
or any other property described in any of the Granting Clauses and all
insurance proceeds with respect to the Aircraft or any Part thereof or
any other property described in any of the Granting Clauses from
insurance required to be maintained by the Owner under Section 4.03,
but excluding any insurance maintained by the Owner and not required
under Section 4.03 and all proceeds from the sale or disposition of the
Aircraft or any other property described in these Granting Clauses;
(4) all moneys and securities now or hereafter paid or
deposited or required to be paid or deposited to or with the Indenture
Trustee by or for the account of the Owner pursuant to any term of any
Operative Document and held or required to be held by the Indenture
Trustee hereunder; and
(5) all proceeds of the foregoing.
PROVIDED, HOWEVER, that notwithstanding any of the foregoing
provisions, so long as no Indenture Event of Default shall have occurred and be
continuing, (a) the Indenture Trustee 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 Indenture Trustee, 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 indemnitees 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 Indenture Event of Default, the Indenture
Trustee shall not enter into any amendment of the Purchase Agreement which would
increase the obligations of the Owner thereunder or in any way affect the right
and interest of Owner under the Purchase Agreement to the extent not assigned
hereunder.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the benefit
and security of the Indenture Trustee and the Noteholders from time to time,
except as provided in Section 2.11 and Article 3 hereof, without any preference,
distinction or priority of any one Equipment Note over any other by reason of
series, 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 this Agreement.
3
<PAGE> 8
[Trust Indenture and Mortgage (1997 747-1)]
1. It is expressly agreed that anything herein contained to
the contrary notwithstanding, the Owner shall remain liable under each of the
Operative Documents to which it is a party to perform all of the obligations
assumed by it thereunder, all in accordance with and pursuant to the terms and
provisions thereof, and the Indenture Trustee and the Noteholders shall have no
obligation or liability under any of the Operative Documents to which the Owner
is a party by reason of or arising out of the assignment hereunder, nor shall
the Indenture Trustee or the Noteholders be required or obligated in any manner
to perform or fulfill any obligations of the Owner under any of the Operative
Documents to which the Owner is a party, 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.
2. The Owner does hereby constitute the Indenture Trustee the
true and lawful attorney of the Owner, irrevocably, for good and valuable
consideration and coupled with an interest and with full power of substitution
with full power (in the name of the Owner or otherwise) subject to the terms and
conditions of this Agreement, to ask, require, demand, receive, sue for,
compound and give acquittance for any and all moneys and claims for moneys due
and to become due to the Owner under or arising out of the Operative Documents,
to endorse any checks or other instruments or orders in connection therewith, to
file any claims or take any action or institute any proceedings which the
Indenture Trustee may deem to be necessary or advisable in the premises as fully
as the Owner itself could do; provided that the Indenture Trustee shall not
exercise any such rights except upon the occurrence and during the continuance
of an Event of Default hereunder.
3. The Owner agrees that at any time and from time to time,
upon the written request of the Indenture Trustee, 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 as the Indenture Trustee may reasonably
deem desirable in obtaining the full benefits of the assignment hereunder and of
the rights and powers herein granted.
4. The Owner does hereby warrant and represent that it has not
assigned or pledged, and hereby covenants that it will not assign or pledge, so
long as the Lien of this Indenture has not been discharged in accordance with
the terms hereof, any of its rights, titles or interests hereby assigned to any
Person other than the Indenture Trustee.
5. It is hereby further agreed that any and all property
described or referred to in the granting clause hereof which is hereafter
acquired by the Owner shall ipso facto, and without any other conveyance,
assignment or act on the part of the Owner or the Indenture Trustee, become and
be subject to the Lien herein granted as fully and completely as though
specifically described herein.
4
<PAGE> 9
[Trust Indenture and Mortgage (1997 747-1)]
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the
parties hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this
Agreement and the other Operative Documents, except as otherwise expressly
provided or unless the context otherwise requires:
(1) each of "Owner," "Indenture Trustee," "Noteholder," "Pass
Through Trustee," "Subordination Agent," "Primary Liquidity Provider,"
or any other Person includes, without prejudice to the provisions of
any Operative Documents, any successor in interest to it and any
permitted transferee, permitted purchaser or permitted assignee of it;
(2) the terms defined in this Article 1 have the meanings
assigned to them in this Article 1, and include the plural as well as
the singular;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States;
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision; and
(5) all references in this Agreement to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Acceptable Alternate Engine" means a Pratt & Whitney Model
PW4056 engine or an engine of the same or another manufacturer of equivalent or
greater value and utility, and suitable for installation and use on the
Airframe; provided that such engine shall (i) be of the same make, model and
manufacturer as the other engine installed on the Airframe and (ii) be an engine
of a type then being utilized by Owner on other Boeing 747- 422 aircraft
operated by Owner.
5
<PAGE> 10
[Trust Indenture and Mortgage (1997 747-1)]
"Additional Insured" means the Indenture Trustee, Owner in its
capacity as lessor under any Permitted Lease, the Subordination Agent (so long
as it is the registered holder of any Equipment Note on behalf of the Pass
Through Trustees), each Pass Through Trustee (so long as it is a Noteholder),
each Primary Liquidity Provider and each of their respective Affiliates,
successors and permitted assigns, and the respective directors, officers and
employees of each of the foregoing.
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Aircraft" means the Airframe together with the two Engines
whether or not such Engines are installed on the Airframe or any other airframe.
"Airframe" means: (i) the Boeing Company Model 747-422
aircraft (excluding Engines or engines from time to time installed thereon)
specified by United States Registration Number and Manufacturer's serial number
in the initial Indenture Supplement; (ii) any Replacement Airframe which may
from time to time be substituted pursuant to Section 5.01(a)(ii) hereof and
(iii) in either case any and all Parts which are from time to time incorporated
or installed in or attached thereto or which have been removed therefrom, unless
the Lien of this Agreement shall not be applicable to such Part in accordance
with Section 4.02.
"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 principal amount of such Equipment Note.
"Amortization Schedule" means, with respect to each Series of
Equipment Notes, the amortization schedule for such Series as set forth on
Exhibit B-1, B-2, B-3 or, if Series D Equipment Notes are issued, B-4, as the
case may be.
"Applicable Date" has the meaning specified therefor in the
definition of "Break Amount".
6
<PAGE> 11
[Trust Indenture and Mortgage (1997 747-1)]
"Applicable Margin" means, with respect to any Series of
Equipment Notes, the Series A Margin, the Series B Margin, the Series C Margin,
or, if Series D Equipment Notes are issued, the Series D Margin, as the case may
be.
"Applicable Rate" means for each Interest Period for each
Series of Equipment Notes, a rate per annum equal to the Three-Month LIBOR for
such Interest Period plus the Applicable Margin.
"Appraisers" means, collectively, Aircraft Information
Services, Inc., BK Associates, Inc. and AvSolutions Inc., or such other
independent aircraft appraiser as may be acceptable to Owner and the Indenture
Trustee.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended from time to time.
"Basic Pass Through Trust Agreement" means the Pass Through
Trust Agreement dated as of December 23, 1997 between Owner and Pass Through
Trustee, but does not include any Pass Through Trust Supplement.
"Bills of Sale" means, collectively, the FAA Bill of Sale and
the Warranty Bill of Sale.
"Break Amount" means, as of any date of payment, redemption or
acceleration for any Series of Equipment Notes (the "Applicable Date"), an
amount determined by the Calculation Agent on the date that is two (2) LIBOR
Business Days prior to the Applicable Date pursuant to the formula set forth
below:
The Break Amount shall be calculated as follows:
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum
of (i) the amount of the outstanding principal amount
for such Series of Equipment Notes as of the first day
of the then applicable Interest Period plus (ii)
interest payable thereon during such entire Interest
Period at then effective Three-Month LIBOR.
Y = X, discounted to present value from the last day of the
then applicable Interest Period to the Applicable Date
using then effective Three-Month LIBOR as the discount
rate.
7
<PAGE> 12
[Trust Indenture and Mortgage (1997 747-1)]
Z = X, discounted to present value from the last day of the
then applicable Interest Period to the Applicable Date
using a rate equal to the applicable London interbank
offered rate for a period commencing on the Applicable
Date and ending on the last day of the applicable
Interest Period, determined by the Calculation Agent as
of two LIBOR Business Days prior to the Applicable Date
as the discount rate.
No Break Amount will be payable (x) if the Break Amount, as calculated pursuant
to the formula set forth above, is equal to or less than zero or (y) on, or in
respect of, any Applicable Date that is an Interest Payment Date.
"Business Day"means any day (x) other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close
in: Chicago, Illinois; New York, New York; Frankfurt, Germany; and, so long as
any Equipment Note is outstanding, the city and state in which the Indenture
Trustee, the Subordination Agent or any Pass Through Trustee has its principal
place of business or receives and disburses funds and (y) on which dealings are
carried on in the London interbank market.
"Calculation Agent" means the Indenture Trustee.
"Certificated Air Carrier" means 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 ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the Bankruptcy Code.
"Citizen of the United States" has the meaning given such term
in Section 40102(a)(15) of Title 49 of the United States Code.
"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
through the Closing Date.
"Consent and Agreement" means the Consent and Agreement (1997
747-1) dated as of the date hereof executed by the Manufacturer.
8
<PAGE> 13
[Trust Indenture and Mortgage (1997 747-1)]
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Corporate Trust Department" means the principal office of the
Indenture Trustee located at the Indenture Trustee's address for notices under
the Participation Agreement or such other office at which the Indenture
Trustee's corporate trust business shall be administered which the Indenture
Trustee shall have specified by notice in writing to Owner and each Noteholder.
"Eligible Institution" means (a) the corporate trust
department of the Indenture Trustee, the Subordination Agent or any Pass Through
Trustee, as applicable, or (b) a depository institution organized under the laws
of the United States of America or any one of the States thereof or the District
of Columbia (or any U.S. branch of a foreign bank), which has a long-term
unsecured debt rating from Moody's and Standard & Poor's of at least "A-3" or
its equivalent.
"Engine" means (i) each of the two Pratt & Whitney Model
PW4056 engines listed by manufacturer's serial numbers in the initial Indenture
Supplement, and whether or not from time to time installed on such Airframe or
any other airframe; (ii) any Replacement Engine which may from time to time be
substituted for any of such two engines pursuant to the terms hereof; and (iii)
in either case, any and all Parts which are from time to time incorporated or
installed in or attached to any such engine and any and all Parts removed
therefrom unless the Lien of this Agreement shall not apply to such Parts in
accordance with Section 4.02.
"Equipment Note" or "Equipment Notes" means any equipment note
or notes issued under this Agreement, including each of the Series A, Series B,
Series C and, if Series D Equipment Notes are issued, Series D Equipment Notes
issued hereunder, substantially in the form of Exhibit A hereto as such form may
be varied pursuant to the terms hereof and any and all Equipment Notes issued in
replacement or exchange therefor in accordance with the provisions hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such property: (i) the
loss of such property or of the use thereof due to the destruction of or damage
to such property which renders repair uneconomic or which renders such property
permanently unfit for normal use by Owner for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive or compromised
total loss; (iii) the theft or disappearance of such property, or the
confiscation, condemnation, or seizure of, or requisition of title to, or use
of, such property by any governmental or purported governmental authority (other
than a requisition for use by the U.S. Government or any government of registry
of the Aircraft or any agency or instrumentality thereof), which in the case of
any event referred to in this clause (iii) shall
9
<PAGE> 14
[Trust Indenture and Mortgage (1997 747-1)]
have resulted in the loss of title or possession of such property by Owner for a
period in excess of 180 consecutive days; (iv) as a result of any law, rule,
regulation, order or other action by the FAA or other governmental body of the
government of registry of the Aircraft having jurisdiction, use of such property
in the normal course of the business of air transportation shall have been
prohibited for a period in excess of 180 consecutive days, unless Owner, prior
to the expiration of such 180-day period, shall have undertaken and shall be
diligently carrying forward, in a manner that does not discriminate against the
Aircraft, all steps which are necessary or desirable to permit the normal use of
such property by Owner, and Owner, within two years from the time of grounding,
shall have conformed at least one such aircraft in its fleet to the requirements
of any such law, rule, regulation, order or other action and commenced regular
commercial use of the same in such jurisdiction; (v) the requisition for use by
any government of registry of the Aircraft (other than the U.S. government) or
any instrumentality or agency thereof, which shall have occurred during the Term
and shall have continued for more than two years; and (vi) any divestiture of
title to an Engine treated as an Event of Loss pursuant to Section 5.02 hereof.
An Event of Loss with respect to the Aircraft shall be deemed to have occurred
if an Event of Loss occurs with respect to the Airframe.
"Expenses" means any and all liabilities, obligations, losses,
damages, penalties, claims (including, but not limited to, negligence, strict or
absolute liability, liability in tort and liabilities arising out of the
violations of laws or regulatory requirements of any kind), actions, suits,
costs, expenses and disbursements (including reasonable legal fees and
expenses).
"FAA Bill of Sale" means an FAA AC Form 8050-2 bill of sale
executed by Manufacturer in favor of Owner and dated the date of delivery of the
Aircraft from Manufacturer to Owner pursuant to the terms of the Purchase
Agreement.
"Federal Aviation Act" means part A of subtitle VII of title
49, United States Code.
"Federal Aviation Administration" and "FAA" mean the United
States Federal Aviation Administration and any successor agency or agencies
thereto.
"Final Expected Distribution Date" means December 2, 2002.
"FSB" means First Security Bank, National Association.
"Fundamental Documents" means, collectively, the Operative
Documents and the Pass Through Documents.
10
<PAGE> 15
[Trust Indenture and Mortgage (1997 747-1)]
"Indemnitee" means (i) FSB and the Indenture Trustee, (ii) so
long as it holds any Equipment Notes on behalf of any Pass Through Trustee, the
Subordination Agent, (iii) the Paying Agent, (iv) so long as it is the holder of
any Equipment Notes, each Pass Through Trustee, (v) each Primary Liquidity
Provider, and (vi) each of their respective affiliates, successors and permitted
assigns and each of their respective directors, officers, employees, agents and
servants.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Article 8.
"Indenture Indemnitee" means (i) the Indenture Trustee in its
individual capacity and as Indenture Trustee, (ii) each separate or additional
trustee appointed pursuant to this Agreement, (iii) the Subordination Agent,
(iv) each Primary Liquidity Provider, (v) each Pass Through Trustee, and (vi)
each of the respective directors, officers, employees, agents and servants of
the persons described in clauses (i) through (v) inclusive above.
"Indenture Supplement" means a supplement to this Agreement in
the form of Exhibit D hereto.
"Indenture Trustee" means First Security Bank, National
Association and each other Person which may from time to time be acting as
Indenture Trustee in accordance with the provisions of this Agreement.
"Insured Amount" has the meaning specified therefor on
Exhibit C.
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Primary Liquidity Providers and
the Subordination Agent, dated as of December 23, 1997; 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.
"Interest Payment Date" means March 2, 1998 and each March 2,
June 2, September 2 and December 2 of each year thereafter.
"Interest Period" means, with respect to each Series of
Equipment Notes initially, the period from (and including) the Issuance Date for
such Series and ending on
11
<PAGE> 16
[Trust Indenture and Mortgage (1997 747-1)]
(but excluding) the first Interest Payment Date following such Issuance Date,
and thereafter each successive quarterly period from (and including) the final
day of the preceding Interest Period for such Series of Equipment Notes and
ending on (but excluding) the next succeeding Interest Payment Date.
"Issuance Date" means, with respect to each Series of
Equipment Notes, the date such Equipment Notes are issued by the Owner pursuant
to the terms hereof.
"LIBOR Business Day" means any day other than Saturday, Sunday
or any other day on which banks in New York, New York or London, England are
required or authorized to be closed.
"Lien" means any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim.
"London Reference Banks" means the principal London offices of
National Westminster Bank Plc, Barclays Bank Plc and Bayerische Landesbank
Girozentrale, or such other bank or banks as may from time to time be agreed by
Owner and the Calculation Agent.
"Loss Payee Amount" has the meaning specified therefor on
Exhibit C.
"Loss Payment Date" shall have the meaning specified in
Section 5.01(a).
"Majority in Interest of Noteholders" means as of a particular
date of determination and subject to Section 2.6 of the Intercreditor Agreement,
the holders of a majority in aggregate unpaid principal amount of all Equipment
Notes outstanding as of such date (excluding any Equipment Notes held by Owner,
Indenture Trustee or any Affiliate of any such party or any interests of Owner
therein unless all Equipment Notes shall be held by any such entity or an
Affiliate thereof); provided that for the purposes of directing any action or
casting any vote or giving any consent, waiver or instruction hereunder, any
Noteholder of an Equipment Note or Equipment Notes may allocate, in such
Noteholder'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" with respect to each of the Series A
Equipment Notes or the Series B Equipment Notes to be redeemed or purchased on
any redemption or purchase date, means an amount which an independent investment
banking institution of national standing selected by the Owner (or, following
the occurrence and during the continuance of an Indenture Event of Default, the
Indenture Trustee) shall determine to be equal to the excess of (i) the sum of
the present values, discounted to such redemption or
12
<PAGE> 17
[Trust Indenture and Mortgage (1997 747-1)]
purchase date, of all the remaining scheduled payments of principal and
interest, using then effective Three-Month LIBOR plus the Applicable Margin for
each such Series for all remaining interest payments discounted quarterly on
each Interest Payment Date, using then effective Three-Month LIBOR less 0.05% as
the discount rate over (ii) the aggregate unpaid principal amount of such Series
of Equipment Notes plus accrued but unpaid interest thereon.
"Manufacturer" means The Boeing Company, and its successors
and assigns.
"Minimum Liability Insurance Amount" has the meaning specified
therefor on Exhibit C.
"Moody's" means Moody's Investors Service, Inc. (or any
successor thereto).
"Non-U.S. Person" means any Person other than a United States
person, as defined in Section 7701(a)(30) of the Code.
"Noteholder" means a person in whose name an Equipment Note is
registered on the Register (including, so long as it holds any Series A, Series
B, Series C or, if Series D Equipment Notes are issued and financed by a Pass
Through Trustee, Series D Equipment Notes issued hereunder, the Subordination
Agent on behalf of the Pass Through Trustee under the applicable Pass Through
Trust Agreement pursuant to the provisions of the Intercreditor Agreement).
"Note Purchase Agreement" has the meaning specified therefor
in the Intercreditor Agreement.
"Obsolete Parts Caps" has the meaning specified therefor on
Exhibit C.
"Operative Documents" means this Agreement, the Participation
Agreement, the Consent and Agreement, the Purchase Agreement (to the extent
assigned pursuant hereto), Bills of Sale, the Equipment Notes and the initial
Indenture Supplement.
"Owner" means United Air Lines, Inc., a Delaware corporation
and its successors and permitted assigns.
"Participation Agreement" means the Participation Agreement
(1997 747-1) dated as of the date hereof among Owner, the Pass Through Trustees,
the Subordination Agent and the Indenture Trustee.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings, seats and other equipment of whatever
nature (other than (a) complete Engines or engines, and (b) any Passenger
Convenience Equipment), that may from time to time be installed or incorporated
in or attached or appurtenant to the Airframe or any Engine.
13
<PAGE> 18
[Trust Indenture and Mortgage (1997 747-1)]
"Pass Through Certificates" means any of the Credit Enhanced
Pass Through Certificates issued pursuant to any of the Pass Through Trust
Agreements.
"Pass Through Documents" means the Pass Through Trust
Agreements, the Intercreditor Agreement, the Registration Rights Agreement, Note
Purchase Agreement and the Primary Liquidity Facilities.
"Pass Through Trust" means each of the four separate pass
through trusts created pursuant to the related Pass Through Trust Agreement.
"Pass Through Trust Agreements" means each of the four
separate Pass Through Trust Supplements, together in each case with the Basic
Pass Through Trust Agreement, each dated as of December 23, 1997 and entered
into by and between the Owner and a Pass Through Trustee.
"Pass Through Trust Supplement" shall have the meaning
specified for the term "Trust Supplement" in the Basic Pass Through Trust
Agreement.
"Pass Through Trustee" means First Security Bank, National
Association in its capacity as trustee under each Pass Through Trust Agreement,
and such other Person that may from time to time be acting as successor trustee
under any such Pass Through Trust Agreement.
"Passenger Convenience Equipment" means severable components
or systems installed on or affixed to the Airframe that are used to provide
individual telecommunications or electronic entertainment to passengers aboard
the Aircraft, if and for so long as such equipment shall be owned by, or shall
be subject to a security interest, license or other interest of, another Person
(other than any Affiliate of Owner) in accordance with the provisions of Section
4.02(d) hereof.
"Past Due Rate" means, with respect to the principal of or
interest, Break Amount, if any, or Make-Whole Amount, if any, on any Equipment
Note not paid in full when due (whether at stated maturity, by acceleration or
otherwise), or with respect to any other amount payable to the holder thereof
thereon or under this Agreement not so paid in full when due, a rate of interest
per annum equal to 1.00% per annum above the Three- Month LIBOR for the period
applicable thereto plus, in the case of the Series C Equipment Notes, the
Applicable Margin payable thereunder (computed on the basis of a year of 360
days and actual days elapsed); but in no event shall such rate exceed the
maximum rate permitted by applicable law.
14
<PAGE> 19
[Trust Indenture and Mortgage (1997 747-1)]
"Paying Agent" means any Person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means, with respect to each Series of Equipment
Notes, each Interest Payment Date listed on the Amortization Schedule for such
Series of Equipment Notes set forth in Exhibit B-1, B-2, B-3 or, if Series D
Equipment Notes are issued, B-4, as the case may be.
"Permitted Air Carrier" means any Certificated Air Carrier or
any air carrier principally domiciled in a country listed on Exhibit E hereto.
"Permitted Investment" means (a) investments in obligations
of, or guaranteed by, the United States Government having maturities no later
than 90 days following the date of such investment; (b) investments in open
market commercial paper of any corporation incorporated under the laws of the
United States of America or any state thereof with a short-term unsecured debt
rating issued by Moody's and Standard & Poor's of at least"A-1" and "P-1,"
respectively, having maturities no later than 90 days following the date of such
investment; or (c) investments in negotiable certificates of deposit, time
deposits, banker's acceptances, commercial paper or other direct obligations of,
or obligations guaranteed by, commercial banks organized under the laws of the
United States or of any political subdivision thereof (or any U.S. branch of a
foreign bank) with issuer ratings of at least "B/C" by Thomson Bankwatch, having
maturities no later than 90 days following the date of such investment;
provided, however, that : (x) all Permitted Investments that are bank
obligations shall be denominated in U.S. dollars; and (y) the aggregate amount
of Permitted Investments at any one time that are bank obligations issued by any
one bank shall not be in excess of 5% of such bank's capital and surplus;
provided further that (1) any investment of the types described in clauses (a),
(b) and (c) above may be made through a repurchase agreement in commercially
reasonable form with a bank or other financial institution qualifying as an
Eligible Institution so long as such investment is held by a third party
custodian also qualifying as an Eligible Institution, and (2) all such
investments set forth in clauses (a), (b) and (c) above mature no later than the
Business Day preceding the next Interest Payment Date; and provided further,
that in the case of any Permitted Investment issued by a domestic branch of a
foreign bank, the income from such investment shall be from sources within the
United States for purposes of the Code.
"Permitted Lien" means (i) the rights of Owner as herein
provided (including the rights of any Permitted Lessee under a Permitted Lease),
and any other rights of Owner or any other Person existing pursuant to the
Operative Documents, (ii) Liens attributable to the Indenture Trustee (both in
its capacity as trustee under this Agreement and in its individual capacity),
any Pass Through Trustee (in its individual capacity, as Noteholder and as
trustee under the Pass Through Trust Agreements) and the Subordination Agent (in
its individual capacity, as registered holder of the Equipment Notes on behalf
of the Pass
15
<PAGE> 20
[Trust Indenture and Mortgage (1997 747-1)]
Through Trustees and as agent under the Intercreditor Agreement),
(iii) Liens for Taxes of Owner (or any Permitted Lessee) either not yet due or
being contested in good faith by appropriate proceeding so long as such
proceedings do not involve any material risk of the sale, forfeiture or loss of
the Airframe or any Engine or any interest thereon, (iv)
materialmen's, mechanics', workmen's, repairmen's, employees' or other like
liens arising in the ordinary course of Owner's or any Permitted Lessee's
business securing obligations that are not overdue for a period of more than 60
days or are being contested in good faith by appropriate proceedings so long as
during such 60-day period there is not, or such proceedings do not involve, any
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein, (v) Liens arising out of any judgment or award against
Owner (or any Permitted Lessee), unless there exists a material risk of the
sale, forfeiture or loss of the Airframe or any Engine or any interest therein
or unless the judgment secured shall not, within 60 days after the entry
thereof, have been discharged, vacated, reversed or execution thereof stayed
pending appeal or shall not have been discharged, vacated or reversed within 60
days after the expiration of such stay, and (vi) any other Lien with respect to
which Owner (or any Permitted Lessee) shall have provided a bond, cash
collateral or other security in an amount and under terms reasonably
satisfactory to the Indenture Trustee.
"Permitted Lease" means a lease permitted under Section
4.01(b) hereof.
"Permitted Lessee" means the lessee under a Permitted Lease.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Primary Liquidity Facilities" means the two (2) Revolving
Credit Agreements (consisting of a separate Revolving Credit Agreement with each
Primary Liquidity Provider with respect to each of the Class A Trust and the
Class B Trust) between the Subordination Agent, as borrower, and a Primary
Liquidity Provider, each dated as of December 23, 1997; provided that, for
purposes of any obligation of Owner, no amendment, modification or supplement
to, or substitution or replacement of, any such Primary Liquidity Facility shall
be effective unless consented to by Owner.
"Primary Liquidity Providers" means Kreditanstalt fur
Wiederaufbau, as the Primary Liquidity Provider under the Class A Primary
Liquidity Facility and the Class B Primary Liquidity Facility (as such terms are
defined in the Intercreditor Agreement) or any successor thereto.
"Purchase Agreement" means the agreement between Owner and the
Manufacturer relating to the purchase by Owner of the Aircraft, as originally
executed or as
16
<PAGE> 21
[Trust Indenture and Mortgage (1997 747-1)]
modified, amended or supplemented in accordance with the terms thereof, but only
insofar as the foregoing relates to the Aircraft.
"Record Date" for the interest or Amortization Amount payable
on any Equipment Note on any Interest Payment Date or Payment Date (other than
the maturity date) for such Equipment Note, as the case may be, means the
calendar day (whether or not a Business Day) which is 15 calendar days prior to
the related Interest Payment Date or Payment Date.
"Redemption Date" means the date on which the Equipment Notes
are to be redeemed or purchased pursuant to Section 6.01 or Section 6.02, as the
case may be, as specified in the notice delivered pursuant to Section 6.03
hereof.
"Redemption Price" means the price at which the Equipment
Notes are to be redeemed or purchased, determined as of the applicable
Redemption Date, pursuant to Section 6.01 or Section 6.02, as the case may be.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Registration Rights Agreement" has the meaning specified
therefor in the Note Purchase Agreement.
"Replacement Airframe" means any airframe substituted for an
airframe in accordance with Section 5.01(a)(ii) hereof.
"Replacement Engine" means any engine substituted for an
Engine in accordance with Sections 4.01(d), 5.01(a)(ii) or 5.01(b) hereof.
"SEC" means the Securities and Exchange Commission.
"Secured Obligations" shall have the meaning specified
therefor in Section 2.09.
"Senior Noteholder" is defined in Section 2.11(c) hereof.
"Series" means any of Series A, Series B, Series C or, if
issued, Series D.
17
<PAGE> 22
[Trust Indenture and Mortgage (1997 747-1)]
"Series A" or "Series A Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series A", in the original principal amount
and maturities and bearing interest as specified in Exhibit B-1.
"Series B" or "Series B Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series B", in the original principal amount
and maturities and bearing interest as specified in Exhibit B-2.
"Series C" or "Series C Equipment Notes" means Equipment Notes
issued hereunder and designated as "Series C", in the original principal amount
and maturities and bearing interest as specified in Exhibit B-3.
"Series D" or "Series D Equipment Notes" means, if Series D
Equipment Notes are issued, the Equipment Notes issued hereunder and designated
as "Series D", in the original principal amount and maturities and bearing
interest as specified in Exhibit B-4.
"Series A Margin" means the margin applicable to the Series A
Equipment Notes, as the same is specified on Exhibit B-1.
"Series B Margin" means the margin applicable to the Series B
Equipment Notes, as the same is specified on Exhibit B-2.
"Series C Margin" means the margin applicable to the Series C
Equipment Notes, as the same is specified on Exhibit B-3.
"Series D Margin" means, if Series D Equipment Notes are
issued, the margin applicable to the Series D Equipment Notes, as the same is
specified on Exhibit B-4.
"Standard & Poor's" means Standard & Poor's Ratings Services,
a division of McGraw-Hill Inc. ( or any successor thereto).
"Subordination Agent" means FSB, as subordination agent under
the Intercreditor Agreement, or any successor thereto.
"Taxes" means any and all fees (including, without limitation,
license, documentation and registration fees), taxes (including, without
limitation, income, gross receipts, sales, rental, use, turnover, value added,
property (tangible and intangible), excise and stamp taxes), licenses, levies,
imposts, duties, recording charges or fees, charges, assessments, or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest thereon (each, individually, a "Tax").
18
<PAGE> 23
[Trust Indenture and Mortgage (1997 747-1)]
"Three-Month LIBOR" means, in relation to any Interest Period,
the interest rate per annum (calculated on the basis of a 360-day year and
actual days elapsed) at which deposits in United States dollars are offered to
prime banks in the London interbank market as indicated on display page 3750
(British Bankers Association-LIBOR) of the Dow Jones Markets Service (or such
other page as may replace such display page 3750 for the purpose of displaying
London interbank offered rates for Dollar deposits) or, if not so indicated, the
average (rounded upwards to the nearest 1/100%), as determined by the
Calculation Agent, of such rates as indicated on the Reuters Screen LIBO Page
(or such other page as may replace such Reuters Screen LIBO Page for the purpose
of displaying London interbank offered rates for Dollar deposits) or, if neither
such alternative is indicated, the average (rounded upwards to the nearest
1/100%), as determined by the Calculation Agent, of such rates offered by the
London Reference Banks to prime banks in the London interbank market, in each
case at or about 11:00 a.m. (London time) on the LIBOR Business Day that is two
LIBOR Business Days prior to the first day of such Interest Period for deposits
of a duration equal to such Interest Period (or other period most nearly
corresponding to such period) in an amount substantially equal to the principal
amount of the Equipment Notes outstanding as of the first day of such Interest
Period. The Calculation Agent will, if necessary, request that each of the
London Reference Banks provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the average of the quotations (rounded
upwards to the nearest 1/100%). If no such quotation can be obtained, the rate
will be the Three-Month LIBOR for the immediately preceding Interest Period.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Mortgage" or "this Agreement" or "this
Indenture" means this Trust Indenture and Mortgage (1997 747-1), as the same may
from time to time be supplemented, amended or modified.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
"United States" or "U.S." means the United States of America.
"United States Government" means the federal government of the
United States or any instrumentality or agency thereof.
"Warranty Bill of Sale" means a full warranty bill of sale
executed by the Manufacturer in favor of Owner and dated the date of delivery of
the Aircraft to Owner pursuant to the terms of the Purchase Agreement.
"Wet Lease" means any arrangement whereby Owner (or any
Permitted Lessee) agrees to furnish the Airframe and Engines or engines
installed thereon to a third party pursuant to which such Airframe and Engines
or engines (i) shall remain in the operational control of Owner (or such
Permitted Lessee) and (ii) shall be maintained, insured and otherwise used and
operated in accordance with the provisions hereof.
19
<PAGE> 24
[Trust Indenture and Mortgage (1997 747-1)]
ARTICLE 2
THE EQUIPMENT NOTES
Section 2.01. Equipment Notes; Title and Terms. The Equipment
Notes shall be issued in three separate series (or, if Series D Equipment Notes
are issued, four separate series) designated as Series A, Series B, Series C
and, if issued, Series D, shall be dated the applicable Issuance Date with
respect to such Series, and shall be in the maturities and principal amounts and
shall bear interest as specified in Exhibit B-1, B-2, B-3 or, if Series D
Equipment Notes are issued, B-4, as the case may be. Each Series A, Series B and
Series C Equipment Note shall be issued to the Subordination Agent as nominee
for the Pass Through Trustee under the applicable Pass Through Trust Agreement.
The Issuance Date for the Series A, Series B and Series C Equipment Notes will
be the Closing Date. Owner shall have the option to issue the Series D Equipment
Notes at any time at or after the Closing Date, subject to compliance with the
applicable terms of the Intercreditor Agreement. In the event Owner exercises
such option to issue the Series D Equipment Notes, the parties hereto agree to
execute and deliver a supplement to this Agreement specifying the original
principal amount, maturity date, Series D Margin and Amortization Schedule
necessary to complete Exhibit B-4 with respect to such Series and otherwise
amending this Agreement as may be necessary or reasonably appropriate in
connection with such issuance but without affecting the rights of the holders of
Series A, Series B or Series C Equipment Notes.
Each Series of Equipment Notes shall bear interest at the
Applicable Rate for such Series (calculated on the basis of a year of 360 days
and the actual number of days elapsed) on the unpaid principal amount thereof
from time to time outstanding, payable in arrears on each Interest Payment Date
until maturity. The principal of each Equipment Note shall be payable in
installments, on each Payment Date, in amounts equal to the Amortization Amount
for such Payment Date. Notwithstanding the foregoing, the final payment made
under each Equipment Note shall be in an amount sufficient to discharge in full
the unpaid principal amount and all accrued and unpaid interest on, and any
other amounts due under, such Equipment Note. Each Equipment Note shall bear
interest at the Past Due Rate (calculated on the basis of a year of 360 days and
the actual number of days elapsed) on any part of the principal amount, Break
Amount, if any, 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 as 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
20
<PAGE> 25
[Trust Indenture and Mortgage (1997 747-1)]
date but shall be made on the next succeeding Business Day and if such payment
is made on such next succeeding Business Day, interest at the then effective
Applicable Rate shall accrue on the amount of such payment during such
extension.
The Equipment Notes are not redeemable or subject to purchase
prior to maturity except as provided in this Agreement.
In the case of the Series A and Series B Equipment Notes, if
the Owner has failed to effect a Registration Event (as defined in the
Registration Rights Agreement) on or prior to July 1, 1998, or if the Shelf
Registration Statement (as defined in the Registration Rights Agreement) ceases
to be effective for more than 60 days in any twelve-month period, whether or not
consecutive, the Applicable Margin shall be increased by .50% per annum from
July 1, 1998, if no Registration Event has occurred, or from the 61st day of
such twelve-month period in the case of such Shelf Registration Statement
ceasing to be effective, until the Owner effects a Registration Event, or causes
such Shelf Registration Statement to be effective, as more particularly set
forth in the Registration Rights Agreement.
Section 2.02. Execution and Authentication. (a) Equipment
Notes shall be executed on behalf of the Owner by the manual or facsimile
signature of one of its authorized officers.
(b) If any officer of the Owner executing an Equipment Note no
longer holds that office at the time such Equipment Note is executed on behalf
of the Owner, such Equipment Note shall be valid nevertheless.
(c) At any time and from time to time after the execution of
the Equipment Notes, the Owner may deliver such Equipment Notes to the Indenture
Trustee for authentication and, subject to the provisions of Section 2.10, the
Indenture Trustee shall authenticate the Equipment Notes by manual signature
upon written orders of the Owner. Equipment Notes shall be authenticated on
behalf of the Indenture Trustee by any authorized officer or signatory of the
Indenture Trustee.
(d) An Equipment Note shall not be valid or obligatory for any
purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner by the manual or facsimile signature of an officer of the
Owner as provided in Section 2.02(a) and until authenticated on behalf of the
Indenture Trustee by the manual signature of an authorized officer or signatory
of the Indenture Trustee as provided in Section 2.02(c). Such signatures shall
be conclusive evidence that such Equipment Note has been duly executed,
authenticated and issued under this Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Equipment Notes may be
presented for registration of
21
<PAGE> 26
[Trust Indenture and Mortgage (1997 747-1)]
transfer or for exchange (the "Registrar") and an office or agency where
(subject to Sections 2.04 and 2.08) the Equipment Notes may be presented for
payment or for exchange (the "Paying Agent"). The Registrar shall keep a
register (the "Register") with respect to the Equipment Notes and to their
transfer and exchange and the payments of Amortization Amounts thereon, if any.
The Indenture Trustee may appoint one or more co-registrars (the
"Co-Registrars") and one or more additional Paying Agents for the Equipment
Notes and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
Section 2.04. Transfer and Exchange. At the option of the
Noteholder thereof, Equipment Notes may be exchanged for an equal aggregate
principal amount of other Equipment Notes of the same Series, maturity and type
and of any authorized denominations or transferred upon surrender of the
Equipment Notes to be exchanged or transferred at the principal corporate trust
office of the Indenture Trustee, or at any office or agency maintained for such
purpose pursuant to Section 2.03. Whenever any Equipment Notes are so
surrendered for exchange, the Owner shall execute, and the Indenture Trustee
shall authenticate and deliver, the replacement Equipment Notes, dated the same
date as the Equipment Note or Equipment Notes being replaced which the
Noteholder making the exchange is entitled to receive.
All Equipment Notes issued upon any registration of transfer
or exchange of Equipment Notes shall be the valid obligations of the Owner,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Equipment Notes surrendered upon such registration
of transfer or exchange.
Every Equipment Note presented or surrendered for registration
of transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Noteholder thereof or his attorney duly
authorized in writing. Indenture Trustee may require such evidence reasonably
satisfactory to it as to the compliance of any such transfer with the Securities
Act, and the securities laws of any applicable state. Each initial Noteholder
and each transferee of an Equipment Note, by its acceptance of an Equipment
Note, agrees to be bound by and comply with the provisions of the Participation
Agreement, this Indenture, the Note Purchase Agreement and each other
Fundamental Document applicable to a Noteholder.
No service charge shall be made to a Noteholder for any
registration of transfer or exchange of Equipment Notes, but the Registrar may,
as a condition to any transfer or exchange hereunder, require payment of a sum
sufficient to cover any tax or other
22
<PAGE> 27
[Trust Indenture and Mortgage (1997 747-1)]
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Equipment Notes.
The Registrar shall not be required to register the transfer
of or to exchange any Equipment Note called for redemption or purchase pursuant
to such Section 6.01 or 6.02.
Section 2.05. Noteholder Lists; Ownership of Equipment Notes.
(a) The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders, which list shall be available to the Owner or its
representative (which may be the Owner Participant) and the Owner for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee quarterly on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the possession
or control of the Registrar as to the names and addresses of the Noteholders.
(b) Ownership of the Equipment Notes shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Equipment Note, the Owner, the Indenture Trustee, the Paying
Agent and the Registrar may deem and treat the Person in whose name any
Equipment Note is registered as the absolute owner of such Equipment Note for
the purpose of receiving payment of principal (including, subject to the
provisions herein regarding the applicable Record Dates, Amortization Amounts)
of, Break Amount, if any, Make-Whole Amount, if any, and interest on such
Equipment Note and for all other purposes whatsoever, whether or not such
Equipment Note is overdue, and none of the Owner, the Indenture Trustee, the
Paying Agent or the Registrar shall be affected by notice to the contrary.
Section 2.06. 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 Noteholder of such Equipment
Note, issue and execute, and the Indenture Trustee shall authenticate and
deliver, in replacement thereof, as applicable, a new Equipment Note of the same
Series and having the same maturity, payable to the same Noteholder in the same
principal amount and dated the same date as the Equipment Note so mutilated,
destroyed, lost or stolen. If the Equipment Note being replaced has become
mutilated, such Equipment Note shall be surrendered to the Indenture Trustee. If
the Equipment Note being replaced has been destroyed, lost or stolen, the
Noteholder of such Equipment Note shall furnish to the Owner and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
and the Indenture Trustee harmless and evidence satisfactory to the Owner and
the Indenture Trustee of the destruction, loss or theft of such Equipment Note
and of the ownership thereof.
23
<PAGE> 28
[Trust Indenture and Mortgage (1997 747-1)]
Section 2.07. Cancellation. The Registrar and any Paying Agent
shall forward to the Indenture Trustee all Equipment Notes surrendered to them
for replacement, redemption, registration of transfer, exchange or payment. The
Indenture Trustee shall cancel all Equipment Notes surrendered for replacement,
redemption, registration of transfer, exchange, payment or cancellation and
shall destroy cancelled Equipment Notes.
Section 2.08. Payment on Equipment Notes. The principal amount
of, interest on, Break Amount, if any, 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 11:00 a.m., Chicago,
Illinois time, on the due date of payment to the Indenture Trustee at the
Corporate Trust Department for distribution among the Noteholders in the manner
provided herein. The Owner shall not have any responsibility for the
distribution of such payment to any Noteholder. Notwithstanding the foregoing or
any provision in any Equipment Note to the contrary, the Indenture Trustee will
use reasonable efforts to pay or cause to be paid, if so directed in writing by
any Noteholder (with a copy to the 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 3 of this Agreement) by transferring, or causing to be transferred, by
wire transfer of immediately available funds in Dollars, prior to 1:00 p.m.,
Chicago, Illinois 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 Indenture Trustee 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 Indenture Trustee,
in its individual capacity and not as trustee, agrees to compensate such holders
for loss of use of funds at the Applicable Rate until such payment is made and
the Indenture Trustee shall be entitled to any interest earned on such funds
until such payment is made. Any payment made hereunder shall be made free and
clear of and without deduction for or on account of all wire and like charges
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 Applicable Trustee for cancellation promptly after
such payment. Notwithstanding any other provision of this Agreement to the
contrary, the Indenture Trustee shall not be required to make, or cause to be
made, wire transfers as aforesaid prior to the first Business Day on which it is
practicable for the Indenture Trustee to do so in view of the time of day when
the funds to be so transferred were received by it if such funds were received
after 11:00 a.m., Chicago, Illinois time, at the place of payment.
Section 2.09. Termination of Interest in the Indenture Estate.
No Noteholder or Indenture Indemnitee shall have any further interest in, or
other right with respect to, the Indenture Estate when and if the principal
amount of, Break Amount, if any, Make-Whole Amount, if any, and interest on all
Equipment Notes held by such Noteholder and all other
24
<PAGE> 29
[Trust Indenture and Mortgage (1997 747-1)]
sums payable to such Noteholder or Indenture Indemnitee, as the case may be,
hereunder, under such Equipment Notes and under the other Fundamental Documents
(collectively, the "Secured Obligations") shall have been paid in full.
Section 2.10. Withholding Taxes. The Indenture Trustee, as
agent for the Owner, shall exclude and withhold at the appropriate rate from
each payment of principal amount of, interest on, Break Amount, if any,
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 Indenture Trustee 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 Noteholders, 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 (but in no event later than 30
days after the due date thereof) it will deliver to each Noteholder (with a copy
to the Owner) appropriate receipts and a U.S. Treasury Form 1042-S and Form 8109
or Form 8109-B (or similar form at any relevant time in effect) showing the
payment thereof, together with such additional documentary evidence as any such
Noteholder may reasonably request from time to time.
If a Noteholder which is a Non-U.S. Person has furnished to
the Indenture Trustee a properly completed, accurate and currently effective
U.S. Internal Revenue Service Form 1001 or W-8 (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
Noteholder is made (but prior to the making of such payment), or in either of
the two preceding calendar years or such other previous period if such forms
continue to apply under applicable law with respect to the year in which such
payment is made, and has not notified the Indenture Trustee of the withdrawal or
inaccuracy of such form prior to the date of such payment (and the Indenture
Trustee has no reason to believe that any information set forth in such form is
inaccurate), the Indenture Trustee shall withhold only the amount, if any,
required by law (after taking into account any applicable exemptions properly
claimed by the Noteholder) to be withheld from payments hereunder or under the
Equipment Notes held by such Noteholder in respect of United States federal
income tax. If a Noteholder (x) which is a Non-U.S. Person has furnished to the
Indenture Trustee a properly completed, accurate and currently effective U.S.
Internal Revenue Service Form 4224 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 or for any other period
in which such form applies under applicable law and in which a payment is made
(but prior to the making of any payment for such year or other period), and
25
<PAGE> 30
[Trust Indenture and Mortgage (1997 747-1)]
has not notified the Indenture Trustee of the withdrawal or inaccuracy of such
certificate or form prior to the date of such payment (and the Indenture Trustee
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 Indenture Trustee
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 Noteholder, no amount shall be withheld from
payments in respect of United States federal income tax. If any Noteholder has
notified the Indenture Trustee that any of the foregoing forms or certificates
is withdrawn or inaccurate, or if such Noteholder has not filed a form claiming
an exemption from United States withholding tax which is applicable to any
relevant period in which a payment is made 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 Noteholder, the
Indenture Trustee agrees to withhold from each payment due to the relevant
Noteholder 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
Indenture Trustee to withhold taxes in the manner provided for herein or for any
false, inaccurate or untrue evidence provided by any Noteholder hereunder.
Section 2.11. Subordination. (a) The Indenture Trustee and, by
acceptance of its Equipment Notes of any Series, each Noteholder of such Series,
hereby agree that no payment or distribution shall be made on or in respect of
the Secured Obligations owed to such Noteholder of such Series, including any
payment or distribution of cash, property or securities after the commencement
of a proceeding of the type referred to in Section 8.01(e) or (f) hereof, except
as expressly provided in Article 3 hereof.
(b) By the acceptance of its Equipment Notes of any Series
(other than Series A), each Noteholder of such Series agrees that in the event
that such Noteholder, in its capacity as a Noteholder, 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 2.11 or Article 3 hereof, it will
hold any amount so received in trust for the Senior Noteholder (as defined in
Section 2.11(c) hereof) and will forthwith turn over such payment to the
Indenture Trustee in the form received to be applied as provided in the Article
3 hereof.
(c) As used in this Section 2.11, the term "Senior Noteholder"
shall mean, (i) the Noteholders of Series A until the Secured Obligations in
respect of
26
<PAGE> 31
[Trust Indenture and Mortgage (1997 747-1)]
Series A Equipment Notes have been paid in full, (ii) after the Secured
Obligations in respect of Series A Equipment Notes have been paid in full, the
Noteholders of Series B until the Secured Obligations in respect of Series B
Equipment Notes have been paid in full and (iii) after the Secured Obligations
in respect of Series B Equipment Notes have been paid in full and if any Series
D Equipment Notes have been issued, the Noteholders of Series C until the
Secured Obligations in respect of Series C Equipment Notes have been paid in
full; provided, however, that in the event that a Series of Equipment Notes
shall be redeemed pursuant to the provisions of Section 6.01(b), the amounts
received by the Indenture Trustee in connection with such redemption shall be
applied in accordance with the provisions of Section 3.02(b) notwithstanding
anything contained in this Section 2.11 to the contrary.
Section 2.12. Certain Agreements Regarding Primary Liquidity
Facilities. The Owner agrees to pay to the Indenture Trustee for distribution in
accordance with Section 3.04 hereof: (i) an amount equal to the fees payable to
the relevant Primary Liquidity Provider under the related Fee Letter (as defined
in the Intercreditor Agreement as originally in effect or as amended with the
consent of the Owner Participant) multiplied by a fraction the numerator of
which shall be the sum of the then outstanding aggregate principal amount of the
Series A Equipment Notes and Series B Equipment Notes and the denominator of
which shall be the sum of the then outstanding aggregate principal amount of all
"Series A Equipment Notes" and "Series B Equipment Notes" (each as defined in
the Intercreditor Agreement); (ii) (x) the amount equal to interest on any
Downgrade Advance (other than any Applied Downgrade Advance) payable under
Section 3.07 of each Primary Liquidity Facility minus Investment Earnings from
such Downgrade Advance multiplied by (y) the fraction specified in the foregoing
clause (i); (iii) (x) any amounts owed to the Primary Liquidity Providers by the
Subordination Agent as borrower under Section 3.01 (other than in respect of an
Unpaid Advance or Applied Downgrade Advance), 3.02, 3.03 (other than in respect
of an Unpaid Advance or Applied Downgrade Advance), 7.05 or 7.07 of each Primary
Liquidity Facility (or similar provisions of any succeeding Primary Liquidity
Facility) multiplied by (y) the fraction specified in the foregoing clause (i);
and (iv) if any payment default shall have occurred and be continuing with
respect to interest on any Series A Equipment Note or Series B Equipment Note,
(x) the excess, if any, of (1) the sum of (x) the amount equal to interest on
any Unpaid Advance or Applied Downgrade Advance payable under Section 3.07 of
each Primary Liquidity Facility plus (y) any other amounts payable in respect of
such Unpaid Advance or Applied Downgrade Advance under Section 3.01, 3.03 or
3.09 of the applicable Primary Liquidity Facility over (2) the sum of Investment
Earnings from any such Unpaid Advance or Applied Downgrade Advance plus any
amount of interest at the Past Due Rate actually payable (whether or not in fact
paid) by the Owner on the overdue scheduled interest on the Equipment Notes in
respect of which such Unpaid Advance or Applied Downgrade 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 Equipment Notes and Series B
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 Equipment
Notes" and
27
<PAGE> 32
[Trust Indenture and Mortgage (1997 747-1)]
"Series B 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"). For purposes of this paragraph, the terms
"Applied Downgrade Advance", "Downgrade Advance", "Final Advance", "Investment
Earnings" and "Unpaid Advance" shall have the meanings specified in each Primary
Liquidity Facility or the Intercreditor Agreement referred to therein.
ARTICLE 3
RECEIPT, DISTRIBUTION AND
APPLICATION OF FUNDS
Section 3.01. Basic Distributions. Except as otherwise
provided in Section 3.03 hereof, each periodic payment of principal or interest
on the Equipment Notes received by the Indenture Trustee shall be promptly
distributed in the following order of priority:
First, (i) so much of such payment as shall be required to pay in
full the aggregate amount of the payment or payments of
principal amount and interest (as well as any interest on
any overdue principal amount and, to the extent permitted by
applicable law, on any overdue interest) then due under all
Series A Equipment Notes shall be distributed to the holders
of Series A Equipment Notes ratably, without priority of one
over the other, in the proportion that the amount of such
payment or payments then due under all Series A Equipment
Notes held by such Noteholder bears to the aggregate amount
of the payments then due under all Series A 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 principal
amount and interest (as well as any interest on any overdue
principal amount and, to the extent permitted by applicable
law, on any overdue interest) then due under all Series B
Equipment Notes shall be distributed to the holders of Series
B Equipment Notes ratably, without priority of one over the
other, in the proportion that the amount of such payment or
payments then due under all Series B Equipment Notes held by
such Noteholder bears to the aggregate amount of the payments
then due under all Series B Equipment Notes;
(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 principal
amount and interest (as well as any interest on any overdue
principal amount and, to the extent permitted by applicable
28
<PAGE> 33
[Trust Indenture and Mortgage (1997 747-1)]
law, on any overdue interest) then due under all Series C
Equipment Notes shall be distributed to the holders of Series
C Equipment Notes ratably, without priority of one over the
other, in the proportion that the amount of such payment or
payments then due under all Series C Equipment Notes held by
such Noteholders bears to the aggregate amount of the payments
then due under all Series C Equipment Notes; and
(iv) if any Series D Equipment Notes have been issued, after
giving effect to paragraph (iii) above, so much of such
payment remaining as shall be required to pay in full the
aggregate amount of the payment or payments of principal
amount and interest (as well as any interest on any overdue
principal amount and, to the extent permitted by applicable
law, on any overdue interest) then due under all Series D
Equipment Notes shall be distributed to the holders of Series
D Equipment Notes ratably, without priority of one over the
other, in the proportion that the amount of such payment or
payments then due under all Series D Equipment Notes held by
such Noteholders bears to the aggregate amount of the payments
then due under all Series D Equipment Notes.
Second, the balance, if any, of such installment remaining thereafter
shall be distributed to the Owner.
Section 3.02. Event of Loss; Optional Redemption. (a) Except
as otherwise provided in Section 3.03 hereof, any payments received by the
Indenture Trustee in connection with a mandatory redemption of the Equipment
Notes pursuant to Section 6.01(a) following an Event of Loss respect to the
Aircraft 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, (i) to reimburse the Indenture Trustee and the Noteholders
for any reasonable costs or expenses incurred in connection
with such redemption for which they are entitled to
reimbursement, or indemnity by Owner, under the Operative
Documents and then (ii) to pay any other amounts then due
(except as provided in clause "Second" below) to the
Indenture Trustee, the Noteholders and the other Indenture
Indemnitees under this Indenture, the Participation
Agreement, the Equipment Notes or any other Fundamental
Documents;
Second, (i) to pay the amounts specified in paragraph (i) of clause
"First" of Section 3.01 hereof;
(ii) after giving effect to paragraph (i) above, to pay the
amounts specified in paragraph (ii) of clause "First" of
Section 3.01 hereof; and
29
<PAGE> 34
[Trust Indenture and Mortgage (1997 747-1)]
(iii) after giving effect to paragraph (ii) above, to pay the
amounts specified in paragraph (iii) of clause "First" of
Section 3.01 hereof; and
(iv) if any Series D Equipment Notes have been issued after
giving effect to paragraph (iii) above, to pay the amounts
specified in paragraph (iv) of clause "First" of Section 3.01
hereof; and
Third, as provided in clause "Second" of Section 3.01 hereof;
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 5.01 hereof, any insurance, condemnation or similar proceeds which
result from such Event of Loss and are paid over to the Indenture Trustee shall
be held by the Indenture Trustee as permitted by Section 5.01 hereof (provided
that such moneys shall be invested as provided in Section 9.04 hereof) as
additional security for the obligations of Owner under the Operative Documents
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.
(b) Except as otherwise provided in Section 3.03 hereof, any
payments received by the Indenture Trustee in connection with an optional
redemption of any Series of the Equipment Notes pursuant to Section 6.01(b)
shall be applied to redemption of such Series of Equipment Notes and to all
other Secured Obligations due and owing the holders of such Series by applying
such funds in the following order of priority:
First, to reimburse the Indenture Trustee and the holders of such
Series 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
Documents;
Second, so much of such payment as shall be required to pay in full
the aggregate amount of the payment or payments of principal
amount and interest (as well as any interest on any overdue
principal amount and, to the extent permitted by applicable
law, on any overdue interest) then due under such Series of
Equipment Notes and all other Secured Obligations due and
owing to the holders of such Series of Equipment Notes shall
be distributed to the holders of such Series ratably,
without priority of one over the other, in the proportion
that the amount of such payment or payments then due under
all Equipment Notes of such Series held by such Noteholders
bears to the aggregate amount of the payments then due under
all Equipment Notes of such Series; and
Third, as provided in clause "Second" of Section 3.01 hereof.
30
<PAGE> 35
[Trust Indenture and Mortgage (1997 747-1)]
Section 3.03. Payments After Indenture Event of Default.
Except as otherwise provided in Section 3.04 hereof, all
payments received and amounts held or realized by the Indenture Trustee
(including any amounts realized by the Indenture Trustee from the exercise of
any remedies pursuant to Article 8 hereof) after an Indenture Event of Default
shall have occurred and be continuing and after the declaration specified in
Section 8.02 hereof, as well as all payments or amounts then held by the
Indenture Trustee as part of the Indenture Estate, shall be promptly distributed
by the Indenture Trustee in the following order of priority:
First, so much of such payments or amounts as shall be required to
(i) reimburse the Indenture Trustee or FSB for any Tax
(except to the extent resulting from a failure of the
Indenture Trustee to withhold taxes pursuant to Section 2.10
hereof), expense or other loss (including, without
limitation, all amounts to be expended at the expense of, or
charged upon the proceeds of, the Indenture Estate pursuant
to Section 8.03 hereof) incurred by the Indenture Trustee or
FSB (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 Indenture
Trustee, FSB or the Noteholders in the protection, exercise or
enforcement of any right, power or remedy or any damages
sustained by the Indenture Trustee, FSB or any Noteholder,
liquidated or otherwise, upon such Event of Default shall be
applied by the Indenture Trustee as between itself, FSB and
the Noteholders in reimbursement of such expenses and any
other expenses for which the Indenture Trustee, FSB or the
Noteholders are entitled to reimbursement under any Operative
Document; and (ii) pay all amounts payable to the other
Indenture Indemnitees hereunder and under the other
Fundamental Documents; 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 prior of one over
the other, in proportion to the amounts owed each hereunder
and under the other Fundamental Documents;
Second, so much of such payments or amounts remaining as shall be
required to reimburse the then existing or prior Noteholders
for payments made pursuant to Section 9.06 hereof (to the
extent not previously reimbursed), shall be distributed to
such then existing or prior Noteholders ratably, without
priority of one over the other, in accordance with the
amount of the payment or payments made by each such then
existing or prior Noteholder pursuant to said Section 9.06
hereof;
Third, (i) so much of such payments or amounts remaining as shall be
required to pay in full the aggregate unpaid principal
amount of all Series A Equipment Notes,
31
<PAGE> 36
[Trust Indenture and Mortgage (1997 747-1)]
and the accrued but unpaid interest and other amounts due
thereon (including Break Amount, if any) and all other
Secured Obligations owed in respect of the Series A
Equipment Notes to the date of distribution, shall be
distributed to the Noteholders of Series A Equipment Notes,
and in case the aggregate amount so to be distributed shall
be insufficient to pay in full as aforesaid, then ratably,
without priority of one over the other, in the proportion
that the aggregate unpaid principal amount of all Series A
Equipment Notes held by each Noteholder plus the accrued but
unpaid interest and other amounts due hereunder or
thereunder (including Break Amount, if any) to the date of
distribution, bears to the aggregate unpaid principal amount
of all Series A Equipment Notes held by all such Noteholders
plus the accrued but unpaid interest and other amounts due
thereon (including Break 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 principal amount of all Series B
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon (including Break Amount, if any) and all
other Secured Obligations in respect of the Series B Equipment
Notes to the date of distribution, shall be distributed to the
Noteholders of Series B Equipment Notes, and in case the
aggregate amount so to be distributed shall be insufficient
to pay in full as aforesaid, then ratably, without priority
of one over the other, in the proportion that the aggregate
unpaid principal amount of all Series B Equipment Notes held
by each holder plus the accrued but unpaid interest and
other amounts due hereunder or thereunder (including Break
Amount, if any) to the date of distribution, bears to the
aggregate unpaid principal amount of all Series B Equipment
Notes held by all such Noteholders plus the accrued but
unpaid interest and other amounts due thereon (including
Break Amount, if any) to the date of distribution; and
(iii) after giving effect to paragraph (ii) above, so much of such
payments or amounts remaining as shall be required to pay in
full the aggregate unpaid principal amount of all Series C
Equipment Notes, and the accrued but unpaid interest and
other amounts due thereon (including Break Amount, if any)
and all other Secured Obligations in respect of the Series C
Equipment Notes to the date of distribution, shall be
distributed to the Noteholders of Series C Equipment Notes,
and in case the aggregate amount so to be distributed shall
be insufficient to pay in full as aforesaid, then ratably,
without priority of one over the other, in the proportion
that the aggregate unpaid principal amount of all Series C
Equipment Notes held by each Noteholder plus the accrued but
unpaid interest and other amounts due hereunder or
thereunder (including Break Amount, if any) to the date of
distribution, bears to the aggregate
32
<PAGE> 37
[Trust Indenture and Mortgage (1997 747-1)]
unpaid principal amount of all Series C Equipment Notes held
by all such Noteholders plus the accrued but unpaid interest
and other amounts due thereon (including Break Amount, if any)
to the date of distribution; and
(iv) if any Series D Equipment Notes have been issued, after giving
effect to paragraph (iii) above, so much of such payments or
amounts remaining as shall be required to pay in full the
aggregate unpaid principal amount of all Series D Equipment
Notes, and the accrued but unpaid interest and other amounts
due thereon (including Break Amount, if any) and all other
Secured Obligations in respect of the Series D Equipment
Notes to the date of distribution, shall be distributed to
the Noteholders of Series D Equipment Notes, and in case the
aggregate amount so to be distributed shall be insufficient
to pay in full as aforesaid, then ratably, without priority
of one over the other, in the proportion that the aggregate
unpaid principal amount of all Series D Equipment Notes held
by each Noteholder plus the accrued but unpaid interest and
other amounts due hereunder or thereunder (including Break
Amount, if any) to the date of distribution, bears to the
aggregate unpaid principal amount of all Series D Equipment
Notes held by all such Noteholders plus the accrued but
unpaid interest and other amounts due thereon (including
Break Amount, if any) to the date of distribution;
Fourth, the balance, if any, of such payments or amounts remaining
thereafter shall be distributed to the Owner.
No Make-Whole Amount shall be payable in connection with an
Indenture Event of Default or distributable under this Section 3.03.
Section 3.04. Certain Payments.
(a) Any payments received by the Indenture Trustee for which
no provision as to the application thereof is made in this Agreement and for
which such provision is made in any other Operative Document shall be applied
forthwith to the purpose for which such payment was made in accordance with the
terms of such other Operative Document, as the case may be.
(b) Notwithstanding anything to the contrary contained in this
Article 3, the Indenture Trustee will distribute promptly upon receipt any
indemnity payment received by it from the Owner in respect of the Indenture
Trustee in its individual capacity, any Noteholder or any other Indenture
Indemnitee, in each case whether or not pursuant to Section 5(b) of the
Participation Agreement, directly to the Person entitled thereto. Subject to the
foregoing sentence of this Section 3.04(b), any payment under Section 2.12 shall
be distributed to the Subordination Agent to the distributed in accordance with
the terms of the Intercreditor Agreement.
33
<PAGE> 38
[Trust Indenture and Mortgage (1997 747-1)]
Section 3.05. Other Payments.
Any payments received by the Indenture Trustee for which no
provision as to the application thereof is made elsewhere in this Agreement or
in any other Operative Document shall be distributed by the Indenture Trustee to
the extent received or realized at any time prior to payment of all Secured
Obligations, 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 4
COVENANTS OF OWNER
So long as the Airframe or any Engine is subject to the Lien
of this Agreement, the Owner covenants and agrees as follows:
Section 4.01. Registration, Maintenance and Operation;
Possession and Permitted Leases; Insignia.
(a) (1) Registration and Maintenance. The Owner, at its own
cost and expense, shall (or shall cause any Permitted Lessee to): (i)
on or prior to the Closing Date, cause the Aircraft to be duly
registered in its name, and, subject to subparagraph (3) of this
Section 4.01(a), to remain duly registered in its name under the
Federal Aviation Act; (ii) maintain, service, repair, and overhaul (or
cause to be maintained, serviced, repaired, and overhauled) the
Aircraft (and any engine which is not an Engine but which is installed
on the Aircraft) (x) so as at all times to keep the Aircraft in as good
an operating condition, ordinary wear and tear excepted, as may be
necessary to enable the airworthiness certification for the Aircraft to
be maintained in good standing at all times (other than during
temporary periods of storage in accordance with applicable regulations)
under (I) the Federal Aviation Act, except when all of Owner's Boeing
Model 747-422 aircraft (powered by engines of the same type as those
with which the Airframe shall be equipped at the time of such
grounding) registered in the United States have been grounded by the
FAA unless such grounding was caused by the failure of Owner to
maintain, service, repair and overhaul the Aircraft in accordance with
the terms hereof, or (II) the applicable laws of any other jurisdiction
in which the Aircraft may then be registered from time to time, except
when all of Owner's Boeing Model 747-422 aircraft (powered by engines
of the same type as those with which the Airframe shall be equipped at
the time of
34
<PAGE> 39
[Trust Indenture and Mortgage (1997 747-1)]
such grounding) registered in such jurisdiction have been grounded by
the aeronautical authority of such jurisdiction unless such grounding
was caused by the failure of Owner to maintain, service, repair and
overhaul the Aircraft in accordance with the terms hereof and (y) in
in substantially the same manner as Owner (or any Permitted Lessee)
maintains, services, repairs or overhauls similar aircraft operated by
Owner (or Permitted Lessee) in similar circumstances and without
discriminating against the Aircraft; and (iii) maintain or cause to be
maintained all records, logs and other materials required to be
maintained in respect of the Aircraft by the FAA or the applicable
regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered.
(2) Operation. Owner will not (or permit any Permitted Lessee
to) maintain, use, service, repair, overhaul or operate the Aircraft in
violation of any material law or any rule, regulation, treaty, order or
certificate of any government or governmental authority (domestic or
foreign) having jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued by
any such authority, except that, Owner or any Permitted Lessee may
contest in good faith the validity or application of any such law,
rule, regulation, order, certificate, license, registration or
violation in any reasonable manner which does not materially adversely
affect the Lien of this Agreement. If the indemnities or insurance
specified in Section 4.03(f), or some combination thereof in amounts
equal to amounts required by Section 4.03(f), have not been obtained,
Owner will not operate the Aircraft, or permit any Permitted Lessee to
operate the Aircraft, in or to any area excluded from coverage by any
insurance required to be maintained by the terms of Section 4.03;
provided, however, that the failure of Owner to comply with the
provisions of this sentence shall not give rise to an Indenture Event
of Default where such failure is attributable to a hijacking, medical
emergency, equipment malfunction, weather conditions, navigational
error or other isolated extraordinary event beyond the control of Owner
and Owner is taking all reasonable steps to remedy such failure as soon
as is reasonably practicable.
(3) Reregistration. Subject to the terms and conditions of
Section 6(a) of the Participation Agreement, the Owner may at any time
cause the Aircraft to be re- registered under the laws of another
country.
(b) Possession and Permitted Leases. Owner will not, without
the prior written consent of Indenture Trustee, lease or otherwise in any manner
deliver, transfer or relinquish possession of the Airframe or any Engine or
install or permit any Engine to be installed on any airframe other than the
Airframe; provided that, so long as such action shall not deprive the Indenture
Trustee of the perfected Lien of this Agreement on the Airframe or any Engine,
Owner may, without the prior written consent of Indenture Trustee:
35
<PAGE> 40
[Trust Indenture and Mortgage (1997 747-1)]
(i) subject the Airframe and the Engines or engines
then installed thereon to normal interchange agreements or any Engine
to normal pooling or similar arrangements, in each case customary in
the airline industry and entered into by Owner (or any Permitted
Lessee) in the ordinary course of its business with any air carrier;
provided, that (A) no such agreement or arrangement contemplates or
requires the transfer of title to the Airframe, and (B) if Owner's
title to any Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss
with respect to such Engine and the Owner shall (or shall cause any
Permitted Lessee to) comply with Section 5.01(b) hereof in respect
thereof;
(ii) deliver possession of the Airframe or any
Engine to the manufacturer thereof or to any other Person for testing,
service, repair, maintenance or overhaul work on the Airframe or in or
Engine or any Part of any thereof or for alterations or modifications
additions to such Airframe or Engine to the extent required or
permitted by the terms hereof;
(iii) install an Engine on an airframe owned by Owner
(or any Permitted Lessee) which airframe is free and clear of all
Liens, except: (A) Permitted Liens and those which apply only to the
engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other than
Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of third parties under interchange agreements
which would be permitted under clause (i) above, provided that Owner's
title to such Engine shall not be divested as a result thereof and (C)
mortgage Liens or other security interests, provided, that (as regards
this clause (C)), such mortgage Liens or other security interests
effectively provide that such Engine shall not become subject to the
lien of such mortgage or security interest, notwithstanding the
installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Owner
(or any Permitted Lessee) or purchased by Owner (or any Permitted
Lessee) subject to a conditional sale or other security agreement,
provided that (x) such airframe is free and clear of all Liens, except:
(A) the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe, or their assignees, and (B)
Liens of the type permitted by subparagraph (iii) of this Section
4.01(b) and (y) such lease, conditional sale or other security
agreement effectively provides that such Engine shall not become
subject to the lien of such lease, conditional sale or other security
agreement, notwithstanding the installation thereof on such airframe;
(v) install an Engine on an airframe owned by Owner
(or any Permitted Lessee), leased to Owner (or any Permitted Lessee) or
purchased by Owner
36
<PAGE> 41
[Trust Indenture and Mortgage (1997 747-1)]
(or any Permitted Lessee) subject to a conditional sale or other
security agreement under circumstances where neither subparagraph
(iii) nor subparagraph (iv) of this Section 4.01(b) is applicable,
provided that any divestiture of title to such Engine resulting from
such installation shall be deemed an Event of Loss with respect to
such Engine and Owner shall (or shall cause any Permitted Lessee to)
comply with Section 5.01(b) hereof in respect thereof;
(vi) transfer (or permit any Permitted Lessee to
transfer) possession of the Airframe or any Engine to the United States
of America or any instrumentality or agency thereof pursuant to the
Civil Reserve Air Fleet Program so long as Owner (or any Permitted
Lessee) shall promptly notify Indenture Trustee (x) upon transferring
possession of the Airframe or any Engine to the United States of
America or any agency or instrumentality thereof pursuant to the Civil
Reserve Air Fleet Program and (y) of the name and the address of the
Contracting Office Representative for the Military Airlift Command of
the United States Air Force to whom notice must be given pursuant to
Section 15 hereof;
(vii) transfer possession of the Airframe or any
Engine to the United States of America or any instrumentality or agency
thereof pursuant to a lease, contract or other instrument; or
(viii) Owner may, at any time so long as no Indenture
Default under Section 8.01(a), (e) or (f) hereof or any Indenture
Event of Default shall have occurred and be continuing, enter into a
lease of the Aircraft, Airframe or any Engine with (1) a Certificated
Air Carrier, (2) any other Permitted Air Carrier, or (3) any other
Person; provided that (A) no such lease shall be permitted to a lessee
that is subject to a proceeding or final order under applicable
bankruptcy, insolvency or reorganization laws on the date the lease is
entered into, (B) in the case of a lease under subclause (2) or (3)
above, on the date of such lease, the United States and the country in
which such lessee is domiciled and principally located maintain
diplomatic relations (which for purposes of this clause (viii) shall
include Taiwan and any other country that is similarly situated) and
(C) in the case only of a lease to any Person under subclause (3)
above, the Indenture Trustee receives at the time of such lease an
opinion of counsel to the effect that there exist no possessory rights
in favor of the lessee under the laws of such lessee's country which
would, upon bankruptcy or insolvency of or other default by the Owner
or the lessee, prevent the return of such Engine or Airframe and such
Engine or engine to the Indenture Trustee in accordance with and when
permitted by the terms of Section 8.03 upon the exercise by the
Indenture Trustee of its remedies pursuant to such Section.
The rights of any Permitted Lessee or other transferee (other
than a transferee where the transfer is of an Engine which is to be an Event of
Loss) shall be subject and subordinate to, all the terms of this Agreement (and
any Permitted Lease shall expressly state
37
<PAGE> 42
[Trust Indenture and Mortgage (1997 747-1)]
that it is so subject and subordinate), including, without limitation, the
Indenture Trustee's right to repossess the Aircraft and to void any lease upon
such repossession, and Owner shall remain primarily liable for the performance
of all of the terms of this Agreement, and the terms of any such Permitted Lease
shall not permit any Permitted Lessee to take any action not permitted to be
taken by Owner in this Agreement with respect to the Aircraft. No pooling
agreement, Permitted Lease or other relinquishment of possession of the Airframe
or any Engine shall in any way discharge or diminish any of Owner's obligations
to the Indenture Trustee under this Agreement or constitute a waiver of
Indenture Trustee's rights or remedies hereunder. The Indenture Trustee agrees,
for the benefit of Owner (and any Permitted Lessee) and for the benefit of any
mortgagee or other holder of a security interest in any engine owned by Owner
(or any Permitted Lessee), any lessor of any engine other than an Engine leased
to Owner (or any Permitted Lessee) and any conditional vendor of any engine
other than an Engine purchased by Owner (or any Permitted Lessee) subject to a
conditional sale agreement or any other security agreement, that no interest
shall be created under this Agreement in any engine so owned, leased or
purchased and that neither the Indenture Trustee nor its successors or assigns
will acquire or claim, as against Owner (or any Permitted Lessee) or any such
mortgagee, lessor or conditional vendor or other holder of a security interest
or any successor or assignee of any thereof, any right, title or interest in
such engine as the result of such engine being installed on the Airframe;
provided, however, that such agreement of Indenture Trustee shall not be for the
benefit of any lessor or secured party of an airframe leased to Owner (or any
Permitted Lessee) or purchased by Owner (or any Permitted Lessee) subject to a
conditional sale or other security agreement or for the benefit of any mortgagee
or any other holder of a security interest in an airframe owned by Owner (or any
Permitted Lessee), on which airframe Owner (or any Permitted Lessee) then
proposes to install an Engine, unless such lessor, conditional vendor, other
secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as against
Indenture Trustee, any right, title or interest in an Engine as a result of such
Engine being installed on such airframe. Owner shall provide the Indenture
Trustee with a copy of any Permitted Lease or any instrument evidencing a
transfer pursuant to paragraph (vii) of this Section 4.01(b), in either case
having a term of more than one (1) year, as promptly as practicable after
entering into such Permitted Lease or other transfer.
Any Wet Lease or similar arrangement under which Owner
maintains operational control of the Aircraft shall not constitute a delivery,
transfer or relinquishment of possession for purposes of this Section 4.01. The
Indenture Trustee acknowledges that any consolidation or merger of Owner or
conveyance, transfer or lease of all or substantially all of Owner's assets
permitted by the Operative Documents shall not be prohibited by this Section
4.01.
(c) Insignia. On or prior to the Closing Date, or as soon
thereafter as practicable, Owner agrees to affix and maintain (or cause to be
affixed and maintained) in the cockpit of the Airframe adjacent to the
registration certificate therein and on each Engine a nameplate bearing the
inscription:
38
<PAGE> 43
[Trust Indenture and Mortgage (1997 747-1)]
Mortgaged To
First Security Bank, National Association, as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Indenture Trustee, in each case as permitted under the
Operative Documents).
Except as above provided, Lessee will not allow the name of
any Person to be placed on the Airframe or on any Engine as a designation that
might be interpreted as a claim of ownership; provided, that nothing herein
contained shall prohibit Owner (or any Permitted Lessee) from placing its
customary colors and insignia on the Airframe or any Engine.
(d) Substitution of Engines. The Owner may at any time, at no
cost to the Indenture Trustee, replace any Engine subjected to the Lien hereof
by causing an Acceptable Alternate Engine to be substituted for such Engine
hereunder in accordance with the provisions of Section 5.01(b) hereof to the
same extent as if an Event of Loss has occurred with respect to such Engine.
Section 4.02. Replacement and Pooling of Parts; Alterations,
Modifications and Additions.
(a) Replacement of Parts. Owner, at its own cost and expense,
will promptly replace or cause to be replaced all Parts 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,
except as otherwise provided in Section 4.02(c). All replacement Parts shall be
owned by Owner free and clear of all Liens (except Permitted Liens, pooling
arrangements permitted by Section 4.02(b) hereof and replacement Parts
temporarily installed on an emergency basis) and shall be in as good operating
condition as, and shall have a value and utility substantially equal to, the
Parts replaced assuming such replaced Parts were in the condition and repair
required to be maintained by the terms hereof. All Parts at any time removed
from the Airframe or any Engine shall remain subject to the Lien of this
Agreement, no matter where located, until such time as such Parts shall be
replaced by Parts which meet the requirements for replacement Parts specified
above. Immediately upon any replacement Part becoming incorporated or installed
in or attached to the Airframe or any Engine, without further act (subject only
to Permitted Liens and any pooling arrangement permitted by Section 4.02(b)
hereof and except replacement Parts temporarily installed on an emergency
basis), (i) such replacement Part shall become subject to the Lien of this
Agreement and be deemed a Part
39
<PAGE> 44
[Trust Indenture and Mortgage (1997 747-1)]
for all purposes hereof to the same extent as the Parts originally incorporated
or installed in or attached to the Airframe or such Engine and (ii) the replaced
Part shall be free and clear of all rights of the Indenture Trustee and shall no
longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or
any Engine as provided in Section 4.02(a) hereof may be subjected by Owner (or
any Permitted Lessee) to a pooling arrangement of the type which is permitted by
Section 4.01(b)(i) hereof; provided, that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 4.02(a) as promptly as practicable after the removal of
such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Airframe or an Engine in accordance with such
Sections may be owned by any third party subject to such a pooling arrangement,
provided, that Owner (or any Permitted Lessee), at its expense, as promptly
thereafter as practicable, either (i) causes such replacement Part to become
subject to the Lien of this Agreement, free and clear of all Liens other than
Permitted Liens or (ii) replaces such replacement Part with a further
replacement Part owned by Owner (or any Permitted Lessee) which shall become
subject to the Lien of this Agreement, free and clear of all Liens other than
Permitted Liens.
(c) Alterations, Modifications and Additions. Owner, at its
own expense, will make (or cause to be made) such alterations and modifications
in and additions to the Airframe and Engines as may be required to be made from
time to time so as to comply with any law, rule, regulation or order of any
regulatory agency or body of any jurisdiction in which the Aircraft may then be
registered; provided, however, that, Owner or any Permitted Lessee may, in good
faith, and by appropriate proceedings contest the validity or application of any
such law, rule, regulation or order in any reasonable manner which does not
materially adversely affect the Lien of this Agreement. In addition, Owner (or
any Permitted Lessee), at its own expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine as
Owner (or any Permitted Lessee) may deem desirable in the proper conduct of its
business, including removal of Parts which Owner (or any Permitted Lessee) deems
to be obsolete or no longer suitable or appropriate for use on the Airframe or
such Engine (such parts, "Obsolete Parts"); provided that no such alteration,
modification, removal or addition diminishes the condition or airworthiness of
the Airframe or such Engine, or materially diminishes the value, utility or, in
regard to the Airframe, remaining useful life of the Airframe or such Engine
below the condition, airworthiness, value, utility or, in regard to the
Airframe, remaining useful life thereof immediately prior to such alteration,
modification, removal or addition assuming the Airframe or such Engine was then
in the condition required to be maintained by the terms of this Agreement. In
addition, the value (but not the utility, condition or airworthiness) of the
Airframe or any Engine may be reduced by the value, if any, of Obsolete Parts
which shall have been removed so long as the aggregate value of all Obsolete
Parts which shall have been removed and not replaced shall not exceed the
Obsolete Parts Cap. All Parts incorporated or installed in or attached or added
to the Airframe or an Engine as the result of
40
<PAGE> 45
[Trust Indenture and Mortgage (1997 747-1)]
such alteration, modification or addition (except those parts which are excluded
from the definition of Parts or which may be removed by Owner pursuant to the
next sentence) (the "Additional Parts") shall, without further act, become
subject to the Lien of this Agreement. Notwithstanding the foregoing sentence,
Owner (or any Permitted Lessee), may, at its own expense, at any time remove or
suffer to be removed any Additional Part, provided that such Additional Part (i)
is in addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to such Airframe or any
Engine at the time of delivery thereof hereunder or any Part in replacement of
or substitution for any such Part, (ii) is not required to be incorporated or
installed in or attached or added to the Airframe or any Engine pursuant to the
first sentence of this paragraph (c) and (iii) can be removed from the Airframe
or such Engine without diminishing the condition, airworthiness, value or
utility of the Airframe or such Engine which the Airframe or such Engine would
have had at such time had such alteration, modification or addition not
occurred. Upon the removal thereof as provided above, such Additional Part shall
no longer be deemed to be subject to the Lien of this Agreement or part of the
Airframe or Engine from which it was removed.
(d) Certain Matters Regarding Passenger Convenience Equipment.
Owner may at any time and from time to time install on the Airframe Passenger
Convenience Equipment that is (i) owned by another Person and leased to Owner,
(ii) sold to Owner by another Person subject to a conditional sale contract or
other retained security interest, (iii) leased to Owner pursuant to a lease
which is subject to a security interest in favor of another Person or (iv)
installed on the Aircraft subject to a license granted to Owner by another
Person, and in any such case the Indenture Trustee will not acquire or claim, as
against any such other Person, any right, title or interest in any such
Passenger Convenience Equipment solely as a result of its installation on the
Airframe.
Section 4.03. Insurance.
(a) Public Liability and Property Damage Insurance.
(1) Except as provided in clause (2) of this Section 4.03(a), and subject to
self-insurance to the extent permitted by Section 4.03 hereof, Owner will carry
or cause to be carried with respect to the Aircraft at its or any Permitted
Lessee's expense (i) comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury, and property damage
liability) insurance (exclusive of manufacturer's product liability insurance
and including, without limitation, aircraft war risk and hijacking insurance, if
and to the extent the same is maintained by Owner (or Permitted Lessee) with
respect to other aircraft owned or leased, and operated by Owner (or Permitted
Lessee) on the same routes) and (ii) cargo liability insurance, (A) in an amount
not less than the greater of (x) the amounts of comprehensive airline liability
insurance from time to time applicable to aircraft owned or leased and operated
by Owner of the same type as the Aircraft and (y) the Minimum Liability
Insurance Amount, (B) of the type and covering the same risks as from time to
time are applicable to aircraft owned or leased and operated by Owner of the
same type as the Aircraft, and (C) which is maintained
41
<PAGE> 46
[Trust Indenture and Mortgage (1997 747-1)]
in effect with insurers of recognized reputation and responsibility; provided,
however, that Owner need not maintain cargo liability insurance, or may maintain
such insurance in an amount less than the Minimum Liability Insurance Amount, as
long as the amount of cargo liability insurance, if any, maintained with respect
to the Aircraft is the same as the cargo liability insurance, if any, maintained
for other Boeing Model 747-422 aircraft owned or leased, and operated by Owner.
(2) During any period that the Airframe or an Engine, as the
case may be, is on the ground and not in operation, Owner may carry or cause to
be carried as to such non-operating property, in lieu of the insurance required
by clause (1) above, and subject to the self-insurance to the extent permitted
by Section 4.03(d) hereof, insurance by insurers of recognized reputation and
responsibility otherwise conforming with the provisions of clause (1) except
that (A) the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable to
property owned or leased by Owner of the same type as such non-operating
property and which is on the ground and not in operation; and (B) the scope of
the risks covered and the type of insurance shall be the same as from time to
time shall be applicable to property owned or leased by Owner of the same type
as such non-operating property and which is on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1)
Except as provided in clause (2) of this Section 4.03(b), and subject to the
provisions of Section 4.03(d) hereof permitting self-insurance, Owner shall
maintain or cause to be maintained in effect, at its or any Permitted Lessee's
expense, with insurers of recognized reputation and responsibility, all-risk
aircraft hull insurance covering the Aircraft and fire and extended coverage and
all-risk aircraft hull insurance covering Engines and Parts while temporarily
removed from the Aircraft and not replaced by similar components (including,
without limitation, aircraft war risk and governmental confiscation and
expropriation (other than by the government of registry of the Aircraft) and
hijacking insurance, if and to the extent the same is maintained by Owner (or
any Permitted Lessee) with respect to other aircraft owned or leased, and
operated by Owner (or such Permitted Lessee) on the same routes); provided,
that such insurance shall at all times while the Aircraft is subject to this
Agreement be for an amount (taking into account self-insurance to the extent
permitted by Section 4.03(d) hereof) not less than the Insured Amount for the
Aircraft; and provided further, that subject to compliance with Section 4.03(d)
hereof, such all-risk property damage insurance covering Engines and Parts while
temporarily removed from the Airframe or an airframe of (in the case of Parts)
an Engine need be obtained only to the extent available at reasonable cost (as
reasonably determined by Owner). In the case of a loss with respect to an engine
(other than an Engine) installed on the Airframe in circumstances which do not
constitute an Event of Loss with respect to the Airframe, the Indenture Trustee
shall promptly remit any payment made to it of any insurance proceeds in respect
of such loss to Owner or any other third party that is entitled to receive such
proceeds.
42
<PAGE> 47
[Trust Indenture and Mortgage (1997 747-1)]
All losses will be adjusted by Owner with the insurers;
provided, however, that during a period when any Indenture Event of Default
shall have occurred and be continuing, Owner shall not agree to any such
adjustment without the consent of the Indenture Trustee. As between the
Indenture Trustee and Owner, it is agreed that all proceeds of insurance
maintained in compliance with the preceding paragraph and received as the result
of the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the
Airframe (or the Airframe and the Engines installed thereon), (i)
unless such property is replaced pursuant to the last paragraph of
Section 5.01(a) hereof, such payments shall be applied in reduction of
Owner's obligation to pay such amounts payable under Section 5.01(a)
hereof, if not already paid by Owner, or, if already paid by Owner,
shall be applied to reimburse Owner for its payment of such amounts
payable under Section 5.01(a) hereof, and the balance, if any, of such
payments remaining thereafter will be paid over to, or retained by,
Owner (or if directed by Owner, any Permitted Lessee); or (ii) if such
property is replaced pursuant to the last paragraph of Section 5.01(a)
hereof, such payments shall be paid over to, or retained by, Owner (or
if directed by Owner, any Permitted Lessee), provided that Owner shall
have fully performed or, concurrently therewith, will fully perform the
terms of the last paragraph of Section 5.01(a) hereof with respect to
the Event of Loss for which such payments are made; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 5.01(b) hereof,
such payments shall be paid over to, or retained by, Owner (or if
directed by Owner, any Permitted Lessee), provided that either (i) such
payments are less than the Loss Payee Amount or (ii) Owner shall have
fully performed or, concurrently therewith, will fully perform the
terms of Section 5.01(b) hereof with respect to the Event of Loss for
which such payments are made.
(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 clause (1) above, and subject to the self-insurance to the
extent permitted by Section 4.03(d) hereof, insurance otherwise conforming with
the provisions of said clause (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 or leased by Owner of the same type as the Aircraft similarly on the
ground and not in operation, provided that, subject to the self-insurance to the
extent permitted by Section 4.03(d) hereof, Owner shall maintain insurance
against risk of loss or damage to the Aircraft in an amount at least equal to
the Insured Amount of the Aircraft during such period that the Aircraft is on
the ground and not in operation.
43
<PAGE> 48
[Trust Indenture and Mortgage (1997 747-1)]
(c) Reports, etc. Owner will furnish, or cause to be
furnished, to the Indenture Trustee on or before the Closing Date, and each
annual renewal of the applicable insurances, a report, signed by AON Risk
Services of Illinois, Inc. or any other independent firm of insurance brokers
reasonably acceptable to the Indenture Trustee which brokers may be in the
regular employ of Owner (the "Insurance Brokers"), describing in reasonable
detail the hull and liability insurance (and property insurance for detached
engines and parts) then carried and maintained with respect to the Aircraft and
stating the opinion of such firm that such insurance complies with the terms
hereof; provided that all information contained in the foregoing report shall
not be made available by the Indenture Trustee to anyone except (A) to any
Noteholder's or to prospective and permitted transferees of Indenture Trustee's
or any Noteholder's interest or its respective counsel, independent certified
public accountants, independent insurance brokers or other agents, who agree to
hold such information confidential, (B) to the Indenture Trustee's counsel or
independent certified public accountants, independent insurance brokers or other
agents who agree to hold such information confidential, (C) as may be required
by any statute, court or administrative order or decree or governmental ruling
or regulation, or (D) as may be necessary for purposes of protecting the
interest of any such Person or for enforcement of this Agreement by the
Indenture Trustee; provided, further, that any and all disclosures permitted by
clauses (C) or (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of the Persons to whom such disclosures are
hereby permitted. Owner will cause such Insurance Broker to agree to advise the
Indenture Trustee in writing of any 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 and to advise the Indenture
Trustee in writing at least 30 days (7 days in the case of war risk and allied
perils coverage) prior to the cancellation or material adverse change of any
insurance maintained pursuant to this Section 4.03; provided that if the notice
period specified above is not reasonably obtainable, the Insurance Broker shall
provide for as long a period of prior notice as shall then be reasonably
obtainable. In the event that Owner or any Permitted Lessee shall fail to
maintain or cause to be maintained insurance as herein provided, the Indenture
Trustee or Pass Through Trustee may, at its sole option, but shall be under no
duty to, provide such insurance and, in such event, Owner shall, upon demand,
reimburse the Indenture Trustee or Pass Through Trustee, as Supplemental Rent,
for the cost thereof to the Indenture Trustee or Pass Through Trustee, as the
case may be; provided, however, that no exercise by the Indenture Trustee or
Pass Through Trustee, as the case may be, of said option shall affect the
provisions of this Agreement, including the provisions that failure by Owner to
maintain the prescribed insurance shall constitute an Event of Default.
(d) Self-Insurance. Owner may self-insure the risks required
to be insured against pursuant to this Section 4.03 under a program applicable
to all aircraft (whether owned or leased) in Owner's fleet, but in no case shall
the aggregate amount of such self-insurance in regard to Sections 4.03(a) and
4.03(b) hereof exceed for any calendar year, with respect to all of the aircraft
(whether owned or leased) in Owner's fleet (including,
44
<PAGE> 49
[Trust Indenture and Mortgage (1997 747-1)]
without limitation, the Aircraft) the lesser of (A) the highest replacement
value of any single aircraft in Owner's fleet or (B) 1-1/2% of the average
aggregate insurable value (during the preceding calendar year) of all aircraft
(including, without limitation, the Aircraft) on which Owner carries insurance.
In addition to the foregoing right to self-insure, Owner (and any Permitted
Lessee) may self-insure, to the extent of any applicable mandatory minimum per
aircraft (or, if applicable, per annum or other period) the hull or liability
insurance deductible imposed by the aircraft hull or liability insurer.
(e) Additional Insurance by Owner. Owner (and any Permitted
Lessee) may at its own expense carry insurance with respect to its interest in
the Aircraft in amounts in excess of that required to be maintained by this
Section 4.03.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 4.03 requiring insurance, the
Indenture Trustee agrees to accept, in lieu of insurance against any risk with
respect to the Aircraft, indemnification from, or insurance provided by, the
United States Government, against such risk in an amount which, when added to
the amount of insurance against such risk maintained by Owner (or any Permitted
Lessee) shall be at least equal to the amount of insurance against such risk
otherwise required by this Section 4.03 (taking into account self-insurance
permitted by Section 4.03(d) hereof).
(g) Terms of Insurance Policies. Any policies carried in
accordance with Sections 4.03(a) and 4.03(b) hereof covering the Aircraft, and
any policies taken out in substitution or replacement for any such policies, (A)
shall name the Additional Insureds as additional insureds, or, if appropriate
(but subject to clause (H) below), loss payees, as their respective interests
may appear (but without imposing on any such party liability to pay premiums
with respect to such insurance), (B) may provide for self-insurance to the
extent permitted in Section 4.03(d) hereof, (C) shall provide that if the
insurers cancel such insurance for any reason whatever, or if the same is
allowed to lapse for non-payment of premium or if any material change is made in
the insurance which adversely affects the interest of any Additional Insured,
such lapse, cancellation or change shall not be effective as to any Additional
Insured for thirty days (seven days in the case of war risk and allied perils
coverage) after receipt by such Additional Insured of written notice by such
insurers of such lapse, cancellation or change; provided, however, 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, (D) shall provide that in respect of the respective interests of
each Additional Insured in such policies the insurance shall not be invalidated
by any action or inaction of Owner (or any Permitted Lessee) or any other Person
and shall insure the respective interests of the Additional Insureds, as they
appear, regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by Owner (or any Permitted Lessee) or by
any other Person, (E) shall be primary without any right of contribution from
any other insurance which is carried by any Additional Insured,
45
<PAGE> 50
[Trust Indenture and Mortgage (1997 747-1)]
(F) shall expressly provide that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, (G) shall waive any right of the insurers
to set-off or counterclaim or any other deduction, whether by attachment or
otherwise, in respect of any liability of any Additional Insured, and (H) shall
provide that (i) in the event of a loss involving the Aircraft, Airframe, or an
Engine for which proceeds are in excess of the Loss Payee Amount, the proceeds
in respect of such loss up to the amount of the Insured Amount for the Aircraft
shall be payable to the Indenture Trustee, it being understood and agreed that
in the case of any payment to the Indenture Trustee otherwise than in respect of
an Event of Loss, the Indenture Trustee shall, upon receipt of evidence
reasonably satisfactory to it that the damages 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, and any interest or
income earned thereon in accordance with Section 9.04 hereof, to Owner or its
order, and (ii) the entire amount of any such loss for which proceeds are equal
to or less than the Loss Payee Amount or the amount of any proceeds of any such
loss in excess of the Insured Amount for the Aircraft shall be paid to Owner or
its order unless a Section 8.01(a)(i), 8.01(e) or 8.01(f) Indenture Default or
any Indenture Event of Default shall have occurred and be continuing and the
insurers have been notified thereof the Indenture Trustee in which case such
proceeds shall be payable to the Indenture Trustee.
(h) Application of Payments During Existence of Certain
Indenture Events of Default. Any amount referred to in this Section 4.03 which
is payable to or retainable by Owner (or any Permitted Lessee) shall not be paid
to or retained by Owner (or any Permitted Lessee) if at the time of such payment
or retention an Indenture Default of the type described in Section 8.01(a)(i),
8.01(e) or 8.01(f) or any Indenture Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Indenture Trustee as security
for the obligations of Owner under this Agreement and applied against Owner's
obligations hereunder as and when due. At such time as there shall not be
continuing any such Indenture Event of Default, such amount shall be paid to
Owner to the extent not previously applied in accordance with the preceding
sentence.
Section 4.04. Inspection. At reasonable times not more often
than once in any twelve (12) month period, and upon at least 20 days prior
written notice to Owner (provided however that if an Indenture Event of Default
shall have occurred and be continuing, any such inspection shall be at
reasonable times without any limit on the number of times and upon at least 5
days prior written notice to Owner), the Indenture Trustee or its respective
authorized representatives may inspect the Aircraft and inspect and make copies
of the books and records of Owner and any Permitted Lessee required to be
maintained by the FAA or the regulatory agency or body of another jurisdiction
in which the Aircraft is then registered relating to the maintenance of the
Aircraft (at the Indenture Trustee's risk and expense) and shall keep any
information or copies obtained thereby confidential and shall not disclose the
same to any Person, except (A) to the Pass Through Trustees and to prospective
46
<PAGE> 51
[Trust Indenture and Mortgage (1997 747-1)]
and permitted transferees of any Pass Through Trustee's or the Indenture
Trustee's interest (and such prospective and permitted transferee's counsel,
independent insurance advisors or other agents) who agree to hold such
information confidential, (B) to any Pass Through Trustee's or the Indenture
Trustee's counsel, independent insurance advisors or other agents who agree to
hold such information confidential, (C) as may be required by any statute, court
or administrative order or decree or governmental ruling or regulation, and (D)
as may be necessary for purposes of protecting the interest of any such Person
or for enforcement of this Agreement by the Indenture Trustee; provided,
however, that any and all disclosures permitted by clauses (C) and (D) above
shall be made only to the extent necessary to meet the specific requirements or
needs of Persons for whom such disclosures are hereby permitted. Any such
inspection of the Aircraft shall be subject to Owner's safety and security rules
applicable at the location of the Aircraft, shall be a visual, walk-around
inspection of the interior and exterior of the Aircraft and shall not include
opening any panels, bays or the like without the express consent of Owner
(except in connection with a heavy maintenance visit when a panel, bay or the
like is scheduled or required to be open), which consent Owner may in its sole
discretion withhold; provided that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Owner (or any Permitted Lessee). The Indenture Trustee shall have
no duty to make any such inspection and shall incur no liability or obligation
by reason of not making any such inspection.
ARTICLE 5
EVENT OF LOSS
Section 5.01. (a) Event of Loss with Respect to the Aircraft.
Upon the occurrence of an Event of Loss with respect to the Airframe or the
Airframe and the Engines and/or engines then installed thereon, Owner shall (1)
forthwith (and in any event, within fifteen days after such occurrence) give the
Indenture Trustee written notice of such Event of Loss and (2) within 60 days
after such occurrence, give the Indenture Trustee written notice of its election
to perform one of the following options (it being understood that the failure to
give such notice shall be deemed to be an election of the option set forth in
clause (i) below):
(i) Not later than the earlier of (x) the Interest
Payment Date next succeeding the 100th day following the occurrence of
such Event of Loss or (y) the first Interest Payment Date that is at
least three Business Days after receipt by the loss payee of the
insurance proceeds with respect to such Event of Loss (but not earlier
than the first Business Day next succeeding the 65th day following the
occurrence of such Event of Loss) (the applicable day being the "Loss
Payment Date"), Owner shall, to the extent not paid to the Indenture
Trustee as insurance proceeds, pay or cause to be paid to the
Indenture Trustee an amount sufficient to redeem the Notes as provided
in Section 6.01(b); or
47
<PAGE> 52
[Trust Indenture and Mortgage (1997 747-1)]
(ii) Not later than the Interest Payment Date next
succeeding the 100th day following the occurrence of such Event of
Loss, Lessee shall substitute an aircraft or an airframe or an airframe
and one or more engines, as the case may be, in accordance with the
terms hereof, provided that if (A) an Indenture Event of Default shall
have occurred and be continuing as of such election date or (B) Lessee
shall have elected to make a substitution under this clause (ii) and
shall fail for any reason to make such substitution in accordance with
the terms hereof, then Lessee shall make the payments required by
clause (i) above on such date.
At such time as Lessor shall have received the sum of the
amounts specified in clause (i) above, the Indenture Trustee shall release from
the Lien of this Agreement the Aircraft by executing and delivering to the Owner
all documents and instruments as the Owner may reasonably request to evidence
such release.
The Owner's right to substitute a Replacement Airframe and
Replacement Engines, if any, as provided in Section 5.01(a)(ii) shall be subject
to the fulfillment, at the Owner's sole cost and expense, to conditions
precedent:
(i) on the date when the Replacement Airframe and Replacement
Engines, if any, is subjected to the Lien of this Agreement (such date
being referred to in this Section 5.01 as the "Replacement Closing
Date"), the following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto and
shall be in full force and effect, and an executed counterpart of each
thereof (or, in the case of the FAA Bill of Sale and full warranty bill
of sale referred to below, a photocopy thereof) shall have been
delivered to the Indenture Trustee:
(A) an Indenture Supplement covering the Replacement
Airframe and Replacement Engines, if any, which shall have
been duly filed for recordation pursuant to the Federal
Aviation 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 4.01(a)(3), as the case may be;
(B) an FAA Bill of Sale (or a comparable document, if
any, of another aviation authority, if applicable) covering
the Replacement Airframe and Replacement Engines, if any,
executed by the former owner thereof in favor of the Owner;
(C) a full warranty (as to title) bill 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 Indenture
Trustee); and
48
<PAGE> 53
[Trust Indenture and Mortgage (1997 747-1)]
(D) Uniform Commercial Code 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 4.01(a)(3)) as are
deemed necessary or desirable by counsel for the Indenture
Trustee to protect the security interests of the Indenture
Trustee in the Replacement Airframe and Replacement Engines,
if any;
(ii) the Replacement Airframe shall be of the same or an
improved make and model as the Airframe replaced and each Replacement
Engine shall be an Acceptable Alternate Engine, and the Replacement
Airframe and Replacement Engines, if any, have a value and utility 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 were in the condition required by the terms hereof) as
evidenced by an appraisal from an independent aircraft appraiser;
(iii) the Indenture Trustee (acting directly or by
authorization to its special counsel) shall have received satisfactory
evidence as to the compliance with Section 4.03 with respect to the
Replacement Airframe and Replacement Engines, if any;
(iv) the Indenture Trustee at the expense of the Owner, shall
have received (acting directly or by authorization to its special
counsel) (A) an opinion of counsel to Owner (which may be Owner's
General Counsel), addressed to the Indenture Trustee, to the effect
that the Replacement Airframe and Replacement Engine, if any, has or
have duly been made subject to the Lien of this Agreement, that all
required action has been taken in order to maintain, and such action
shall maintain, the effectiveness and priority (to the extent the same
existed immediately prior to the occurrence of such Event of Loss,
assuming the Owner was in compliance with all relevant terms hereof) of
the security interests in the Airframe, the Engines and title thereto
created by this Agreement and that the protections afforded to the
Indenture Trustee by Section 1110 of the Bankruptcy Code will
not be less than such protections immediately prior to the occurrence
of such Event of Loss (assuming the Owner was in compliance with all
relevant terms hereof) and (B) an opinion of qualified FAA counsel (or
counsel in any jurisdiction outside the Untied States where the
Aircraft may be registered in accordance with Section 4.01(a)(3)),
addressed to the Indenture Trustee, as to, in the case of FAA counsel,
the due recordation of the Indenture Supplement and all other
documents or instruments the recordation of which is necessary to
perfect and protect the rights of the Indenture Trustee in the
Replacement Airframe and Replacement Engines, if any, or, in the case
of counsel in another jurisdiction, the taking of all action necessary
in such jurisdiction for such purposes; and
49
<PAGE> 54
[Trust Indenture and Mortgage (1997 747-1)]
(v) the Indenture Trustee (acting directly or by authorization
to special counsel) shall have received an officer's certificate of
Owner stating that, in the opinion of the signer, all conditions
precedent provided for in this Section 5.01(a) relating to such
replacement have been complied with.
Upon satisfaction of all conditions to such substitution, (x)
the Indenture Trustee 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 Airframe and Engines, if any,
from the Lien of this Agreement, (y) the Indenture Trustee 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 and proceeds in respect of any Event of Loss giving rise to
such replacement. For all purposes hereof, the property so substituted shall
after such transfer be deemed to be subjected to the Lien of this Agreement and
shall be deemed an "Aircraft," "Airframe" and "Engine," as the case may be, as
defined herein.
(b) Event of Loss with Respect to an Engine. Upon the
occurrence of an Event of Loss with respect to an Engine under circumstances in
which there has not occurred an Event of Loss with respect to the Airframe,
Owner shall forthwith (and in any event, within fifteen days after such
occurrence) give the Indenture Trustee written notice thereof and shall, within
sixty (60) days after the occurrence of such Event of Loss, substitute an
Acceptable Alternate Engine free and clear of all Liens (other than Permitted
Liens) in as good an operating condition as, the Engine subject to such Event of
Loss (assuming that such Engine had been maintained in accordance with this
Agreement) and cause such Acceptable Alternate Engine to be subjected to the
Lien of this Agreement. 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 Indenture Trustee agrees to cooperate with the Owner to the extent necessary
to enable it to timely satisfy such conditions:
(i) the following documents shall be duly authorized, executed
and delivered by the respective party or parties thereto, and an
executed counterpart of each shall be delivered to the Indenture
Trustee:
(A) an Indenture Supplement covering the Replacement
Engine, which shall have been duly filed for recordation
pursuant to the Federal Aviation 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 4.01(a)(3), as the case may be;
50
<PAGE> 55
[Trust Indenture and Mortgage (1997 747-1)]
(B) a full warranty bill 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 Indenture Trustee); and
(C) Uniform Commercial Code financing statements
covering the security interests created by this Agreement (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 Indenture Trustee to protect the
security interests of the Indenture Trustee in the Replacement
Engine;
(ii) the Owner shall cause to be delivered to the Indenture
Trustee, if requested by it, an opinion of counsel (which may be
Owner's General Counsel) to the effect that the Lien of this Agreement
continues to be in full force and effect with respect to the
Replacement Engine; and
(iii) the Owner shall deliver to the Indenture Trustee an
officer's certificate stating that in the opinion of such signer, all
conditions precedent provided for in this Section 5.01(b) relating to
such replacement have been complied with.
Upon satisfaction of all conditions to such substitution, (x)
the Indenture Trustee 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
Agreement, (y) the Indenture Trustee 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 and proceeds
in respect of any Event of Loss giving rise to such replacement. For all
purposes hereof, each such replacement engine shall, after such conveyance, be
deemed to be subjected to the Lien of this Agreement and shall be deemed an
"Engine."
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 4.03) received at any time by
the Indenture Trustee or by Owner from any governmental authority or other
Person with respect to an Event of Loss, other than a requisition for use by the
United States Government or other government of registry of the Aircraft or any
instrumentality or agency of any thereof not constituting an Event of Loss, will
be applied as follows:
(i) if payments are received with respect to the Airframe
(or the Airframe and any Engine or engines then installed thereon),
(A) unless the same are replaced pursuant to the last paragraph of
Section 5.01(a), such payments as shall not
51
<PAGE> 56
[Trust Indenture and Mortgage (1997 747-1)]
exceed the amounts payable under Section 5.01(a) hereof required to be
paid by Owner pursuant to Section 5.01(a), shall be applied in
reduction of Owner's obligation to pay the amounts payable under
Section 5.01(a) hereof, if not already paid by Owner, or, if already
paid by Owner, shall be applied to reimburse Owner for its payment of
such amounts, and following the foregoing application, the balance, if
any, of such payments shall be paid over to, or retained by, Owner; or
(B) if such property is replaced pursuant to the last paragraph of
Section 5.01(a), such payments shall be paid over to or retained by,
Owner; provided, that Owner shall have fully performed or,
concurrently therewith, will fully perform the terms of the last
paragraph of Section 5.01(a) with respect to the Event of Loss for
which such payments are made; and
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 5.01(b) hereof, such
payments shall be paid over to, or retained by, Owner, provided that
either (x) such payments are less than the Loss Payee Amount or (y)
Owner shall have fully performed, or concurrently therewith will
perform, the terms of Section 5.01(b) with respect to the Event of Loss
for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe by the United States Government or any other government of registry of
the Aircraft or any instrumentality or agency of any thereof, Owner shall
promptly notify the Indenture Trustee of such requisition, and all of Owner's
obligations under this Agreement with respect to the Aircraft shall continue to
the same extent as if such requisition had not occurred. All payments received
by the Indenture Trustee or Owner from such government for the use of such
Airframe and Engines or engines shall be paid over to, or retained by, Owner
(or, if directed by Owner, any Permitted Lessee).
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft. In the event of the
requisition for use of an Engine by the United States Government or any other
government of registry of the Aircraft or any agency or instrumentality of any
thereof (other than in the circumstances contemplated by subsection (d)), Owner
shall replace (or cause any Permitted Lessee to replace) such Engine hereunder
and Indenture Trustee and Owner (or Permitted Lessee as the case may be) shall
comply with the terms of Section 5.01(b) hereof to the same extent as if an
Event of Loss had occurred with respect to such Engine. Upon compliance with
Section 5.01(b) hereof, any payments received by Indenture Trustee or Owner from
such government with respect to such requisition shall be paid over to, or
retained by Owner.
52
<PAGE> 57
[Trust Indenture and Mortgage (1997 747-1)]
(f) Application of Payments During Existence of Certain
Indenture Defaults and Events of Default. Any amount referred to in this Section
5.01 which is payable to or retainable by Owner (or any Permitted Lessee) shall
not be paid to or retained by Owner (or any Permitted Lessee) if at the time of
such payment or retention an Indenture Default of the type described in Section
8.01(a)(i), 8.01(e) or 8.01(f) or any Indenture Event of Default shall have
occurred and be continuing, but shall be held by or paid over to Indenture
Trustee as security for the obligations of Owner (or such Permitted Lessee)
under this Agreement and applied against Owner's obligations hereunder as and
when due. At such time as there shall not be continuing any such Indenture Event
of Default, such amount shall be paid to Owner to the extent not previously
applied in accordance with the preceding sentence.
Section 5.02. Liens. The Owner will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Airframe on any Engine or any interest 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.
ARTICLE 6
REDEMPTION OF EQUIPMENT NOTES
Section 6.01. Redemption of Equipment Notes upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft or Airframe and
the Aircraft or Airframe is not replaced pursuant to Section 5.01(a)(ii), each
outstanding Equipment Note shall be redeemed in whole at a price (the
"Redemption Price") equal to 100% of the outstanding principal amount of such
Equipment Note, together with accrued and unpaid interest thereon to but
excluding the applicable Redemption Date and Break Amount, if any. No
Make-Whole Amount shall be payable in connection with a redemption under this
Section 6.01.
(b) Each of the Series A and Series B Equipment Notes may be
redeemed by the Owner on any date, upon notice as specified in Section 6.02, and
in such event, each outstanding Equipment Note of such Series shall be redeemed
in whole at a Redemption Price to 100% of the outstanding principal amount of
such Equipment Note, together with accrued and unpaid interest thereon to but
excluding the applicable Redemption Date plus Break Amount, if any, and/or
Make-Whole Amount, if any, payable with respect thereto. The Series C Equipment
Notes may not be redeemed by the Owner.
Section 6.02. Notice of Redemption to Noteholders. Irrevocable
notice of redemption shall be given by first-class mail, postage prepaid, mailed
not less than 26 nor
53
<PAGE> 58
[Trust Indenture and Mortgage (1997 747-1)]
more than 60 days prior to the Redemption Date, to each Noteholder of Equipment
Notes to be redeemed or purchased, at such Noteholder's address appearing in the
Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the applicable basis for determining the Redemption Price;
(3) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Equipment Note, and that interest
on Equipment Notes shall cease to accrue on and after such Redemption
Date;
(4) the amount of Break Amount, if any, payable with respect
to such redemption;
(5) the amount of Make-Whole Amount, if any, payable with
respect to such redemption; and
(6) the place or places where such Equipment Notes are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Equipment Notes to be redeemed shall be given by the
Indenture Trustee.
Section 6.03. Deposit of Redemption Price. On or before the
Redemption Date, 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 in the Indenture Estate, deposit or cause to be deposited
with the Indenture Trustee or the Paying Agent by 11:00 a.m., Chicago time, in
immediately available funds the Redemption Price of the Equipment Notes to be
redeemed on the Redemption Date.
Section 6.04. Equipment Notes Payable on Redemption Date.
Notice of redemption or purchase having been given as aforesaid, the Equipment
Notes shall, on the applicable Redemption Date, become due and payable at the
Corporate Trust Department of the Indenture Trustee or at any office or agency
maintained for such purposes pursuant to Section 2.03, and from and after such
Redemption Date (unless there shall be a default in the deposit of the
Redemption Price pursuant to Section 6.03) any Equipment Notes then outstanding
shall cease to bear interest or be deemed to be outstanding for any purpose.
Upon surrender of any such Equipment Note for redemption in accordance with said
notice such Equipment Note shall be paid at the Redemption Price.
54
<PAGE> 59
[Trust Indenture and Mortgage (1997 747-1)]
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 applicable to such Equipment Note.
ARTICLE 7
MATTERS CONCERNING UNCLAIMED MONIES
Section 7.01. Repayment of Monies for Equipment Note Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Break Amount, if any,
Make-Whole Amount, if any, or interest on any Equipment Note, including without
limitation any money deposited pursuant to Section 6.03 or Article 10 and
remaining unclaimed for two years after the due date for such payment, shall be
paid to the Owner. The Noteholders of any outstanding Equipment Notes shall
thereafter, as unsecured general creditors, look only to the Owner for payment
thereof, and all liability of the Indenture Trustee or any such Paying Agent
with respect to such trust money shall thereupon cease; provided that the
Indenture Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Owner cause to be mailed to each such
Noteholder notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner as provided herein.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) Owner shall fail to pay (i) any amount of interest on,
Break Amount, if any, Make-Whole Amount, if any, or principal of any
Equipment Note when due and payable (whether upon redemption or
purchase, final maturity, acceleration or otherwise) and such failure
shall continue unremedied for 10 days after such amount shall have
become due and payable or (ii) any other amount payable by Owner
hereunder or under the Participation Agreement when due and payable and
such
55
<PAGE> 60
[Trust Indenture and Mortgage (1997 747-1)]
failure shall continue unremedied for more than 20 Business Days
after receipt by Owner of written notice from the Indenture Trustee; or
(b) 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
4.03 hereof; provided that such lapse or cancellation shall not
constitute an Indenture Event of Default until the earlier of (i) 30
days after receipt by the Indenture Trustee of written notice of such
lapse or cancellation or (ii) the date that such lapse or cancellation
is effective as to the Indenture Trustee; or
(c) Owner shall have failed to perform or observe (or caused
to be performed and observed) in any material respect any other
covenant or agreement to be performed or observed by it under any
Operative Document, and such failure shall continue unremedied for a
period of 60 days after receipt by Owner of written notice thereof from
Indenture Trustee; provided, however, that if Owner shall have
undertaken to cure any such failure and, notwithstanding the reasonable
diligence of Owner in attempting to cure such failure, such failure is
not cured within said 60-day period there shall exist no Indenture
Event of Default under this Section 8.01 so long as Owner is proceeding
with due diligence to cure such failure and such failure is in fact
cured within 360 days; or
(d) any representation or warranty made by Owner herein or in
any Operative Document shall prove to have been incorrect in any
material respect at the time made and shall remain material at the time
in question; provided, however, such incorrectness shall constitute a
default hereunder only if such incorrectness shall continue uncured for
a period of 60 days after the receipt by Owner of a written notice from
Indenture Trustee or, subject to Section 2.6 of the Intercreditor
Agreement, holders of 25% in outstanding principal amount of Equipment
Notes advising Owner of the existence of such incorrectness; or
(e) the commencement of an involuntary case or other
proceeding in respect of Owner in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law
in the United States or seeking the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of Owner or for all or substantially all of its property, or
seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding undismissed or
unstayed for a period of ninety (90) consecutive days or an order for
relief under Chapter 11 of the Bankruptcy Code with respect to Owner as
debtor or any other order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without
the consent of Owner, a receiver, trustee
56
<PAGE> 61
[Trust Indenture and Mortgage (1997 747-1)]
or liquidator of Owner, or for all or substantially all of its
property, or sequestering of all or substantially all of the property
of Owner and any such order, judgment or decree or appointment or
sequestration shall be final or shall remain in force undismissed,
unstayed or unvacated for a period of ninety (90) days after the date
of entry thereof; or
(f) the commencement by Owner of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency or other
similar law in the United States, or the consent by Owner to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of Owner or for all or substantially all of its property, or the making
by Owner of any assignment for the benefit of creditors or Owner shall
take any corporate action to authorize any of the foregoing; or
(g) Owner shall fail to maintain its status as a Certificated
Air Carrier and such failure shall continue for 5 consecutive Business
Days;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 8.01, any failure of Owner to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Indenture Event of Default if such failure or error is caused
solely by reason of any event that constitutes an Event of Loss so long as Owner
is continuing to comply with all of the terms of Section 5.01 hereof.
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default under Section 8.01(e) or 8.01(f) shall have occurred
and is continuing, then the principal of the all Equipment Notes, together with
accrued but unpaid interest thereon, and all other amounts due thereunder and
hereunder shall immediately become due and payable without presentment, demand,
protest or notice, all of which are hereby waived, and if any other Indenture
Event of Default occurs and is continuing, the Indenture Trustee may (and shall,
subject to Section 2.6 of the Intercreditor Agreement, upon receipt of a written
demand therefor from the holders of 25% in outstanding principal amount of
Equipment Notes of Noteholders), by notice to the Owner declare the principal of
all the Equipment Notes to be immediately due and payable. Upon such
declaration, the principal of all Equipment Notes together with accrued interest
thereon from the date in respect of which interest was last paid hereunder to
the date payment of such principal has been made or duly provided for, and Break
Amount, if any, but without Make-Whole Amount, shall be immediately due and
payable without presentment, demand, protest or other notice, all of which are
hereby waived. At any time after such declaration and prior to the sale or
disposition of the Indenture Estate, the Indenture Trustee may (and shall upon
receipt of a written demand therefor from a Majority in Interest of Noteholders)
by notice to the Owner, rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal
57
<PAGE> 62
[Trust Indenture and Mortgage (1997 747-1)]
on any Equipment Notes which have become due otherwise than by such declaration
and any interest thereon and interest due or past due, if any, and all sums due
and payable to the Indenture Trustee have been deposited with the Indenture
Trustee, (ii) the rescission would not conflict with any judgment or decree and
(iii) all existing Indenture Defaults and Indenture Events of Default under this
Agreement have been cured or waived except nonpayment of principal of, or
interest on, the Equipment Notes that has become due solely because of such
acceleration. No such rescission shall affect any subsequent default or impair
any right consequent thereon.
Section 8.03. Other Remedies Available to Indenture Trustee.
(a) After an Indenture Event of Default shall have occurred and so long as such
Indenture Event of Default shall be continuing, then and in every such case the
Indenture Trustee, as holder of a security interest in the Aircraft or Engines
may, and when required pursuant to the provisions of Article 9 shall, exercise,
any or all of the rights and powers and pursue any and all of the remedies
accorded to a secured party under applicable law, may recover judgment in its
own name as Indenture Trustee against the Indenture Estate and may take
possession of all or any part of the Indenture Estate and may exclude the Owner
and all Persons claiming under any of them wholly or partly therefrom.
(b) After an Indenture Event of Default shall have occurred
and so long as such Indenture Event of Default shall be continuing, the
Indenture Trustee may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either with or
without taking possession, and either before or after taking possession and
without instituting any legal proceedings whatsoever, and having first given
notice of such sale by registered mail to the Owner, at least 30 days prior to
the date of such sale, and any other notice which may be required by law, sell
and dispose of the Indenture Estate, or any part thereof, or interest therein,
at public auction or private sale, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that, notwithstanding any provision herein
to the contrary, the Indenture Trustee may not provide the notice provided for
above of its intention to sell any of the Indenture Estate, exercise remedies
against the Indenture Estate seeking to deprive the Owner of its rights therein
unless a declaration of acceleration has been made pursuant to Section 8.02 or
the Equipment Notes have otherwise theretofore become due and payable through
redemption or otherwise. Any such sale or sales may be adjourned from time to
time by announcement at the time and place appointed for such sale or sales, or
for any such adjourned sale or sales, without further notice, and the Indenture
Trustee and the Noteholder or Noteholders of any Equipment Notes, or any
interest therein, may bid and become the purchaser at any such sale and each
Noteholder shall be entitled at any sale to credit against any purchase price
bid at such sale by such Noteholder all or any part of the unpaid Secured
Obligations owing to such Noteholder secured by the Lien of this Agreement. The
Indenture
58
<PAGE> 63
[Trust Indenture and Mortgage (1997 747-1)]
Trustee may exercise such right without possession or production of
the Equipment Notes or proof of ownership thereof, and as representative of the
Noteholders may exercise such right without notice to the Noteholders or
including the Noteholders as parties to any suit or proceeding relating to
foreclosure of any property in the Indenture Estate.
(c) If an Indenture Event of Default has occurred and is
continuing, the Indenture Trustee shall also be entitled to pursue all or any
part of the Indenture Estate wherever it may be found and may enter any of the
premises of the Owner or any other Person wherever the Indenture Estate may be
or be supposed to be and search for the Indenture Estate and take possession of
any item of the Indenture Estate pursuant to this Section 8.03(c). The Indenture
Trustee may, from time to time, at the expense of the Indenture Estate, make all
such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Indenture Estate, as it
may deem proper. In each such case, the Indenture Trustee shall have the right
to maintain, use, insure, operate, store, lease, control or manage the Indenture
Estate, and to carry on business and exercise all rights and powers of the Owner
relating to the Indenture Estate as the Indenture Trustee shall deem
appropriate, including the right to enter into any and all such agreements with
respect to the maintenance, use, insurance, operation, storage, leasing, control
or management of the Indenture Estate or any part thereof. The Indenture Trustee
shall be entitled to collect and receive directly all tolls, rents (including
Rent), issues, profits, products, revenues or other income pursuant to this
Section 8.03(c). In accordance with the terms of this Section 8.03(c), such
tolls, rents (including Rent), issues, profits, products, revenues and other
income shall be applied to pay the expenses of using, operating, storing,
leasing, controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect to
make, if any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate 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 Indenture Trustee
may be required or authorized to make under any provision of this Agreement,
including this Section 8.03(c), as well as just and reasonable compensation for
the services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its discretion
to protect the Indenture Estate and the Indenture Trustee, as trustee and
individually, against any and all liability for loss or damage to the
59
<PAGE> 64
[Trust Indenture and Mortgage (1997 747-1)]
Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Noteholders or any other
Person upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as trustee
and individually, against any and all such liabilities.
(d) Subject to Sections 8.03(b), the Indenture Trustee may
proceed to protect and enforce this Agreement and the Equipment Notes by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for the
specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted; or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Indenture Estate or any
part thereof, or for the recovery of judgment for the indebtedness secured by
the Lien created under this Agreement or for the enforcement of any other
proper, legal or equitable remedy available under applicable law.
(e) Each and every right, power and remedy herein given to the
Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the exercise
or the beginning of the exercise of any power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or thereafter any other
right, power or remedy. No delay or omission by the Indenture Trustee in the
exercise of any right, remedy or power or in pursuing 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.
(f) Notwithstanding anything contained herein to the contrary,
so long as the Subordination Agent (acting on behalf of the Pass Through
Trustees) or any Pass Through Trustee is a Noteholder, the Indenture Trustee is
not authorized or empowered to acquire title to the Indenture Estate, or to take
any action with respect to any of the Indenture Estate so acquired by it, if
such acquisition or action would cause any Pass Through Trust to fail to qualify
as a "grantor trust" for federal income tax purposes.
Section 8.04. Waiver of Existing Defaults. The Majority in
Interest of Noteholders by notice to the Indenture Trustee may waive on behalf
of the Noteholders an existing Indenture Default or Indenture Event of Default
and its consequences except (i) an Indenture Default or Indenture Event of
Default in the payment of the principal of or interest on any Equipment Note or
(ii) in respect of a covenant or provision hereof which pursuant to Section
11.02 can not be amended or modified without the consent of each Noteholder
affected thereby.
60
<PAGE> 65
[Trust Indenture and Mortgage (1997 747-1)]
Section 8.05. Control by Majority. (a) Except as otherwise
expressly provided herein, the Majority in Interest of Noteholders may direct
the time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee or exercising any trust or power conferred on it by
this Agreement. However, the Indenture Trustee may refuse to follow any
direction that conflicts with law or this Agreement, that is unduly prejudicial
to the rights of the Noteholders so affected, or that would subject the
Indenture Trustee to personal liability.
Section 8.06. Rights of Noteholders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any
Noteholder to receive payment of principal of, Break Amount, if any, Make-Whole
Amount, if any, and interest on such 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, shall not be impaired or
affected without the consent of such Noteholder.
Section 8.07. Indenture Trustee May File Proofs of Claim. The
Indenture Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee and of the Noteholders allowed in any judicial proceedings relating to
any obligor on the Equipment Notes, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee. (a) The Indenture
Trustee may refuse to perform any duty or exercise any right or power unless it
receives indemnity satisfactory to it against any loss, liability or expense.
(b) Subject to the provisions of Sections 2.08 and 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Document. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to the
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The Indenture
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
61
<PAGE> 66
[Trust Indenture and Mortgage (1997 747-1)]
(b) Before the Indenture Trustee acts or refrains from acting,
it may consult with counsel or require an officer's certificate or an opinion of
counsel from the Owner after which it will take such action or refrain from
acting as it deems appropriate. The Indenture Trustee shall not be liable for
any action it takes or omits to take in good faith and in accordance herewith in
reliance on a resolution of the Board of Directors of the Owner, the written
advice of counsel acceptable to the Owner and the Indenture Trustee, officer's
certificate or opinions of counsel provided by the Owner.
(c) The Indenture Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any such agent appointed with
due care; provided that, no such agents shall be appointed by the Indenture
Trustee without the consent of the Owner, such consent not to be unreasonably
withheld.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.
(e) If an Indenture Event of Default under this Agreement has
occurred and is continuing, the Indenture Trustee shall exercise its rights and
powers under this Agreement, and shall use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Equipment Notes and may otherwise deal with the Owner or an
Affiliate of the Owner or a subsidiary of the Owner with the same rights it
would have if it were not the Indenture Trustee. Any Agent may do the same with
like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or Paying
Agent; Investments. Any monies (including without limitation for purpose of this
Section 9.04 Permitted Investments constituting the proceeds of the maturity,
sale or other disposition of any Permitted Investment) held by the Indenture
Trustee or the Paying Agent hereunder as part of the Indenture Estate, until
paid out by the Indenture Trustee or the Paying Agent as herein provided, (i)
subject to clause (ii) below, may be carried by the Indenture Trustee or the
Paying Agent on deposit with itself or on deposit to its account with any bank,
trust company or national banking association incorporated or doing business
under the laws of the United States of America or one of the States thereof
having combined capital and surplus and retained earnings of at least
$75,000,000, and neither the Indenture Trustee nor the Paying Agent shall have
any liability for interest upon any such monies except as otherwise agreed in
writing or (ii) at any time and from time to time, at the request of the Owner,
shall be invested and reinvested in Permitted Investments as specified in such
request (if such investments are reasonably available for purchase) and sold, in
any case at such prices, including accrued interest or its equivalent, as are
set forth in such request, and such
62
<PAGE> 67
[Trust Indenture and Mortgage (1997 747-1)]
Permitted Investments shall be held by the Indenture Trustee in trust as part of
the Indenture Estate until so sold; provided that the Owner shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity, sale
or other disposition of any such Permitted Investment and be entitled to receive
from the Indenture Trustee, and the Indenture Trustee shall promptly pay to the
Owner, any profit, income, interest, dividend or gain realized upon maturity,
sale or other disposition of any Permitted Investment. The Indenture Trustee
shall not be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section 9.04. All
Permitted Investments held by the Indenture Trustee or the Paying Agent pursuant
to this Section 9.04 shall either be (a) registered in the name of, payable to
the order of, or specially indorsed to, the Indenture Trustee or the Paying
Agent, as the case may be, or (b) held in an Eligible Account. For purposes of
this Section 9.04, "Eligible Account" means an account established by and with
an Eligible Institution at the request of the Indenture Trustee or the Paying
Agent, as the case may be, which institution agrees, for all purposes of the
applicable Uniform Commercial Code ("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 Indenture Trustee or the Paying Agent, as the case may be, shall be the
"entitlement holder" (as defined in Section 8-102(7) of the UCC) in respect of
such account, (d) the Eligible Institution will comply with all entitlement
orders issued by the Indenture Trustee or the Paying Agent, as the case may be,
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
Illinois. For purposes of this Section 9.04, "Eligible Institution" means the
corporate trust department of (a) First Security Bank, National Association,
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.
Section 9.05. Notice of Defaults. If an Indenture Default or
Indenture Event of Default under this Agreement occurs and is continuing and the
Indenture Trustee has actual knowledge of same, the Indenture Trustee shall (i)
promptly send written notice thereof to the Owner and (ii) within 90 days after
the occurrence of an Indenture Event of Default, mail to each Noteholder notice
of all uncured Indenture Events of Default under this Agreement. Except in the
case of a default in the payment of the principal of, Break Amount, if any,
Make-Whole Amount, if any, or interest on any Equipment Note, the Indenture
Trustee shall be protected in withholding the notice required under clause (ii)
above if and so long as the executive committee or trust committee of directors
of the Indenture Trustee and/or other responsible officers thereof in good faith
determines that withholding such notice is in the best interests of the
Noteholders.
63
<PAGE> 68
[Trust Indenture and Mortgage (1997 747-1)]
Section 9.06. Compensation and Indemnity. The Indenture Trustee
shall not be required to take any action or refrain from taking any action under
Section 9.05 (other than the first sentence thereof) or Article 8 hereof unless
the Indenture Trustee 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 Noteholders. The Indenture Trustee agrees that it shall look solely to the
Noteholders 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 9.06. The Indenture Trustee shall not be
under any obligation to take any action under this Agreement or any other
Operative Document and nothing herein or therein shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur the risk of any
financial ability 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
Indenture Trustee shall not be required to take any action under Section 9.05
(other than the first sentence thereof) or Article 8 hereof, nor shall any other
provision of this Agreement or any other Operative Document be deemed to impose
a duty on the Indenture Trustee to take any action, if the Indenture Trustee
shall have been advised by counsel that such action is contrary to the terms
hereof or is otherwise contrary to law.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least 30
days' prior written notice to the Owner. A Majority in Interest of Noteholders
may remove the Indenture Trustee by giving at least 30 days' prior written
notice to the Indenture Trustee and the Owner and may appoint a successor
Indenture Trustee for such Equipment Notes with the Owner's consent. The Owner
may remove the Indenture Trustee at any time no Indenture Default under Section
8.01(a), (e) or (f) or any Indenture Event of Default shall have occurred and be
continuing, if the Owner determines in its reasonable business judgment that
such removal would be appropriate or if:
(1) the Indenture Trustee fails to comply with Section 9.09;
(2) the Indenture Trustee is adjudged a bankrupt or an
insolvent;
(3) a receiver or public officer takes charge of the Indenture
Trustee or its property; or
(4) the Indenture Trustee becomes incapable of acting.
64
<PAGE> 69
[Trust Indenture and Mortgage (1997 747-1)]
(c) If a vacancy exists in the office of Indenture Trustee for
any reason, the Owner shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Owner or a Majority in Interest of Noteholders
may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Noteholder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee and to the
Owner. Thereupon, the resignation or removal of the retiring Indenture Trustee
shall become effective, and the successor Indenture Trustee shall have all the
rights, powers and duties of the retiring Indenture Trustee for which the
successor Indenture Trustee is to be acting as Indenture Trustee under this
Agreement. The retiring Indenture Trustee shall promptly transfer all property
and all books and records relating to the administration of the Indenture Estate
held by it as Indenture Trustee to the successor Indenture Trustee. The
Indenture Trustee shall give notice of each appointment of a successor Indenture
Trustee to the Noteholders, by mailing written notice of such event by
first-class mail to the Noteholders.
Section 9.08. Successor Indenture Trustee, Agents by Merger,
etc. If the Indenture Trustee or any Agent consolidates with, merges or converts
into, or transfers all or substantially all of its corporate trust business
assets to, another corporation, the successor corporation, without any further
act, shall be the successor Indenture Trustee or Agent, as the case may be.
Section 9.09. Eligibility; Disqualification. This Agreement
shall at all times have an Indenture Trustee which (i) shall have a combined
capital and surplus of at least $75,000,000 or (ii) shall have a combined
capital and surplus in excess of $7,500,000 and the obligations of which,
whether now in existence or hereafter incurred, are fully and unconditionally
guaranteed by a corporation organized and doing business under the laws of the
United States, any State or Territory thereof or of the District of Columbia and
having a combined capital and surplus of at least $75,000,000, and which, in any
case, shall be a Citizen of the United States. If such corporation publishes
reports of conditions at least annually, pursuant to law or to the requirements
of Federal, State, Territorial, or District of Columbia supervising or examining
authority, then for the purposes of this Section 9.09, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of conditions so published.
65
<PAGE> 70
[Trust Indenture and Mortgage (1997 747-1)]
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in its
individual capacity agrees that it will at its own cost and expense promptly
take such action as may be necessary to duly discharge and satisfy in full all
Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Documents, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
ARTICLE 10
TERMINATION OF TRUST INDENTURE
Section 10.01. Termination of Trust Indenture. Upon (or at
any time after):
(x) payment in full of the outstanding principal amount of,
Break Amount, if any, 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 Noteholders and the Indenture Indemnitees shall have been
satisfied or paid in full; or
(y) at any time after there has been irrevocably deposited
(except as provided in Section 10.04) with the Indenture Trustee as funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Noteholders, (1) money in an amount, or (2) Permitted Investments
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 Permitted Investments 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 Indenture Trustee, to pay in full
the outstanding principal amount of, Break Amount, if any, 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 Indenture Trustee 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
theretofore been given) shall terminate;
66
<PAGE> 71
[Trust Indenture and Mortgage (1997 747-1)]
(B) the Owner has delivered to the Indenture Trustee an
officer's certificate and an opinion of counsel to the effect that
there has been published by the Internal Revenue Service a ruling to
the effect that Noteholders 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 10.01 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 Indenture Trustee an
officer's certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the satisfaction and
discharge of this Agreement contemplated by this Section 10.01 have
been complied with;
the Owner shall direct the Indenture Trustee 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 property included in the Indenture Estate
from the Lien of this Agreement and the Indenture Trustee shall execute and
deliver such instrument as aforesaid; provided, however, that this Agreement and
the trusts created hereby shall earlier terminate and this Agreement shall be of
no further force or effect upon any sale or other final disposition by the
Indenture Trustee of all property constituting part of the Indenture Estate and
the final distribution by the Indenture Trustee of all monies or other property
or proceeds constituting part of the Indenture Estate in accordance with the
terms hereof. Except as aforesaid otherwise provided, this Agreement and the
trusts created hereby shall continue in full force and effect in accordance with
the terms hereof.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, Section 7.01, Section
9.10, Section 10.03 and Section 10.04, and the other rights, duties, immunities
and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and
Permitted Investments deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Equipment Notes and this Agreement, to the payment either
directly or through any Paying Agent, as the Indenture Trustee may determine, to
the Noteholders, of all sums due and to become due thereon for principal, Break
Amount, if any, Make-Whole Amount, if any, and interest, but such money need not
be segregated from other funds except to the extent required by law.
67
<PAGE> 72
[Trust Indenture and Mortgage (1997 747-1)]
Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the Owner
upon request of the Owner any money or Permitted Investments held by them at any
time that are not required for the payment of the amounts described above in
Section 10.03 on the Equipment Notes for which money or Permitted Investments
have been deposited pursuant to Section 10.01.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent of
Noteholders. The Owner and the Indenture Trustee may enter into one or more
agreements supplemental hereto without the consent of any Noteholder for any of
the following purposes:
(1) to correct any mistake or cure any ambiguity, 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 Noteholder;
(2) to evidence the succession of another party as the Owner
in accordance with the terms of the Trust Agreement or to evidence (in
accordance with Article 9) the succession of a new trustee hereunder,
the removal of the trustee hereunder or the appointment of any
co-trustee or co-trustees or any separate or additional trustee or
trustees;
(3) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee 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 the
Noteholders;
(4) to correct or amplify the description of any property at
any time subject to the Lien of this Agreement or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subject to the Lien of this Agreement or to subject to
the Lien of this Agreement the Airframe or Engines or airframe or
engines substituted for the Airframe or Engines in accordance herewith;
(5) to add to the covenants of the Owner, for the benefit of
the Noteholders, or to surrender any rights or power herein conferred
upon the Owner;
(6) to add to the rights of the Noteholders;
68
<PAGE> 73
[Trust Indenture and Mortgage (1997 747-1)]
(7) to provide for the issuance of Series D Equipment Notes
and Pass Through Certificates issued by the Class D Pass Through Trust
and to make changes relating thereto, provided that the Series D
Equipment Notes are issued in accordance with the terms hereof and of
the Participation Agreement; or
(8) to provide for the re-issuance of any Series of Equipment
Notes that has previously been prepaid pursuant to Section 6.01(b),
provided that such Series of Equipment Notes is issued in accordance
with the Series hereof; or
(9) to include on the Equipment Notes any legend as may be
required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Noteholders. (a) With the written consent of a Majority in Interest of
Noteholders, the Owner and the Indenture Trustee may enter into such
supplemental agreements to add any provisions to or to change or eliminate any
provisions of this Agreement or of any such supplemental agreements or to modify
the rights of the Noteholders; provided, however, that, an amendment under this
Section 11.02 may not without the consent of each of the Noteholders of the
applicable Series of Equipment Notes and, in the case of the Series A or Series
B Equipment Notes, the applicable Primary Liquidity Provider:
(1) reduce the principal amount of, Break Amount, if any,
Make-Whole Amount, if any, or any installment of interest on, such
Series of Equipment Notes; or
(2) change the date on which any principal amount of, any
Amortization Amount payable with respect to, Break Amount, if any,
Make-Whole Amount, if any, or interest on such Series of Equipment
Notes, is due or payable; or
(3) with respect to each Series of Equipment Notes, create any
Lien on the Indenture Estate prior to or pari passu with the Lien
thereon under this Agreement except such as are permitted by this
Agreement, or deprive any Noteholder of the benefit of the Lien on the
Indenture Estate created by this Agreement; or
(4) with respect to such Series of Equipment Notes, reduce the
percentage in principal amount of the outstanding Equipment Notes, the
consent of whose Noteholders is required for any such supplemental
agreement, or the consent of whose Noteholders is required for any
waiver (of compliance with certain provisions of this Agreement or of
certain defaults hereunder or their consequences) provided for in this
Agreement; or
(5) make any change in Article 3, Article 6, Section 8.01
(except to add Indenture Events of Default) or this Section 11.02(a).
69
<PAGE> 74
[Trust Indenture and Mortgage (1997 747-1)]
(b) It is not necessary under this Section 11.02 for the
Noteholders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner and the
Indenture Trustee of any supplemental agreement pursuant to the provisions of
this Section 11.02, the Indenture Trustee shall transmit by first-class mail a
notice, setting forth in general terms the substance of such supplemental
agreement, to all Noteholders, as the names and addresses of such Noteholders
appear on the Register. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Noteholder is a
continuing consent by the Noteholder and every subsequent Noteholder, even if
notation of the consent is not made on any Equipment Note. However, any such
Noteholder or subsequent Noteholder may revoke the consent as to his Equipment
Note if the Indenture Trustee receives the notice of revocation before the date
the amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Noteholder affected by such amendment or waiver.
Section 11.04. Notation on or Exchange of Equipment Notes. The
Indenture Trustee may place an appropriate notation about an amendment or waiver
on any Equipment Note thereafter executed. The Indenture Trustee in exchange for
such Equipment Notes may execute new Equipment Notes that reflect the amendment
or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, etc. of Other Operative
Documents. (a) Subject to Section 11.01, without the consent of a Majority in
Interest of Noteholders, the respective parties to the Participation Agreement
may not modify, amend or supplement such agreement, or give any consent, waiver,
authorization or approval thereunder, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of the respective parties thereunder;
provided, however, that, without the consent of the Indenture Trustee or any
Noteholder, the Participation Agreement may be modified, amended or supplemented
in order to cure any ambiguity, to correct or supplement any provisions thereof
which may be defective or inconsistent with any other provision thereof or of
any provision of this Agreement, or to make any other provision with respect to
matters or questions arising thereunder or under this Agreement which shall not
be inconsistent with the provisions of this Agreement, provided the making of
any such other provision shall not adversely affect the interests of the
Noteholders.
70
<PAGE> 75
[Trust Indenture and Mortgage (1997 747-1)]
Section 11.07. Notices to Primary Liquidity Providers. Any
request made to any Noteholder for consent to any amendment or supplement
pursuant to this Article 11 shall be promptly furnished by the Indenture Trustee
to each Primary Liquidity Provider.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided for herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by hand-delivery, overnight courier service, mail, or telecopier (to be
confirmed by hand delivery, overnight courier service or mail) addressed as
indicated below and any such notice shall be effective, in the case of
hand-delivery, when delivered, in the case of overnight courier service, one
Business Day after delivery with charges paid to a courier service with
instructions for overnight delivery, in the case of mail, three Business Days
after delivery to the postal service with certified or registered mail charges
paid, and, in the case of telecopier, upon confirmed transmittal:
if to the Owner, to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attention: Vice President and Treasurer
Telecopier: (847) 700-7117
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Vice President and Treasurer
Telecopier: (847) 700-7117
71
<PAGE> 76
[Trust Indenture and Mortgage (1997 747-1)]
if to the Indenture Trustee, to:
First Security Bank,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopier: (801) 246-5053
(b) The Owner or the Indenture Trustee by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to the Noteholders shall be
mailed by first-class mail to the respective addresses for the Noteholders shown
on the Register kept by the Registrar and to addresses filed with the Indenture
Trustee for other Noteholders. Failure so to mail a notice or communication or
any defect in such notice or communication shall not affect its sufficiency with
respect to other Noteholders of such Equipment Notes of that or any other Series
entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) If the Owner mails a notice or communication to the
Noteholders, it shall mail a copy to the Indenture Trustee and to the Paying
Agent at the same time.
Section 12.02. GOVERNING LAW. THIS AGREEMENT AND THE EQUIPMENT
NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF
THE STATE OF ILLINOIS.
Section 12.03. Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which shall be an original
but such counterparts shall together constitute but one instrument.
* * *
72
<PAGE> 77
[Trust Indenture and Mortgage (1997 747-1)]
IN WITNESS WHEREOF, the Owner and the Indenture Trustee have
caused this Trust Indenture and Mortgage to be duly executed by their respective
officers thereunto duly authorized.
UNITED AIR LINES, INC.
By:
------------------------------------------
Name:
Title:
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
-----------------------------------------
Name:
Title:
73
<PAGE> 78
EXHIBIT A
to Trust Indenture and
Mortgage
FORM OF EQUIPMENT NOTES
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.
UNITED AIR LINES, INC.
SERIES [______] EQUIPMENT NOTE DUE [_____] ISSUED IN CONNECTION
WITH THE BOEING MODEL ________ AIRCRAFT BEARING UNITED STATES
REGISTRATION NUMBER N_____.
No.______ Date: [___________,____]
<TABLE>
<CAPTION>
Original Principal Amount Maturity Date
- ------------------------- -------------
<S> <C>
$____________________ _____________
</TABLE>
UNITED AIR LINES, INC., a Delaware corporation ("Owner") for
value received, hereby promises to pay to __________________________________, or
registered assigns, the principal sum of _____________________________ Dollars
($_____________) in installments, one such installment to be due and payable on
each Payment Date, each such installment to be in an amount equal to the amount
set forth in Schedule 1 hereto, together with interest on the unpaid principal
amount hereof from time to time outstanding from and including the date hereof
until such principal amount is paid in full. Interest shall accrue with respect
to each Interest Period at the Applicable Rate (calculated on the basis of a
year of 360 days and the actual number of days elapsed) in effect for such
Interest Period and shall be payable in arrears on each Interest Payment Date
and on the date this Equipment Note is paid in full. Interest shall be payable
with respect to the first but not the last day of each Interest Period.
Notwithstanding the foregoing, the final payment made on this Equipment Note
shall be in an amount sufficient to discharge in full the unpaid principal
amount and all accrued and unpaid interest on, and any other amounts due under,
this Equipment Note. Notwithstanding anything to the contrary contained herein,
if any date on which a payment
<PAGE> 79
[Trust Indenture and Mortgage (1997 747-1)]
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, interest at the then Applicable Rate shall accrue on the amount of
such payment during such extension.
For purposes hereof, the term "Indenture" means the Trust
Indenture and Mortgage (1997 747-1) dated as of December 23, 1997), between the
Owner and First Security Bank, National Association (the "Indenture Trustee"),
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 Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (calculated on the basis of a year of 360 days and the actual
number of days elapsed) on any overdue principal amount, any overdue Break
Amount, if any, 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).
[The interest rate borne by this Equipment Note shall be
subject to adjustments to the extent, and under the circumstances, specified by
the Registration Rights Agreement as more particularly set forth in the fourth
paragraph of Section 2.01 of the Indenture.](1)
This Equipment Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Equipment
Note has been executed on behalf of the Owner by the manual or facsimile
signature of an authorized officer of the Owner, and authenticated by the
Indenture Trustee by the manual signature of an authorized officer or signatory
of the Indenture Trustee, in each case as specified in Section 2.02 of the
Indenture.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Owner pursuant to
the terms of the Indenture. Reference is made to the Indenture and all
supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its Corporate Trust Department) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties thereby conveyed, pledged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner, the Indenture Trustee
and the Noteholders of the Equipment Notes, and the terms upon which the
Equipment Notes are, and are to be, executed and delivered, as well as for a
statement of the terms and conditions of the trust created by the Indenture, to
all of which terms and conditions in the Indenture each Noteholder hereof agrees
by its acceptance of this Equipment Note.
- ----------
(1) To be inserted only in the case of a Series A or Series B Equipment Note.
A-2
<PAGE> 80
[Trust Indenture and Mortgage (1997 747-1)]
This Equipment Note is subject to redemption, refinancing,
purchase or prepayment as provided in Article 6 of the Indenture but not
otherwise.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Equipment Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
As provided in the Indenture, in certain circumstances this
Equipment Note is transferable, and upon surrender of this Equipment Note for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Registrar duly executed by, the Noteholder or his attorney duly authorized
in writing, one or more new Equipment Notes of the same maturity and type and of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Equipment Notes are issuable only as registered Equipment
Notes. As provided in the Indenture and subject to certain limitations therein
set forth, Equipment Notes are exchangeable for a like aggregate principal
amount of Equipment Notes of the same series, maturity and type and of
authorized denominations, as requested by the Noteholder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer or
exchange, but the Registrar may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner, the Indenture Trustee, the Paying Agent and the
Registrar may deem and treat the person in whose name this Equipment Note is
registered as the absolute owner hereof for the purpose of receiving payment of
the principal of and interest on this Equipment Note and for all other purposes
whatsoever whether or not this Equipment Note be overdue, and neither the Owner,
the Indenture Trustee, the Paying Agent nor the Registrar shall be affected by
notice to the contrary.
[The indebtedness evidenced by this Equipment Note is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of the Secured Obligations (as
defined in the Indenture) in respect of
A-3
<PAGE> 81
[Trust Indenture and Mortgage (1997 747-1)]
[Series A Equipment Notes](2) [Series A and Series B Equipment Notes](3) [Series
A, Series B and Series C Equipment Notes](4) and this Equipment Note is issued
subject to such provisions. The Noteholder of this Equipment Note, by accepting
the same, (a) agrees to and shall be bound by such provisions and each other
provision applicable to it in the Indenture, the Note Purchase Agreement, the
Participation Agreement and each other Fundamental Document and the
Participation Agreement, (b) authorizes and directs the Indenture Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Indenture
Trustee his attorney-in-fact for such purpose.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS EQUIPMENT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE
STATE OF ILLINOIS.
* * *
- ----------
(2) To be inserted in the case of a Series B Equipment Note.
(3) To be inserted in the case of a Series C Equipment Note.
(4) To be inserted in the case of a Series D Equipment Note.
A-4
<PAGE> 82
[Trust Indenture and Mortgage (1997 747-1)]
IN WITNESS WHEREOF, the Owner has caused this Equipment Note
to be duly executed.
UNITED AIR LINES, INC.
By:
----------------------------
Title:
A-5
<PAGE> 83
[Trust Indenture and Mortgage (1997 747-1)]
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the
within-mentioned Indenture.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
---------------------------------------
Authorized officer and signatory
A-6
<PAGE> 84
[Trust Indenture and Mortgage (1997 747-1)]
SCHEDULE I
AMORTIZATION SCHEDULE
<TABLE>
<CAPTION>
Payment Date Principal Amount (Expressed as a
------------ Percentage of Original Principal Amount
---------------------------------------
<S> <C>
</TABLE>
[SEE EXHIBIT [B-1] [B-2] [B-3] [B-4] TO INDENTURE
WHICH IS INSERTED UPON ISSUANCE]
* * *
A-7
<PAGE> 85
[Trust Indenture and Mortgage (1997 747-1)]
EXHIBIT D
to Trust Indenture
and Mortgage
TRUST INDENTURE AND MORTGAGE SUPPLEMENT (1997 747-1)
This TRUST INDENTURE AND MORTGAGE SUPPLEMENT (1997 747-1)
dated December __, 1997 (herein called the "Indenture Supplement") between
UNITED AIR LINES, INC., a Delaware corporation (herein called the "Owner") and
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association as
Indenture Trustee (the "Indenture Trustee").
WITNESSETH:
WHEREAS, the Trust Indenture and Mortgage (1997 747-1), dated
as of December 23, 1997 (herein called the "Indenture"), between the Owner and
Indenture Trustee, 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 Indenture
Trustee; and
WHEREAS, the Indenture relates to the Airframe and Engines
described below, and a counterpart of the Indenture is attached hereto and made
a part hereof and this Indenture Supplement, together with such counterpart of
the Indenture, is being filed for recordation on the date hereof with the
Federal Aviation Administration as one document;
NOW, THEREFORE, this Indenture Supplement Witnesseth, that to
secure the prompt payment of the principal of, Break Amount, if any, Make-Whole
Amount, if any, and interest on, and all other amounts due with respect to, all
Equipment Notes from time to time outstanding under the Indenture and the
performance and observance by the Owner of all the agreements, covenants and
provisions contained in the Indenture and in the Participation Agreement, for
the benefit of the Noteholders, and each of the Indenture Indemnitees, and the
prompt payment of any and all amounts from time to time owing hereunder, under
the Lease and under the Participation Agreement by the Owner Trustee, the Owner
Participant or the Lessee to the Noteholders and the Indenture Indemnitees, and
for the uses and purposes and subject to the terms and provisions of the
Indenture, and in consideration of the premises and of the covenants contained
in the Indenture, and of the acceptance of the Equipment Notes by the
Noteholders, and of 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
<PAGE> 86
[Trust Indenture and Mortgage (1997 747-1)]
confirm, unto the Indenture Trustee, its successors and assigns, for the
security and benefit of the Noteholders and the Indenture Indemnitees from time
to time, a first priority security interest in the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
- ------------ ----- ------------- -------------
<S> <C> <C> <C>
The Boeing Company 747-422 N_____ _____
</TABLE>
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, unless the Lien of the
Indenture shall not be applicable to such Part pursuant to the provisions of the
Indenture.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated take-off
horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to the Airframe or any other airframe, identified as
follows:
<TABLE>
<CAPTION>
Manufacturer Model Serial Number
------------ ----- --------------
<S> <C> <C>
Pratt & Whitney PW____ _______
Pratt & Whitney PW____ _______
</TABLE>
in each case, together with all Parts which are from time to time incorporated
or installed in or attached thereto or which have been removed therefrom, unless
the Lien of the Indenture shall not be applicable to such Part pursuant to the
provisions of the Indenture.
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the equal
and proportionate benefit and security of the Indenture Trustee and the
Noteholders from time to time of the Equipment Notes outstanding, except as
provided in Section 2.10 and Article 3 of the Indenture, without any preference,
distinction or priority of any one Equipment Note over any other by reason of
series, priority of time of issue, sale, negotiation, date of maturity
D-2
<PAGE> 87
[Trust Indenture and Mortgage (1997 747-1)]
thereof or otherwise for any reason whatsoever, and for the uses and purposes
and subject to the terms and provisions set forth in the Indenture.
This Indenture Supplement shall be construed as a supplemental
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
* * *
D-3
<PAGE> 88
[Trust Indenture and Mortgage (1997 747-1)]
IN WITNESS WHEREOF, each of the parties hereto have caused
this Indenture Supplement to be duly executed by one of its officers, thereunto
duly authorized, on the day and year first above written.
UNITED AIR LINES, INC.
By:
---------------------------------------
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
---------------------------------------
Title:
D-4
<PAGE> 1
EXHIBIT 4.29
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.
UNITED AIR LINES, INC.
SERIES A EQUIPMENT NOTE DUE DECEMBER 2, 2002 ISSUED IN CONNECTION
WITH THE BOEING MODEL 747-422 AIRCRAFT BEARING UNITED STATES
REGISTRATION NUMBER N193UA.
No. 1997 747-1-A1 Date: December 23, 1997
Original Principal Amount Maturity Date
$64,961,000 December 2, 2002
UNITED AIR LINES, INC., a Delaware corporation ("Owner") for
value received, hereby promises to pay to FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Subordination Agent, as nominee for the Pass Through Trustee
under the Intercreditor Agreement, or registered assigns, the principal sum of
Sixty-Four Million Nine Hundred Sixty-One Thousand Dollars ($64,961,000) in
installments, one such installment to be due and payable on each Payment Date,
each such installment to be in an amount equal to the amount set forth in
Schedule 1 hereto, together with interest on the unpaid principal amount hereof
from time to time outstanding from and including the date hereof until such
principal amount is paid in full. Interest shall accrue with respect to each
Interest Period at the Applicable Rate (calculated on the basis of a year of
360 days and the actual number of days elapsed) in effect for such Interest
Period and shall be payable in arrears on each Interest Payment Date and on the
date this Equipment Note is paid in full. Interest shall be payable with
respect to the first but not the last day of each Interest Period.
Notwithstanding the foregoing, the final payment made on this Equipment Note
shall be in an amount sufficient to discharge in full the unpaid principal
amount and all accrued and unpaid interest on, and any other amounts due under,
this Equipment Note. 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, interest at the then
Applicable Rate shall accrue on the amount of such payment during such
extension.
<PAGE> 2
For purposes hereof, the term "Indenture" means the Trust
Indenture and Mortgage (1997 747-1) dated as of December 23, 1997, between the
Owner and First Security Bank, National Association (the "Indenture Trustee"),
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 Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (calculated on the basis of a year of 360 days and the actual
number of days elapsed) on any overdue principal amount, any overdue Break
Amount, if any, 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).
The interest rate borne by this Equipment Note shall be
subject to adjustments to the extent, and under the circumstances, specified by
the Registration Rights Agreement as more particularly set forth in the fourth
paragraph of Section 2.01 of the Indenture.
This Equipment Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Equipment
Note has been executed on behalf of the Owner by the manual or facsimile
signature of an authorized officer of the Owner, and authenticated by the
Indenture Trustee by the manual signature of an authorized officer or signatory
of the Indenture Trustee, in each case as specified in Section 2.02 of the
Indenture.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Owner pursuant to
the terms of the Indenture. Reference is made to the Indenture and all
supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its Corporate Trust Department) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties thereby conveyed, pledged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner, the Indenture Trustee
and the Noteholders of the Equipment Notes, and the terms upon which the
Equipment Notes are, and are to be, executed and delivered, as well as for a
statement of the terms and conditions of the trust created by the Indenture, to
all of which terms and conditions in the Indenture each Noteholder hereof
agrees by its acceptance of this Equipment Note.
This Equipment Note is subject to redemption, refinancing,
purchase or prepayment as provided in Article 6 of the Indenture but not
otherwise.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Equipment Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
2
<PAGE> 3
As provided in the Indenture, in certain circumstances this
Equipment Note is transferable, and upon surrender of this Equipment Note for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Noteholder or his attorney
duly authorized in writing, one or more new Equipment Notes of the same
maturity and type and of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
The Equipment Notes are issuable only as registered Equipment
Notes. As provided in the Indenture and subject to certain limitations therein
set forth, Equipment Notes are exchangeable for a like aggregate principal
amount of Equipment Notes of the same series, maturity and type and of
authorized denominations, as requested by the Noteholder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer or
exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner, the Indenture Trustee, the Paying Agent and the
Registrar may deem and treat the person in whose name this Equipment Note is
registered as the absolute owner hereof for the purpose of receiving payment of
the principal of and interest on this Equipment Note and for all other purposes
whatsoever whether or not this Equipment Note be overdue, and neither the
Owner, the Indenture Trustee, the Paying Agent nor the Registrar shall be
affected by notice to the contrary.
The Noteholder of this Equipment Note, by accepting the same,
(a) agrees to and shall be bound by such provisions and each other provision
applicable to it in the Indenture, the Note Purchase Agreement, the
Participation Agreement and each other Fundamental Document and the
Participation Agreement, (b) authorizes and directs the Indenture Trustee on
his behalf to take such action as may be necessary or appropriate to effectuate
the subordination as provided in the Indenture and (c) appoints the Indenture
Trustee his attorney-in-fact for such purpose.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS EQUIPMENT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF
THE STATE OF ILLINOIS.
* * *
3
<PAGE> 4
IN WITNESS WHEREOF, the Owner has caused this Equipment Note
to be duly executed.
UNITED AIR LINES, INC.
By:
--------------------------------
Title
4
<PAGE> 5
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the
within-mentioned Indenture.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
------------------------------------
Authorized officer and signatory
5
<PAGE> 6
SCHEDULE I
AMORTIZATION SCHEDULE
Principal Amount (Expressed as a
Payment Date Percentage of Original Principal Amount)
------------ ----------------------------------------
* * *
6
<PAGE> 1
EXHIBIT 4.30
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.
UNITED AIR LINES, INC.
SERIES B EQUIPMENT NOTE DUE DECEMBER 2, 2002 ISSUED IN CONNECTION
WITH THE BOEING MODEL 747-422 AIRCRAFT BEARING UNITED STATES
REGISTRATION NUMBER N193UA.
No. 1997 747-1-B1 Date: December 23, 1997
Original Principal Amount Maturity Date
$15,534,000 December 2, 2002
UNITED AIR LINES, INC., a Delaware corporation ("Owner") for
value received, hereby promises to pay to FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Subordination Agent, as nominee for the Pass Through Trustee
under the Intercreditor Agreement, or registered assigns, the principal sum of
Fifteen Million Five Hundred Thirty-Four Thousand Dollars ($15,534,000) in
installments, one such installment to be due and payable on each Payment Date,
each such installment to be in an amount equal to the amount set forth in
Schedule 1 hereto, together with interest on the unpaid principal amount hereof
from time to time outstanding from and including the date hereof until such
principal amount is paid in full. Interest shall accrue with respect to each
Interest Period at the Applicable Rate (calculated on the basis of a year of
360 days and the actual number of days elapsed) in effect for such Interest
Period and shall be payable in arrears on each Interest Payment Date and on the
date this Equipment Note is paid in full. Interest shall be payable with
respect to the first but not the last day of each Interest Period.
Notwithstanding the foregoing, the final payment made on this Equipment Note
shall be in an amount sufficient to discharge in full the unpaid principal
amount and all accrued and unpaid interest on, and any other amounts due under,
this Equipment Note. 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, interest at the then
Applicable Rate shall accrue on the amount of such payment during such
extension.
<PAGE> 2
For purposes hereof, the term "Indenture" means the Trust
Indenture and Mortgage (1997 747-1) dated as of December 23, 1997, between the
Owner and First Security Bank, National Association (the "Indenture Trustee"),
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 Indenture.
This Equipment Note shall bear interest, payable on demand, at
the Past Due Rate (calculated on the basis of a year of 360 days and the actual
number of days elapsed) on any overdue principal amount, any overdue Break
Amount, if any, 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).
The interest rate borne by this Equipment Note shall be
subject to adjustments to the extent, and under the circumstances, specified by
the Registration Rights Agreement as more particularly set forth in the fourth
paragraph of Section 2.01 of the Indenture.
This Equipment Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Equipment
Note has been executed on behalf of the Owner by the manual or facsimile
signature of an authorized officer of the Owner, and authenticated by the
Indenture Trustee by the manual signature of an authorized officer or signatory
of the Indenture Trustee, in each case as specified in Section 2.02 of the
Indenture.
This Equipment Note is one of the Equipment Notes referred to
in the Indenture which have been or are to be issued by the Owner pursuant to
the terms of the Indenture. Reference is made to the Indenture and all
supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its Corporate Trust Department) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties thereby conveyed, pledged and assigned, the nature and extent of the
security, the respective rights thereunder of the Owner, the Indenture Trustee
and the Noteholders of the Equipment Notes, and the terms upon which the
Equipment Notes are, and are to be, executed and delivered, as well as for a
statement of the terms and conditions of the trust created by the Indenture, to
all of which terms and conditions in the Indenture each Noteholder hereof
agrees by its acceptance of this Equipment Note.
This Equipment Note is subject to redemption, refinancing,
purchase or prepayment as provided in Article 6 of the Indenture but not
otherwise.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Equipment Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
2
<PAGE> 3
As provided in the Indenture, in certain circumstances this
Equipment Note is transferable, and upon surrender of this Equipment Note for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Noteholder or his attorney
duly authorized in writing, one or more new Equipment Notes of the same
maturity and type and of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
The Equipment Notes are issuable only as registered Equipment
Notes. As provided in the Indenture and subject to certain limitations therein
set forth, Equipment Notes are exchangeable for a like aggregate principal
amount of Equipment Notes of the same series, maturity and type and of
authorized denominations, as requested by the Noteholder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer or
exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner, the Indenture Trustee, the Paying Agent and the
Registrar may deem and treat the person in whose name this Equipment Note is
registered as the absolute owner hereof for the purpose of receiving payment of
the principal of and interest on this Equipment Note and for all other purposes
whatsoever whether or not this Equipment Note be overdue, and neither the
Owner, the Indenture Trustee, the Paying Agent nor the Registrar shall be
affected by notice to the contrary.
The indebtedness evidenced by this Equipment Note is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of the Secured Obligations (as
defined in the Indenture) in respect of Series A Equipment Notes and this
Equipment Note is issued subject to such provisions. The Noteholder of this
Equipment Note, by accepting the same, (a) agrees to and shall be bound by such
provisions and each other provision applicable to it in the Indenture, the Note
Purchase Agreement, the Participation Agreement and each other Fundamental
Document and the Participation Agreement, (b) authorizes and directs the
Indenture Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Indenture Trustee his attorney-in-fact for such purpose.
3
<PAGE> 4
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS EQUIPMENT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF
THE STATE OF ILLINOIS.
* * *
4
<PAGE> 5
IN WITNESS WHEREOF, the Owner has caused this Equipment Note
to be duly executed.
UNITED AIR LINES, INC.
By:
-------------------------------------
Title:
5
<PAGE> 6
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the
within-mentioned Indenture.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
-------------------------------------
Authorized officer and signatory
6
<PAGE> 7
SCHEDULE I
AMORTIZATION SCHEDULE
Payment Date Principal Amount (Expressed as a
Percentage of Original Principal Amount)
* * *
7
<PAGE> 1
EXHIBIT 4.31
UNITED AIR LINES, INC.
ENHANCED PASS THROUGH CERTIFICATES, SERIES 1997-1A
PURCHASE AGREEMENT
December 18, 1997
<PAGE> 2
December 18, 1997
Morgan Stanley & Co. Incorporated
BT Alex. Brown Incorporated
Citicorp Securities, Inc.
Credit Suisse First Boston Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Madames:
United Air Lines, Inc., a Delaware corporation (the
"COMPANY"), proposes that First Security Bank of Utah, National Association,
acting not in its individual capacity but solely as Pass Through Trustee (the
"Trustee) under the Pass Through Trust Agreement referred to below, issue and
sell to the several purchasers named in Schedule I hereto (the "INITIAL
PURCHASERS") its Enhanced Pass Through Certificates, Series 1997-1A in the
aggregate principal amounts and with the interest rates and final expected
distribution dates set forth on the cover page of the Final Memorandum (as
defined below) (the "SECURITIES") on the terms and conditions stated herein. The
aggregate principal amount of Securities payable on each such final expected
distribution date is referred to as a "Pass Through Certificate Designation."
The Securities will be issued under a Pass Through Trust Agreement dated as of
December 23, 1997 (the "BASIC PASS THROUGH TRUST AGREEMENT") between the Company
and the Trustee, as supplemented by a Pass Through Trust Supplement, dated as of
December 23, 1997 (a "TRUST SUPPLEMENT"), between the Company and the Trustee
(the Basic Pass Through Trust Agreement as it is to be supplemented by the Trust
Supplement being referred to herein as the "PASS THROUGH TRUST AGREEMENT").
As used in this Agreement, the terms "Aircraft," "Certificate
Owner," "Equipment Notes," "Lease," "Loan Trustee," "Operative Documents,"
"Owner Participant," "Owner Trustee" and "Participation Agreement" shall have
the meanings specified in the 1997 Indentures or the 1994 Indentures as defined
in the Note Purchase
<PAGE> 3
Agreement, dated as of December 23, 1997, between the Company, the Trustee,
State Street Bank and Trust Company of Connecticut, National Association,
individually for certain purposes and as owner trustee, First Security Bank,
National Association, as indenture trustee, and First Security Bank, National
Association, as subordination agent (the "Note Purchase Agreement").
For purposes hereof, the term "Financing Agreements" shall
mean, collectively, the Note Purchase Agreement, the Pass Through Trust
Agreement, the Primary Liquidity Facilities, the Above-Cap Liquidity Facilities,
the Registration Rights Agreement and the Intercreditor Agreement and the term
"Fundamental Documents" shall mean collectively, the Financing Agreements, each
Operative Document (as defined in the 1994 Indenture) and each Operative
Document (as defined in the 1997 Indenture).
The Securities will be offered without being registered under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), to qualified
institutional buyers in compliance with the exemption from registration
provided by Rule 144A under the Securities Act, in offshore transactions in
reliance on Regulation S under the Securities Act ("REGULATION S") and to
institutional accredited investors (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) that deliver a letter in the form annexed to the
Final Memorandum (as defined below).
The Initial Purchasers and their direct and indirect
transferees will be entitled to the benefits of a Registration Rights Agreement
dated the date hereof between the Company and the Initial Purchasers (the
"REGISTRATION RIGHTS AGREEMENT").
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and
will prepare a final offering memorandum (the "FINAL MEMORANDUM" and, with the
Preliminary Memorandum, each a "MEMORANDUM") including or incorporating by
reference a description of the terms of the Securities, the terms of the
offering and a description of the Company. As used herein, the term "Memorandum"
shall include in each case the documents incorporated by reference therein. The
terms "SUP-
2
<PAGE> 4
PLEMENT", "AMENDMENT" and "AMEND" as used herein with respect to a Memorandum
shall include all documents deemed to be incorporated by reference in the
Preliminary Memorandum or Final Memorandum that are filed with the Securities
and Exchange Commission (the "COMMISSION") pursuant to the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), after the issue date of such
Memorandum and on or prior to the completion of the offering.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, you that:
(a) (i) Each document, if any, filed or to be filed
pursuant to the Exchange Act and incorporated by reference in either Memorandum
complied or will comply when so filed in all material respects with the Exchange
Act and the applicable rules and regulations of the Commission thereunder and
(ii) the Preliminary Memorandum does not contain and the Final Memorandum, in
the form used by the Initial Purchasers to confirm sales and on the Closing Date
(as defined in Section 4), will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in either Memorandum based upon information
relating to any Initial Purchaser furnished to the Company in writing by such
Initial Purchaser through you expressly for use therein.
(b) The Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the State
of Delaware, has the corporate power and authority to own or lease its property
and to conduct its business as described in each Memorandum and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole. All of the outstanding shares
of capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable
3
<PAGE> 5
and are owned by UAL Corporation, directly, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind ("Liens").
(c) Each Financing Agreement and each other
Fundamental Document conforms in all material respects to the descriptions
thereof in the Final Memorandum.
(d) This Agreement has been duly authorized,
executed and delivered by the Company.
(e) The Securities have been duly authorized and,
when executed and authenticated in accordance with the provisions of the Pass
Through Trust Agreement and delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, will be valid and binding
obligations of the Trustee, enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and will be entitled to the benefits of the
Pass Through Trust Agreement and the Registration Rights Agreement and the other
Financing Agreements to which the Trustee is a party.
(f) Each of the Pass Through Trust Agreement and the
Registration Rights Agreement and each of the other Fundamental Documents to
which the Company is a party has been duly authorized, executed and delivered
by, and is a valid and binding agreement of, the Company, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law) and
except as rights to
4
<PAGE> 6
indemnification and contribution under the Registration Rights Agreement may be
limited under applicable law.
(g) The Equipment Notes to be issued under each 1997
Indenture, when duly executed and delivered by the Company and duly
authenticated by the Indenture Trustee in accordance with the terms of such
1997 Indenture, will be duly issued under such 1997 Indenture and will
constitute the valid and binding obligations of the Company and the holders
thereof will be entitled to the benefits of such 1997 Indenture.
(h) The Equipment Notes to be issued under each 1994
Indenture, when duly executed and delivered by the Company and duly
authenticated by the Indenture Trustee in accordance with the terms of such
1994 Indenture, will be duly issued under such 1994 Indenture and will
constitute the valid and binding obligations of the Owner Trustee and the
holders thereof will be entitled to the benefits of such 1994 Indenture.
(i) The Company is not in default in the performance
or observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it may be bound or to
which any of its properties may be subject, except for such defaults that would
not have a material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Company and its subsidiaries, taken as a
whole. The execution and delivery by the Company of this Agreement, the Pass
Through Trust Agreement and the Fundamental Documents to which the Company is,
or is to be, a party, the consummation by the Company of the transactions
contemplated in this Agreement, the Pass Through Trust Agreement and such
Fundamental Documents, and compliance by the Company with the terms of this
Agreement, the Pass Through Trust Agreement and such Fundamental Documents, do
not and will not result in any violation of the charter or by-laws of the
Company, and do not and will not conflict with, or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance (other than Permitted
Liens) upon any property or assets of the Company under (A) any inden-
5
<PAGE> 7
ture, mortgage, loan agreement, note, lease or other material agreement or
instrument to which the Company is a party or by which it may be bound or to
which any of its properties may be subject or (B) any existing applicable law,
rule, regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its properties other than the securities or Blue Sky or
similar laws of the various states and foreign jurisdictions (except, in the
case of either clause (A) or (B), for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings or business affairs of the
Company and its subsidiaries, taken as a whole).
(j) No authorization, approval, consent, order or
license of or filing with or notice to any government, governmental
instrumentality or court, domestic or foreign, is required on behalf of the
Company for the valid authorization, issuance, sale and delivery of the
Securities and the Equipment Notes, the valid authorization, execution,
delivery and performance by the Company of this Agreement, the Pass Through
Trust Agreement, the Leases and the other Fundamental Documents to which the
Company is, or is to be, a party, or the consummation by the Company of the
transactions contemplated by this Agreement, the Pass Through Trust Agreement,
the Leases and such other Fundamental Documents, except such as are required
under (x) the Securities Act, the Exchange Act, the Trust Indenture Act and the
securities or Blue Sky or similar laws of the various states and of foreign
jurisdictions and except for (y) the Sections of Title 49 of the United States
Code, as amended, relating to aviation (the "Aviation Act") and filings or
recordings with the Federal Aviation Administration (the "FAA") and (z) filings
under the Uniform Commercial Code as in effect in Connecticut and Illinois,
which filings shall have been made or obtained, or duly presented for filing, on
or prior to the Closing Date.
(k) Except as disclosed in the Final Memorandum or
incorporated by reference, there is no action, suit or proceeding before or by
any government, governmental instrumentality or court, domestic or foreign, now
pending or, to the knowledge of the Company,
6
<PAGE> 8
threatened against that is required to be disclosed in the Final Memorandum or
that could reasonably be expected to result in any material adverse change in
the condition (financial or otherwise), earnings or business affairs of the
Company and its subsidiaries, taken as a whole, or that could reasonably be
expected to materially and adversely affect the properties or assets of the
Company and its subsidiaries, taken as a whole, or that could reasonably be
expected to materially and adversely affect the consummation of the transactions
contemplated by this Agreement; the aggregate of all pending legal or
governmental proceedings to which the Company is a party or which affect any of
its properties that are not described in the Final Memorandum, including
ordinary routine litigation incidental to its business, would not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Company and its subsidiaries,
taken as a whole.
(l) The Company has all licenses, permits, orders,
consents, authorizations and approvals, of and from, and has made all filings
(other than those filings described in clauses (x), (y) and (z) of Section
1(j)above) with, all governmental authorities, all self-regulatory organizations
and all courts and other tribunals, necessary to own or lease its properties
and to conduct its business in the manner described in the Memoranda, except to
the extent that the failure to so have would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(m) Since the dates as of which information is given
in the Memoranda, as amended, there has not occurred any material adverse
change, or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that set
forth in, or incorporated by reference in, the Final Memorandum.
(n) The Company is not, and after giving effect to
the offering and sale of the Securities and the application of the proceeds
thereof as described in the Final Memorandum, will not be an "investment
company" as
7
<PAGE> 9
such term are defined in the Investment Company Act of 1940, as amended.
(o) Neither the Company nor any affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act, an "AFFILIATE")
of the Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale of
the Securities in a manner that would require the registration under the
Securities Act of the Securities or (ii) engaged in any form of general
solicitation or general advertising in connection with the offering of the
Securities (as those terms are used in Regulation D under the Securities Act) or
in any manner involving a public offering within the meaning of Section 4(2) of
the Securities Act.
(p) None of the Company, its Affiliates or any person
acting on its or their behalf has engaged or will engage in any directed selling
efforts (within the meaning of Regulation S) with respect to the Securities and
the Company and its Affiliates and any person acting on its or their behalf have
complied and will comply with the offering restrictions requirement of
Regulation S, except no representation, warranty or agreement is made by the
Company in this paragraph with respect to the Initial Purchasers.
(q) It is not necessary in connection with the offer,
sale and delivery of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register the Securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended.
(r) The Securities satisfy the requirements set
forth in Rule 144A(d)(3) under the Securities Act.
(s) Arthur Andersen LLP, who have reported upon the
audited consolidated financial statements and the financial statement schedules,
if any, incorporated by reference in the Final Memorandum, are inde-
8
<PAGE> 10
pendent public accountants as required by the Securities Act.
(t) The Company is a "citizen of the United States"
within the meaning of Section 40102(a)(15) of Title 49 of the United States
Code, as amended, holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code, as amended, for aircraft capable of carrying 10 or more individuals
or 6,000 pounds or more of cargo.
2. Agreements to Sell and Purchase. Subject to the terms and
conditions contained herein, the Company hereby agrees to sell to the several
Initial Purchasers, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company the respective principal amount of
Securities set forth in Schedule I hereto opposite its name at a purchase price
of 99.50% of the principal amount thereof (the "PURCHASE PRICE") plus accrued
interest, if any, to the Closing Date.
The Company hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Initial
Purchasers, it will not, during the period beginning on the date hereof and
continuing to and including the Closing Date, offer, sell, contract to sell or
otherwise dispose of any debt of the Company or warrants to purchase debt of the
Company, in either case substantially similar to the Securities (other than the
sale of the Securities under this Agreement and the sale of The Enhanced Pass
Through Certificates, Series 1997-1B, the Enhanced Pass Through Certificates,
Series 1997-1C and the Enhanced Pass Through Certificates, Series 1997-1D).
3. Terms of Offering. You have advised the Company that the
Initial Purchasers will make an offering of the Securities purchased by the
Initial Purchasers hereunder on the terms to be set forth in the Final
Memorandum, as soon as practicable after this Agreement is entered into as in
your judgment is advisable.
4. Payment and Delivery. Payment for the Securities shall be
made to the Company in Federal or other funds immediately available in New York
City
9
<PAGE> 11
against delivery of such Securities for the respective accounts of the several
Initial Purchasers at 10:00 a.m., New York City time, on December 23, 1997, or
at such other time on the same or such other date, not later than December 31,
1997, as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "CLOSING DATE."
Certificates for the Securities shall be in definitive form or
global form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date. The certificates evidencing the Securities shall
be delivered to you on the Closing Date for the respective accounts of the
several Initial Purchasers, with any transfer taxes payable in connection with
the transfer of the Securities to the Initial Purchasers duly paid, against
payment of the Purchase Price therefor plus accrued interest, if any, to the
date of payment and delivery.
5. Conditions to the Initial Purchasers' Obligations. The
several obligations of the Initial Purchasers to purchase and pay for the
Securities on the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change that does
not indicate the direction of the possible change, in the rating
accorded the Company or any of the Company's securities by Moody's
Investor Services, Inc. ("Moody's") or Standard & Poor's Ratings
Services ("Standard & Poor's");
(ii) the Company's Enhanced Pass Through
Certificates, Series 1997-1A shall be rated "Aa2" by Moody's and "AAA"
by Standard & Poor's; and
10
<PAGE> 12
(iii) there shall not have occurred any
change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Final Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that, in
your reasonable judgment, is material and adverse and that makes it,
in your reasonable judgment, impracticable to market the Securities on
the terms and in the manner contemplated in the Final Memorandum.
(b) The Initial Purchasers shall have received on the
Closing Date a certificate, dated the Closing Date and signed by the Vice
President and Treasurer or the Vice President-General Counsel and Secretary of
the Company, to the effect set forth in Section 5(a)(i) and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
(i) The officer signing and delivering such
certificate may rely upon his or her knowledge (after due inquiry) as
to proceedings threatened.
(c) The Initial Purchasers shall have received on the
Closing Date an opinion of (i) Mayer, Brown & Platt, outside counsel for the
Company, dated the Closing Date, substantially to the effect set forth in
Exhibit A-1, (ii) Vedder, Price, Kaufman & Kammholz, outside counsel for the
Company, dated the Closing Date, substantially to the effect set forth in
Exhibit A-2, (iii) the General Counsel or Assistant General Counsel of the
Company, dated the Closing Date, substantially to the effect set forth in
Exhibit A-3, and (iv) Ray, Quinney & Nebeker, counsel for the Trustee, dated the
Closing Date, substantially to the effect set forth in Exhibit A-4.
11
<PAGE> 13
Such opinions shall be rendered to the Initial Purchasers at the request of the
Company and shall so state therein.
(d) The Initial Purchasers shall have received on the
Closing Date an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
the Initial Purchasers, dated the Closing Date, covering opinions delivered
pursuant to such matters as you shall reasonably require and in form and
substance acceptable to you.
(e) The Initial Purchasers shall have received on
each of the date hereof and the Closing Date a letter, dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers, from Arthur Andersen LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information incorporated by reference into
each Memorandum; provided that the letter delivered on the Closing Date shall
use a "cut-off date" not earlier than Friday, December 19, 1997.
(f) At the Closing Date, all conditions precedent
specified in the Note Purchase Agreement shall have been satisfied; the
representations and warranties of the Company, the Owner Trustee, the Pass
Through Trustee and the Indenture Trustee contained in the Note Purchase
Agreement and each other Fundamental Document shall be accurate as of the
Closing Date (except to the extent that they relate solely to an earlier date in
which case they shall be accurate as of such earlier date) and you shall have
received certificates of the Chief Financial Officer or the Treasurer of the
Company and appropriate officers of the respective Owner Trustees, Pass Through
Trustees and Indenture Trustees, dated as of the Closing Date, to such effect;
and you shall have received a copy of each opinion required to be delivered
under the Note Purchase Agreement and dated as of the Closing Date, and
addressed to you, and of such other documents furnished in connection with the
fulfillment of such conditions as you or your counsel may reasonably request.
12
<PAGE> 14
(g) At the Closing Date, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
such counsel may reasonably require for the purpose of enabling such counsel to
pass upon the issuance and sale of Securities as herein con templated and
related proceedings, or in order to evi dence the accuracy and completeness of
any of the repre sentations and warranties, or the fulfillment of any of the
conditions, herein contained and all proceedings taken by the Company in
connection with the issuance and sale of Securities as herein contemplated shall
be satis factory in form and substance to you and to counsel for the Initial
Purchasers.
6. Covenants of the Company. In further consideration of the
agreements of the Initial Purchasers contained in this Agreement, the Company
covenants with each Initial Purchaser as follows:
(a) To furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the second business day next
succeeding the date of this Agreement and during the period mentioned in Section
6(c), as many copies of the Final Memorandum, any docu ments incorporated by
reference therein and any supple ments and amendments thereto as you may
reasonably re quest.
(b) Before amending or supplementing either
Memorandum, to furnish to you a copy of each such proposed amendment or
supplement and not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and
prior to the date on which all of the Securi ties shall have been sold by the
Initial Purchasers, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Final Memoran dum in order to
make the statements therein, in the light of the circumstances when the Final
Memorandum is deliv ered to a purchaser, not misleading, or if, in the opin ion
of counsel for the Initial Purchasers, it is neces sary to amend or supplement
the Final Memorandum to comply with applicable law, forthwith to prepare and
furnish, at its own expense, to the Initial Purchasers,
13
<PAGE> 15
either amendments or supplements to the Final Memorandum so that the statements
in the Final Memorandum as so amended or supplemented will not, in the light of
the circumstances when the Final Memorandum is delivered to a purchaser, be
misleading or so that the Final Memorandum, as amended or supplemented, will
comply with applicable law.
(d) To endeavor, in cooperation with the Initial
Purchasers, to qualify the Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as you shall reasonably request.
(e) Whether or not the transactions contemplated in
this Agreement are consummated or, subject to the last paragraph of Section 10,
this Agreement is terminated, to pay or cause to be paid all expenses incident
to the performance of its obligations under this Agreement, including: (i) the
fees, disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the issuance and sale of the Securities and all
other fees or expenses in connection with the preparation of each Memorandum
and all amendments and supplements thereto, including all printing costs
associated therewith, and the delivering of copies thereof to the Initial
Purchasers, in the quantities herein above specified, (ii) all costs and
expenses related to the preparation, issuance, transfer and delivery of the
Securities to the Initial Purchasers, including any transfer or other taxes
payable thereon, (iii) the cost of producing any Blue Sky or legal investment
memorandum in connection with the offer and sale of the Securities under state
securities laws and all expenses in connection with the qualification of the
Securities for offer and sale under state securities laws as provided in
Section 6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchasers in connection with such
qualification and in connection with the Blue Sky or legal investment
memorandum, (iv) any fees charged by rating agencies for the rating of the
Securities, (v) all legal fees and expenses of counsel to the Initial Purchasers
in connection with the preparation, negotiation, execution and delivery of this
Agreement, the Financing Agreements and the other Fundamental Documents, (vi)
the fees and expenses, if any, incurred in connection with the admission
14
<PAGE> 16
of the Securities for trading in any appropriate market system, (vii) the costs
and charges of the Trustee and any transfer agent, registrar or depositary,
(viii) the costs and expenses of the Company relating to investor presentations
on any "road show" undertaken in connection with the marketing of the offering
of the Securities, including, without limitation, expenses associated with the
production of road show slides and graphics, travel and lodging expenses of the
representatives and officers of the Company and (ix) all other cost and expenses
incident to the performance of the obligations of the Company hereunder or under
the Fundamental Documents for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this Section,
Section 8, and the last paragraph of Section 10, the Initial Purchasers will
pay all of their costs and expenses, transfer taxes payable on resale of any of
the Securities by them and any advertising expenses connected with any offers
they may make.
(f) Neither the Company nor any Affiliate will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell
the Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act.
(h) While any of the Securities remain "restricted
securities" within the meaning of the Securities Act, to make available, upon
request, to any seller of such Securities the information specified in Rule
144A(d)(4) under the Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(i) None of the Company, its Affiliates or any person
acting on its or their behalf (other than the Initial Purchasers) will engage in
any directed
15
<PAGE> 17
selling efforts (as that term is defined in Regulation S) with respect to the
Securities, and the Company and its Affiliates and each person acting on its or
their behalf (other than the Initial Purchasers) will comply with the offering
restrictions requirement of Regulation S.
(j) During the period of two years after the Closing
Date, the Company will not, and will not permit any of its affiliates (as
defined in Rule 144A under the Securities Act) to resell any of the Securities
which constitute "restricted securities" under Rule 144A that have been
reacquired by any of them, except in compliance with the Securities Act.
7. Offering of Securities; Restrictions on Transfer. (a) Each
Initial Purchaser, severally and not jointly, represents and warrants that such
Initial Purchaser is a qualified institutional buyer as defined in Rule 144A
under the Securities Act (a "QIB"). Each Initial Purchaser, severally and not
jointly, agrees with the Company that (i) it will not solicit offers for, or
offer or sell, such Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Securities only
from, and will offer such Securities only to, persons that it reasonably
believes to be (A) in the case of offers inside the United States, (1) QIBs or
(2) other institutional accredited investors (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act ("INSTITUTIONAL ACCREDITED INVESTORS")
that, prior to their purchase of the Securities, deliver to such Initial
Purchaser a letter substantially in the form set forth in Appendix III to the
Memorandum and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("FOREIGN PURCHASERS," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)) in
reliance upon Regulation S under the Securities Act that, in each case, in
purchasing such Securities are deemed to have represented and agreed as provided
in the Final Memorandum under the caption "Transfer Restrictions".
16
<PAGE> 18
(b) Each Initial Purchaser, severally and not
jointly, represents, warrants, and agrees with respect to offers and sales
outside the United States that:
(i) such Initial Purchaser understands that
no action has been or will be taken in any jurisdiction by the Company
that would permit a public offering of the Securities, or possession or
distribution of either Memorandum or any other offering or publicity
material relating to the Securities, in any country or jurisdiction
where action for that purpose is required;
(ii) such Initial Purchaser will comply with
all applicable laws and regulations in each jurisdiction in which it
acquires, offers, sells or delivers Securities or has in its
possession or distributes either Memorandum or any such other material,
in all cases at its own expense;
(iii) the Securities have not been
registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Rule 144A or Regulation S under the
Securities Act or pursuant to another exemption from the registration
requirements of the Securities Act;
(iv) such Initial Purchaser has offered the
Securities and will offer and sell the Securities (A) as part of their
distribution at any time and (B) other wise until 40 days after the
later of the commencement of the offering and the Closing Date, only
in accordance with Rule 903 of Regulation S or as otherwise permitted
in Section 7(a); accordingly, neither such Initial Purchaser, its
Affiliates nor any persons acting on its or their behalf have engaged
or will engage in any directed selling efforts (within the meaning of
Regulation S) with respect to the Securities, and any such Initial
Purchaser, its Affiliates
17
<PAGE> 19
and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S;
(v) such Initial Purchaser has (A) not
offered or sold and, prior to the date six months after the Closing
Date, will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal
or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer
to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (B) complied and will comply
with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Securities in, from
or otherwise involving the United Kingdom, and (C) only issued or
passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the Securities
to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully
be issued or passed on;
(vi) such Initial Purchaser understands
that the Securities have not been and will not be registered under the
Securities and Exchange Law of Japan, and represents that it has not
offered or sold, and agrees not to offer or sell, directly or
indirectly, any Securities in Japan or for the account of any resident
thereof except pursuant to any exemption from the registration
requirements of the Securities and Exchange Law of Japan and otherwise
in compliance with applicable provisions of Japanese law; and
(vii) such Initial Purchaser agrees that, at
or prior to confirma-
18
<PAGE> 20
tion of sales of the Securities, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise until 40
days after the later of the commencement of the offering and the closing date,
except in either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the meaning given to
them by Regulation S." Terms used in this Section 7(b) have the meanings given
to them by Regulation S.
8. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through you expressly for use therein.
(b) Each Initial Purchaser agrees, severally and not
jointly, to indemnify and hold harmless the
19
<PAGE> 21
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Initial Purchaser, but only with reference to information
relating to such Initial Purchaser furnished to the Company in writing by such
Initial Purchaser through you expressly for use in either Memorandum or any
amendments or supplements thereto.
(c) In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b), such person
(the "INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated, in the case of parties indemnified pursuant to Section 8(a), and
by the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any
20
<PAGE> 22
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in
Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company on the one
hand and of the Initial Purchasers on the other hand in connection with the
statements or omissions that resulted in such losses,
21
<PAGE> 23
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other hand in connection with the offering of
the Securities shall be deemed to be in the same respective proportions as the
net proceeds from the offering of the Securities (before deducting expenses)
received by the Company and the total discounts and commissions received by the
Initial Purchasers, in each case as set forth in the Final Memorandum, bear to
the aggregate offering price of the Securities. The relative fault of the
Company on the one hand and of the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Initial Purchasers' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the respective principal amount of
Securities they have purchased hereunder, and not joint.
(e) The Company and the Initial Purchasers agree
that it would not be just or equitable if contribution pursuant to this Section
8 were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 8(d). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in Section 8(d) shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities resold by it in the initial placement of such Securities were
offered to investors exceeds the amount of any damages that such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or
22
<PAGE> 24
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions
contained in this Section 8 and the representations, warranties and other
statements of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this Agreement,
(ii) any investigation made by or on behalf of any Initial Purchaser or any
person controlling any Initial Purchaser or by or on behalf of the Company, its
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Securities.
9. Termination. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc., (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your reasonable judgment,
is material and ad verse and (b) in the case of any of the events specified in
clauses 9(a)(i) through 9(a)(iv), such event, singly or together with any other
such event, makes it, in your reasonable judgment, impracticable to market the
Securities on the terms and in the manner contemplated in the Final Memorandum.
23
<PAGE> 25
10. Effectiveness; Defaulting Initial Purchasers. This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.
If, on the Closing Date, any one or more of the Initial
Purchasers shall fail or refuse to purchase Securities that it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, the other Initial
Purchasers shall be obligated severally in the proportions that the principal
amount of Securities set forth opposite their respective names in Schedule I
bears to the aggregate principal amount of Securities set forth opposite the
names of all such non-defaulting Initial Purchasers, or in such other pro
portions as you may specify, to purchase the Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
on such date; provided that in no event shall the principal amount of Securities
that any Initial Purchaser has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Securities
with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Initial Purchaser
or of the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven
business days, in order that the required changes, if any, in the Final
Memorandum or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial
24
<PAGE> 26
Purchaser from liability in respect of any default of such Initial Purchaser
under this Agreement.
If this Agreement shall be terminated by the Initial
Purchasers, or any of them, because of any failure or refusal on the part of
the Company to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company shall be unable to perform its
obligations under this Agreement, in either case other then in connection with a
termination specified in Section 9, the Company will reimburse the Initial
Purchasers or such Initial Purchasers as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such Initial
Purchasers in connection with this Agreement or the offering contemplated
hereunder.
11. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
25
<PAGE> 27
13. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
Very truly yours,
UNITED AIR LINES, INC.
By: /s/ THOMAS A. MUTRYN
------------------------------------------
Name: THOMAS A. MUTRYN
Title: VICE PRESIDENT AND TREASURER
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
BT Alex. Brown Incorporated
Citicorp Securities, Inc.
Credit Suisse First Boston Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Acting severally on behalf of themselves and the
several Initial Purchasers named in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: /s/ Thomas F. Cahill, Jr.
------------------------------------
Name: Thomas F. Cahill, Jr.
Title: Principal
26
<PAGE> 1
EXHIBIT 4.32
CERTIFICATE PURCHASE AGREEMENT
UNITED AIR LINES ENHANCED PASS THROUGH CERTIFICATES, SERIES 1997-1
$106,607,000 ENHANCED PASS THROUGH CERTIFICATES, SERIES 1997-1B
December 23, 1997
Kreditanstalt fur Wiederaufbau
Palmengartenstrasse 5-9
D-60325 Frankfurt am Main
Germany
Ladies and Gentlemen:
First Security Bank, National Association, as Trustee of the
United Airlines 1997-1B Pass Through Trust (the "Seller") and United Air Lines,
Inc. ("United") hereby agree with Kreditanstalt fur Wiederaufbau (the
"Purchaser") as follows:
1. Authorization of Offered Certificates. The United Airlines
1997-1B Pass Through Trust (the "Trust") has authorized the issuance and sale of
$106,607,000 aggregate principal amount of Enhanced Pass Through Certificates,
Series 1997-1B (the "Certificates") to the Purchaser. The Certificates shall be
issued pursuant to a Pass Through Trust Agreement, dated as of December 23,
1997, between United and the Seller, as Trustee, and the Trust Supplement No.
1997-1B-1 to Pass Through Trust Agreement, dated as of December 23, 1997,
between United and the Seller, as Trustee (collectively, the "Trust Agreement").
Capitalized terms used herein without definition shall have the meanings given
such terms in the Trust Agreement.
<PAGE> 2
Each Certificate shall represent the right to receive
distributions of the proceeds of Trust Property in accordance with the Trust
Agreement. The "Trust Property" shall consist of (i) the Equipment Notes held as
the property of such Trust and all monies at any time paid thereon and all
monies due and to become due thereunder, (ii) funds from time to time deposited
in the related Escrow Account, the related Certificate Account and the related
Special Payments Account, (iii) all rights of such Trust and the Trustee, on
behalf of such Trust, under the Intercreditor Agreement, the Registration Rights
Agreement and the Note Purchase Agreement, including all rights to receive
certain payments thereunder and all monies paid to such Trustee on behalf of
such Trust pursuant to the Intercreditor Agreement, the Registration Rights
Agreement or the Note Purchase Agreement, and (iv) all monies receivable by the
Subordination Agent under the Liquidity Facilities for the Trust. The
Certificates shall be issued in an aggregate principal amount of $106,607,000.
2. Purchase Price. On the basis of the representations,
warranties and agreements contained herein, and subject to the terms and
conditions contained herein, the Purchaser agrees to pay to the Trust an amount
equal to $106,607,000.00 (the "Purchase Price").
3. Closing. (a) The closing of the issuance and sale of the
Certificates (the "Closing") shall be held at 9:00 a.m., Chicago time, at the
Chicago offices of Vedder, Price, Kaufman & Kammholz on December 23, 1997, or at
such other time as shall be satisfactory to the Seller and the Purchaser (the
"Closing Date"). At the Closing, the Seller shall deliver or cause to be
delivered to the Purchaser the Certificates, against payment of the Purchase
Price by the Purchaser by federal funds bank wire transfer or other immediately
available funds to an account to be designated in writing by the Seller at least
one Business Day prior to the Closing Date and registered in the Certificate
Registrar under name of the Purchaser or its nominee.
(b) The Certificates shall be in definitive form or global
form, as specified by the Purchaser, and registered in such names and in such
denominations as the Purchaser shall request in writing not later than one full
business day prior to the Closing Date. The Certificates shall be delivered to
the Purchaser on the Closing Date, with any transfer taxes payable in connection
with the transfer of the Certificates to the Purchaser duly paid, against
payment of the Purchase Price therefor.
4. Distributions. Distributions of principal, any Additional
Payments and interest shall be payable on the Certificates as set forth in the
Trust Agreement.
5. Representations and Warranties of United and the Seller.
United and the Seller incorporate herein by reference all of the representations
and warranties contained in Sections 5, 6 and 7 of the Note Purchase Agreement,
and assign to Purchaser all of their rights, title and interest in and to the
Note Purchase Agreement relating to the Series B Equipment Notes and such
representations and warranties contained therein. In addition, United represents
and warrants to the Purchaser that:
(a) Neither United nor any Affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act) of United has directly, or
through any agent, (i) sold, offered for sale,
2
<PAGE> 3
solicited offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale of
the Certificates in a manner that would require the registration under the
Securities Act of the Certificates or (ii) engaged in any form of general
solicitation or general advertising in connection with the offering of the
Certificates (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act.
(b) Neither United, its Affiliates, nor any person acting on
its or their behalf has engaged or will engage in any directed selling efforts
(within the meaning of Regulation S) with respect to the Certificates, and
United and its Affiliates and any person acting on its or their behalf have
complied and will comply with the offering restrictions requirement of
Regulation S.
(c) It is not necessary in connection with the offer, sale and
delivery of the Certificates to the Purchaser in the manner contemplated by this
Agreement to register the Certificates under the Securities Act or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended.
(d) The Certificates satisfy the requirements set forth in
Rule 144A(d)(3) under the Securities Act.
6. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to United and the Seller that:
(a) Neither United nor the Seller, nor any person representing
United or the Seller has made any representation with respect to
United, the Seller or the offer or sale of any Certificates, and the
Purchaser has received such information as it deems necessary in order
to make its investment decision.
(b) It is purchasing Certificates having an aggregate
principal amount of not less than $100,000 and each account (if any)
for which it is purchasing Certificates is purchasing Certificates
having an aggregate principal amount of not less than $100,000.
(c) It understands that any subsequent transfer of the
Certificates is subject to certain restrictions and conditions set
forth in the Trust Agreement relating to the Certificates (the
"Agreement"), and it agrees to be bound by, and not to resell, pledge
or otherwise transfer the Certificates except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended
(the "Securities Act").
(d) It understands that the Certificates have not been
registered under the Securities Act, are being sold to it in a
transaction that is exempt from the registration requirements of the
Securities Act and that the Certificates may not be reoffered or resold
except as permitted in the following sentence. It agrees, on its own
behalf and on behalf of any accounts for which it is acting as
hereinafter stated, that, if it should sell any Certificate within two
years after the later of the original issuance of such Certificate and
the last date
3
<PAGE> 4
on which such Certificate is owned by United, the Trustee or any
affiliate of any of such persons, it shall do so only (A) in accordance
with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (B) to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes to
the Trustee a signed letter containing representations and agreements
relating to the restrictions on transfer of the Certificates (the form
of which letter can be obtained from the Trustee), (C) outside the
United States in accordance with Rule 904 of Regulation S under the
Securities Act, (D) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act or (E) pursuant to an
effective registration statement under the Securities Act, and it
further agrees to provide to any person purchasing any of the
Certificates from it a notice advising such purchaser that resales of
the Certificates are restricted as stated herein.
(e) It understands that, on any proposed resale of any
Certificates, it shall be required to furnish to United and to the
Trustee such certifications, legal opinions and other information as
United and the Trustee may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. It further
understands that the Certificates purchased by it shall bear a legend
to the foregoing effect.
(f) It is an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its
investment in the Certificates, and it and any accounts for which it is
acting are each able to bear the economic risks of its or their
investments.
(g) It is acquiring the Certificates purchased by it for its
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which it exercises
sole investment discretion and not with a view to any distribution of
the Certificates, subject, nevertheless to the understanding that the
disposition of its property shall at all times be and remain within its
control.
(h) Either: (a) it is not acquiring the Certificates with plan
assets of any plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"); or (b) its
purchase and holding of the Certificates is exempt from the prohibited
transaction restrictions of Section 406(a) of ERISA and Section 4975 of
the Code by an administrative class prohibited transaction exemption
granted by the Department of Labor.
7. Covenants of United. United hereby covenants and agrees
with the Purchaser as follows for so long as the Purchaser owns any
Certificates:
(a) Neither United nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) which could be integrated with the sale of the
Certificates in a manner which would require the registration under the
Securities Act of the Certificates.
4
<PAGE> 5
(b) Not to solicit any offer to buy or offer or sell the
Certificates by means of any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(c) While any of the Certificates remain "restricted
securities" within the meaning of the Securities Act, to make available, upon
request, to any seller of such Certificates the information specified in Rule
144A(d)(4) under the Securities Act, unless United is then subject to Section 13
or 15(d) of the Exchange Act.
(d) Neither United, its Affiliates nor any person acting on
its or their behalf (other than the Initial Purchasers) will engage in any
directed selling efforts (as that term is defined in Regulation S) with respect
to the Certificates, and United and its Affiliates and each person acting on its
or their behalf (other than the Initial Purchasers) will comply with the
offering restrictions requirement of Regulation S.
(e) During the period of two years after the Closing Date,
United will not, and will not permit any of its affiliates (as defined in Rule
144A under the Securities Act) to resell any of the Certificates which
constitute "restricted securities" under Rule 144A that have been reacquired by
any of them, except in compliance with the Securities Act.
8. Conditions Precedent. The obligation of the Seller to sell
the Certificates and the Purchaser to purchase the Certificates shall be subject
to the fulfillment, on or prior to the Closing Date, of the following conditions
precedent: (a) all conditions precedent specified in the Note Purchase Agreement
shall have been satisfied; (b) the representations and warranties of United, the
Owner Trustee, the Pass Through Trustee and the Indenture Trustee contained in
the Note Purchase Agreement and each other Operative Agreement shall be accurate
as of the Closing Date (except to the extent that they relate solely to an
earlier date in which case they shall be accurate as of such earlier date); (c)
the Purchaser shall have received certificates of the Chief Financial Officer or
the Treasurer of United and appropriate officers of the respective Owner
Trustees, Pass Through Trustees and Indenture Trustees, dated as of the Closing
Date, to such effect; (d) the Seller and the Purchaser shall have received a
copy of each opinion required to be delivered under the Note Purchase Agreement
and dated as of the Closing Date; and (e) the Certificates shall be rated "A1"
by Moody's and "AA-" by Standard & Poor's.
9. Communications and Notices. (a) All communications and
notices among the parties to this Agreement shall be in English and in writing,
and any such notice may be given by United States mail, courier service or
telecopy, and any such notice shall be effective when delivered or received or,
if mailed, three days after deposit in the United States mail with proper
postage for ordinary mail prepaid,
5
<PAGE> 6
if to the Seller, to:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopy: (801) 246-5053
if to United, to:
U.S. Mail Overnight Delivery Service
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Attn: Vice President and
Treasurer Treasurer
Telecopy: (708) 952-7117
or if to the Purchaser, to
Kreditanstalt fur Wiederaufbau
Palmengartenstrasse 5-9
D-60325 Frankfurt am Main
Germany
Attention: Head of Aircraft Finance Department KIII6-1
Telecopy: 011-49-69-7431-2944
(b) United, the Seller or the Purchaser, by written notice to
the other, may designate additional or different addresses for subsequent
notices or communications.
(c) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it. Notwithstanding the
foregoing, all communications or notices to the Seller shall be deemed to be
given only when received by a Responsible Officer of the Seller.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW)) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
6
<PAGE> 7
11. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
12. Effect of Headings and Table of Contents. The Section
headings herein are for convenience only and shall not affect the construction
hereof.
13. Successors and Assigns. All covenants, agreements,
representations and warranties in this Agreement by United, the Seller and the
Purchaser shall bind and, to the extent permitted hereby, shall inure to the
benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not (including, without the need for an express
assignment, subsequent holders of the Certificates).
14. Benefits of Agreement. Nothing in this Agreement, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder any benefit or any legal or equitable right, remedy or
claim under this Agreement.
15. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
7
<PAGE> 8
If the foregoing is in accordance with your understanding of
its agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it shall become a binding agreement between United, the Seller and the
Purchaser in accordance with its terms.
Very truly yours,
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Trustee for the
United Airlines 1997-1B Pass
Through Trust
By: /s/ C. SCOTT NIELSEN
-------------------------------------
Name: C. Scott Nielsen
Title: Vice President
S-1
<PAGE> 9
UNITED AIR LINES, INC.
By: /s/ THOMAS A. MUTRYN
----------------------------------
Name: Thomas A. Mutryn
Title: Vice President & Treasurer
S-2
<PAGE> 10
KREDITANSTALT FUR
WIEDERAUFBAU
By: /s/ DR. CHRISTIAN STAAB
----------------------------------
Name: Dr. Christian Staab
Title: VP
By: /s/ WOLFGANG BEHLER
----------------------------------
Name: Wolfgang Behler
Title: Senior Project Manager
S-3
<PAGE> 1
Exhibit 5.1
March 5, 1998
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Re: United Airlines Enhanced Pass Through Certificates,
Series 1997-1A and Series 1997-1B
Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation of a
registration statement on Form S-4 (the "Registration Statement") to be filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Securities Act"), in respect of the registration under
the Securities Act of the Enhanced Pass Through Certificates, Series 1997- 1A
(the "New Class A Certificates") and the Enhanced Pass Through Certificates,
Series 1997-1B (the "New Class B Certificates" and, together with the New Class
A Certificates, the "New Certificates"), to be offered in exchange for all
outstanding Enhanced Pass Through Certificates, Series 1997-1A and Series
1997-1B (collectively, the "Old Certificates"). Each of the New Class A
Certificates and the New Class B Certificates represents a fractional undivided
interest in the United Airlines 1997-1A Pass Through Trust and the United
Airlines 1997-1B Pass Through Trust (the "Trusts"), respectively, which have
been formed pursuant to a pass through trust agreement, dated as of December 23,
1997 (the "Basic Pass Through Trust Agreement"), between United Air Lines, Inc.
("United") and First Security Bank, National Association, as pass through
trustee under each Trust (the "Trustee"), and two separate trust supplements
thereto, dated as of December 23, 1997 (each, a "Trust Supplement" and, together
with the Basic Pass Through Trust Agreement, the "Pass Through Trust
Agreements"), between United and the Trustee.
In connection with this opinion letter, we have examined the
Registration Statement, including the Prospectus that forms a part of the
Registration Statement, the Pass Through Trust Agreements, the forms of Old
Certificates and New Certificates, each filed as an exhibit to the Registration
Statement, and originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, instruments and certificates of
public officials as we have deemed necessary or appropriate to enable us to
render this opinion. In addition, we have assumed: (i) that all signatures are
genuine, (ii) that all documents submitted to us as originals are genuine, (iii)
that all copies submitted to us conform to the originals, (iv) that each Pass
Through Trust Agreement has been duly authorized, executed and delivered by the
applicable Trustee and is the legal, valid,
<PAGE> 2
binding and enforceable agreement of the applicable Trustee and (v) that the Old
Certificates were duly authorized and validly executed, authenticated, issued
and delivered by the Trustees pursuant to the terms of the Pass Through Trust
Agreements.
We are members of the bar of the State of New York, and the opinion set
forth below is restricted to matters controlled by federal laws and the laws of
the State of New York.
Based on the foregoing, it is our opinion that, when (a) the applicable
provisions of the Securities Act and such "Blue Sky" or other state securities
laws as may be applicable shall have been compiled with and (b) the New
Certificates, in the forms filed as exhibits to the Registration Statement, have
been duly executed and authenticated in accordance with the Pass Through Trust
Agreements, and duly issued and delivered by the Trusts in exchange for an equal
principal amount of Old Certificates pursuant to the terms of the Exchange
Offer, the New Certificates will be legal, valid, binding and enforceable
obligations of the applicable Trust, subject to (x) limitations imposed by
bankruptcy, reorganization, moratorium, insolvency, fraudulent conveyance,
fraudulent transfer, preferential transfer and other laws of general application
relating to or affecting the enforceability of creditors' rights and to general
principles of equity, including, without limitation, laches and estoppel as
equitable defenses, concepts of materiality, reasonableness, good faith and fair
dealing (regardless of whether such enforceability is considered or applied in a
proceeding in equity or at law), and considerations of impracticability or
impossibility of performance and defenses based upon unconscionability and (y)
the qualification that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this Firm under the headings
"Legal Matters" and "Federal Income Tax Consequences" in the Prospectus included
in the Registration Statement. In giving such consent, we do not thereby admit
that we are "experts" within the meaning of the Securities Act or the rules and
regulations of the Securities and Exchange Commission issued thereunder with
respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Mayer, Brown & Platt
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 26,
1998, included in the United Air Lines, Inc. Form 10-K for the year ended
December 31, 1997, and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 6, 1998
<PAGE> 1
EXHIBIT 23.3
AIRCRAFT INFORMATION SERVICES, INC.
23232 PERALTA DRIVE, SUITE 115
LAGUNA HILLS, CALIFORNIA 92653
March 4, 1998
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Mr. John Springer
RE: Registration Statement on Form S-4 of United Air Lines, Inc.
relating to Enhanced Pass Through Certificates, Series 1997-1A
and Series 1997-1B (the "Registration Statement")
Ladies and Gentlemen:
We consent to the use of our report dated November 6, 1997 (the
"Report") in the Registration Statement and to the reference to our name in the
text of the Registration Statement under the headings "Prospectus Summary --
Equipment Notes and the Aircraft," "Risk Factors -- Appraisals and Realizable
Value of Aircraft," "Description of the Aircraft and the Appraisals" and
"Experts" and to the summary of the Report contained in the text under such
headings.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ FRED E. BEARDEN
-----------------------------------
Name: Fred E. Bearden
Title: President
<PAGE> 1
EXHIBIT 23.4
BK ASSOCIATES, INC.
1295 NORTHERN BOULEVARD
MANHASSET, NEW YORK 11030
March 4, 1998
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Mr. John Springer
RE: Registration Statement on Form S-4 of United Air Lines, Inc.
relating to Enhanced Pass Through Certificates, Series 1997-1A
and Series 1997-1B (the "Registration Statement")
Ladies and Gentlemen:
We consent to the use of our report dated November 6, 1997 (the
"Report") in the Registration Statement and to the reference to our name in the
text of the Registration Statement under the headings "Prospectus Summary --
Equipment Notes and the Aircraft," "Risk Factors -- Appraisals and Realizable
Value of Aircraft," "Description of the Aircraft and the Appraisals" and
"Experts" and to the summary of the Report contained in the text under such
headings.
Sincerely,
BK ASSOCIATES, INC.
/s/ JOHN F. KEITZ
---------------------------
Name: John F. Keitz
Title: President
<PAGE> 1
EXHIBIT 23.5
AVSOLUTIONS
7518-B DIPLOMATIC DRIVE
MANASSAS, VIRGINIA 20109
March 4, 1998
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Mr. John Springer
RE: Registration Statement on Form S-4 of United Air Lines, Inc.
relating to Enhanced Pass Through Certificates, Series 1997-1A
and Series 1997-1B (the "Registration Statement")
Ladies and Gentlemen:
We consent to the use of our report dated November 6, 1997 (the
"Report") in the Registration Statement and to the reference to our name in the
text of the Registration Statement under the headings "Prospectus Summary --
Equipment Notes and the Aircraft," "Risk Factors -- Appraisals and Realizable
Value of Aircraft," "Description of the Aircraft and the Appraisals" and
"Experts" and to the summary of the Report contained in the text under such
headings.
Sincerely,
AVSOLUTIONS
/s/ QUENTIN BRASIE
---------------------------
Name: Quentin Brasie
Title: Vice-President
<PAGE> 1
Exhibit 23.6
February 28, 1998
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Re: Registration Statement on Form S-4 with respect to the registration
of the United Airlines Enhanced Pass Through Certificates, Series
1997-1A and Series 1997-1B
Ladies and Gentlemen:
We hereby consent to the reference to this firm in the above-referenced
Registration Statement and the related Prospectus under the headings "Prospectus
Summary -- Section 1110 Protection" and "Summary of New Certificates and Certain
Agreements -- Description of the Equipment Notes -- Remedies," in each case with
respect to the summary of our opinion dated as of December 23, 1997 contained in
the text under such headings. In giving such consent, we do not thereby admit
that we are "experts" within the meaning of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
issued thereunder with respect to any part of the Registration Statement,
including this Exhibit.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By:/s/ Dean N. Gerber
-----------------------------
Name:Dean N. Gerber
Title: Partner
<PAGE> 1
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE 87-0131890
(JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
NOT APPLICABLE
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
UNITED AIR LINES, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2675206
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(ADDRESS OR PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ENHANCED PASS THROUGH CERTIFICATES
(TITLE OF THE INDENTURE SECURITIES)
<PAGE> 2
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining of supervising authority
to which it is subject.
Comptroller of the Currency, Washington, D.C. 20230; Federal Reserve
Bank of San Francisco, San Francisco, CA 94120; Federal Deposit
Insurance Corporation, Washington, D.C. 20429.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations With The Obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the Trustee.
Item 16. List of Exhibits. List below all exhibits filed as part of this
statement of eligibility and qualification.
Exhibit 1: copy of the articles of association as now in effect
Exhibit 2: certificate of authority to commence business including a
certificate of the Comptroller of the Currency evidencing
the change of the Trustee's name
Exhibit 3: copy of the authorization of the trustee to exercise
corporate trust powers
Exhibit 4: copy of the bylaws of the trustee
Exhibit 5: Not applicable
Exhibit 6: Not applicable
Exhibit 7: A copy of the latest report published pursuant to law or
its supervising or examining authority
Exhibit 8: Not applicable
Exhibit 9: Not applicable
<PAGE> 3
Signature
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Security Bank, National Association, a national
banking association organized and existing under the laws of the United States,
has duly caused this statement of eligibility and qualification to be signed on
its behalf by the undersigned thereunder duly authorized, all in the City of
Salt Lake City, and State of Utah, on the 5th day of February, 1998.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, Trustee
By: /s/ Greg A. Hawley
-------------------------
Greg A. Hawley
Vice President
<PAGE> 4
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FIRST SECURITY BANK
NATIONAL ASSOCIATION
(As Amended)
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be "First
Security Bank, National Association."
SECOND. The place where the main banking house or office of this
Association shall be located shall be Ogden, County of Weber, State of Utah. Its
general business and its operations of discount and deposit shall also be
carried on in said city, and the branch or branches established or maintained by
it in accordance with the provisions of Section 36 of Title 12, United States
Code. The Board of Directors shall the power to change the location of the main
office of this Association (i) to any other authorized branch location within
the limits of Ogden, Utah, without the approval of the shareholders of this
Association and upon notice to the Comptroller of the Currency or, (ii) to any
other place within Ogden, Utah, or within thirty (30) miles of Ogden, Utah, with
the approval of the shareholders and the Comptroller of the Currency. The Board
of Directors shall have the power to change the location of any branch or
branches of this Association to any other location, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the Currency.
THIRD. The Board of Directors of the consolidated association shall
consist of not less than five (5) nor more than twenty-five (25) of its
shareholders.
FOURTH. There shall be an annual meeting of the shareholders the
purpose of which shall be the election of Directors and the transaction of
whatever other business may be brought before said meeting. It shall be held at
the main office of the Bank or other convenient place as the Board of Directors
may designate, on the third Monday of March of each year, but if no election is
held on that day, it may be held on any subsequent day according to such lawful
rules as may be prescribed by the Board of Directors. Nominations for election
to the Board of Directors may be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the Bank entitled to
vote for election of directors. Nominations, other than those made by or on
behalf of the existing management of the Bank, shall be made in writing and
shall be delivered or mailed to the President of the Bank and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of stockholders called for the election of directors,
provided, however, that if less than 21 days notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
the Bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the Bank that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the Bank owned by
the notifying shareholder. Nominations not made in accordance herewith may, in
his discretion, be disregarded by the Chairman of the meeting, and upon his
instructions, the voting inspectors may disregard all votes cast for each such
nominee.
<PAGE> 5
FIFTH. The authorized amount of capital stock of this Association
shall be One Hundred Million Dollars ($100,000,000.00), divided into 4,000,000
shares of common stock of the par value of Twenty-five Dollars ($25.00) each;
provided, however, that said capital stock may be increased or decreased from
time to time, in accordance with the provision of the laws of the United States.
The shareholders of this Association shall not have any pre-emptive rights to
acquire unissued shares of this Association.
SIXTH. (1) The Board of Directors shall appoint one of its members
President of this Association. It may also appoint a Chairman of the Board, and
one or more Vice Chairman. The Board of Directors shall have the power to
appoint one or more Vice Presidents, at least one of whom shall also be a member
of the Board of Directors, and who shall be authorized, in the absence of the
President, to perform all acts and duties pertaining to the office of the
President; to appoint a Cashier and such other officers and employees as may be
required to transact the business of this Association; to fix the salaries to be
paid to such officers or employees and appoint others to take their place.
(2) The Board of Directors shall have the power to define the
duties of officers and employees of this Association and to require adequate
bonds from them for the faithful performance of their duties; to make all
By-Laws that may be lawful for the general regulation of the business of this
Association and the management of its affairs, and generally to do and perform
all acts that may be lawful for a Board of Directors to do and perform.
(3) Each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, administrative or investigative (other than an action by or in
the right of the Association) by reason of the fact that he is or was a
director, officer, employee or agent of the Association or is or was serving at
the request of the Association as a director, officer, employee, fiduciary or
agent of another corporation, partnership, joint venture, trust, estate or other
enterprise or was acting in furtherance of the Association's business shall be
indemnified against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Association; provided, however, no indemnification shall be given to a person
adjudged guilty of, or liable for, willful misconduct, gross neglect of duty, or
criminal acts or where there is a final order assessing civil money penalties or
requiring affirmative action by such person in the form of payments to the
Association. The termination of any action, suit or proceeding by judgment,
order, settlement, or its equivalent, shall not of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Association.
(4) Each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Association (such action or suit being known as a "derivative
proceeding") to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Association or is or was
serving at the request of the Association as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust,
estate or other enterprise shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Association; provided, however, that no indemnification shall be given where
there is a final order assessing civil money penalties or requiring affirmative
action by such person in the form of payments to the Association; and provided
further that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Association,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
<PAGE> 6
(5) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in (3) or (4) of this Article or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him in
connection therewith.
(6) Any indemnification under (3) or (4) of this Article
(unless ordered by a court) shall be made by the Association only as authorized
in the specific case upon a reasonable determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in (3) or (4) of this
Article. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in written opinion, or (c) by the stockholders.
(7) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Association in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in (6) of this Article (i) if the Board of Directors determines, in
writing, that (1) the director, officer, employee or agent has a substantial
likelihood or prevailing on the merits; (2) in the event the director, officer,
employee or agent does not prevail, he or she will have the financial capability
or reimburse the Association; and (3) payment of expenses by the Association
will not adversely affect its safety and soundness; and (ii) upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Association as authorized in this Article.
(8) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any By-Law, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office and shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors, successors in interest, and administrators of
such a person.
SEVENTH. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
EIGHTH. The Board of Directors of this Association, or any three or
more shareholders owning, in the aggregate, not less than ten per centum of the
stock of this Association, may call a special meeting of shareholders at any
time: Provided, however, that unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this Association. These Articles of
Association may be amended at any regular or special meeting of the Shareholders
by the affirmative vote of the shareholders owning at least a majority of the
stock of this Association, subject to the provisions of the banking laws of the
United States. The notice of any shareholders' meeting, at which an amendment to
the Articles of Association of this Association is to be considered shall be
given as hereinabove set forth.
<PAGE> 7
EXHIBIT 2
CERTIFICATE
TREASURY DEPARTMENT )
Office of ) ss:
Comptroller of the Currency)
I, Thomas G. DeShazo, Deputy Comptroller of the Currency, do hereby certify
that:
Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., the
Comptroller of the Currency charters and exercises regulatory and supervisory
authority over all national banking associations;
On December 9, 1881, The First National Bank of Ogden, Ogden, Utah was chartered
as a National Banking Association under the laws of the United States and under
Charter No. 2597;
The document hereto attached is a true and complete copy of the Comptroller
Certificate issued to The First National Bank of Ogden, Ogden, Utah, the
original of which certificate was issued by this Office on December 9, 1881;
On October 2, 1922, in connection with a consolidation of The First Bank of
Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the title
was charged to "The First & Utah National Bank of Ogden"; on January 18, 1923,
The First & Utah National Bank of Ogden changed its title to "First Utah
National Bank of Ogden"; on January 19, 1926, the title was changed to "First
National Bank of Ogden"; and on February 24, 1934, the title was changed to
"First Security Bank of Utah, National Association"; and
First Security Bank of Utah, National Association, Ogden, Utah, continues to
hold a valid certificate to do business as a National Banking Association.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
caused the seal of Office of the Comptroller of the Currency to
be affixed to these presents at the Treasury Department, in the
City of Washington and District of Columbia, this fourth day of
April, A.D. 1972.
/s/ Thomas G. DeShazo
--------------------------------------------
Deputy Comptroller of the Currency
<PAGE> 8
TREASURY DEPARTMENT
Comptroller of the Currency,
Washington, December 9th, 1881
WHEREAS, by satisfactory evidence presented to the undersigned it has
been made to appear that "The First National Bank of Ogden" in Ogden
City in the County of Weber, and Territory of Utah has complied with
all the provisions of the Revised Statutes of the United States,
required to be complied with before an association shall be authorized
to commence the business of Banking.
Now, therefore, I, John Jay Knox, Comptroller of the Currency, do
hereby certify that "The First National Bank of Ogden" in Ogden City
in the County of Weber, and Territory of Utah is authorized to
commence the business of Banking, as provided in Section Fifty-one
hundred and sixty-nine of the Revised Statutes of the United States.
In testimony whereof, witness my hand and seal of
office this 9th day of December, 1881.
/s/ John Jay Knox
---------------------------------
Comptroller of the Currency
<PAGE> 9
EXHIBIT 3
FEDERAL RESERVE BOARD
WASHINGTON, D.C.
I, S.R. Carpenter, Assistant Secretary of the Federal Reserve
Board, do hereby certify that it appears from the records of the
Federal Reserve Board that:
(1) Pursuant to authority vested in the Federal Reserve Board by
an Act of Congress approved December 23, 1913, known as the Federal
Reserve Act, as amended, the Federal Reserve Board has heretofore
granted to the First National Bank of Ogden, Ogden, Utah, the right to
act when not in contravention of State or local law, as trustee,
executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in
any other fiduciary capacity in which State banks, trust companies or
other corporations which come into competition with national banks are
permitted to act under the laws of the State of Utah;
(2) On February 24, 1934, the First National Bank of Ogden,
Ogden, Utah, changed its title to First Security Bank of Utah,
National Association, under the provisions of an Act of Congress
approved May 1, 1886, whereby all of the rights, liabilities and
powers of such national bank under its old name devolved upon and
inured to the bank under its new name; and
(3) Pursuant to the permission heretofore granted by the Federal
Reserve Board to the First National Bank of Ogden, Ogden, Utah, as
aforesaid, and by virtue of the change in the title of such bank, the
First Security Bank of Utah, National Association has authority to
act, when not in contravention of State or local law, as trustee,
executor, administrator, registrar of stocks and bonds, guardian of
estates of lunatics, or in any other
<PAGE> 10
fiduciary capacity in which State banks, trust companies or other
corporations which come into competition with national banks are
permitted to act under the laws of the State of Utah, subject to
regulations prescribed by the Federal Reserve Board.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused
the seal of the Federal Reserve Board to be affixed at the City of
Washington, in the District of Columbia, on the 1st day of March,
1934.
S.R. Carpenter
--------------------------------------------------
Assistant Secretary, Federal Reserve Board.
<PAGE> 11
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 1, 1934.
First Security Bank of Utah, National Association,
Ogden, Utah.
Dear Sirs:
Reference is made to the change in the name of the First National Bank of
Ogden, Ogden, Utah, pursuant to the provisions of the Act of May 1, 1886, to
First Security Bank of Utah, National Association, and there is inclosed a
certificate issued by the Federal Reserve Board showing the trust powers
heretofore granted to the bank under its former name and that it is authorized
to exercise such powers under its new name.
Very truly yours,
/s/ S.R. Carpenter
S.R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE> 12
[LOGO]
Comptroller of the Currency
Administrator of National Banks
LICENSING UNIT (APPLICATIONS)
50 Fremont Street, Suite 3900
San Francisco, CA 94105
(415) 545-5900, FAX (415) 545-5925
June 20, 1996
Board of Directors
FIRST SECURITY BANK OF UTAH, N.A.
c/o First Security Corporation
Attn: Brad D. Hardy, EVP
Post Office Box 30006
Salt Lake City, Utah 84130
RE: MERGER - FIRST SECURITY BANK OF IDAHO, N.A., BOISE, IDAHO INTO FIRST
SECURITY BANK OF UTAH, N.A., OGDEN, UTAH, UNDER THE TITLE OF FIRST
SECURITY BANK, N.A., ODGEN, UTAH. CONTROL NO: 96-WE-02-010
Dear Members of the Board:
This letter is the OFFICIAL CERTIFICATION of the Comptroller of the Currency to
merge First Security Bank of Idaho, National Association, Boise, Idaho into
First Security Bank of Utah, National Association, Ogden, Utah, EFFECTIVE AS OF
JUNE 21, 1996. THE RESULTING BANK TITLE IS FIRST SECURITY BANK, NATIONAL
ASSOCIATION AND CHARTER NUMBER IS 2597.
This is also the official authorization given to First Security Bank, National
Association to operate the branches of the target institution and to operate the
main office of the target institution as a branch. Branches of a national bank
target are not listed since they are automatically carried over to the resulting
bank and retain their current OCC branch numbers.
Please be advised that the Charter Certificate for the merged bank, First
Security Bank of Idaho, National Association, MUST BE RETURNED TO THE WESTERN
DISTRICT OFFICE for cancellation.
Very truly yours,
Robert G. Tornborg
Robert G. Tornborg
Acting Director of Bank Supervision - Compliance and Analysis
<PAGE> 13
EXHIBIT 4
BY-LAWS OF THE
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
Organized under the National Banking laws of the United States.
MEETINGS
SECTION 1. Unless otherwise provided by the articles of association a
notice of each shareholder's meeting, setting forth clearly the time, place and
purpose of the meeting, shall be given, by mail, to each shareholder of record
of this bank at lease 10 days prior to the date of such meeting. Any failure to
mail such notice or any irregularity therein, shall not affect the validity of
such meeting or of any of the proceedings thereat.
SECTION 2. A record shall be made of the shareholders represented in
person and by proxy, after which the shareholders shall proceed to the
transaction of any business that may properly come before the meeting. A record
of the shareholder's meeting, giving the names of the shareholders present and
the number of shares of stock held by each, the names of the shareholders
represented by proxy and the number of shares held by each, and the names of the
proxies, shall be entered in the records of the meeting in the minute book of
the bank. This record shall show the names of the shareholders and the number of
shares voted for each resolution or voted for each candidate for director.
Proxies shall be secured for the annual meeting alone, shall be dated, and shall
be filed with the records of the meeting. No officer, director, employee, or
attorney for the bank may act as proxy.
The chairman or Secretary of the meeting shall notify the directors-elect of
their election and of the time at which they are required to meet at the banking
house for the purpose of organizing the new board. At the appointed time, which
as closely as possible shall follow their election, the directors-elect shall
convene and organize.
The president or cashier shall then forward to the office of the Comptroller of
the Currency a letter stating that a meeting of the shareholders was held in
accordance with these by-laws, stating the number of shares represented in
person and the number of shares represented by proxy, together with a list of
the directors elected and the report of the appointment and signatures of
officers.
OFFICERS
SECTION 3. Each officer and employee of this bank shall be responsible for
all such moneys, funds, valuables, and property of every kind as may be
entrusted to his care or otherwise come into his possession, and shall
faithfully and honestly discharge his duties and apply and account for all such
moneys, funds, valuables and other property that may come into his hands as such
officer or employee and pay over and deliver the same to the order of the Board
of Directors or to such person or persons as may be authorized to demand and
receive same.
Association By-Laws
<PAGE> 14
SECTION 4. If the Board of Directors shall not require separate bonds, it
shall require a blanket bond in an amount deemed by it to be sufficient.
SECTION 5. The following is an impression of the seal adopted by the Board
of Directors of this bank: (Here in the original resolution was imprinted the
Association's seal).
SECTION 6. The various branches of this bank shall be open for business
during such hours as shall be customary in the vicinity, or as shall be fixed,
as to any branch, by the clearing house association of which such branch shall
be a member.
SECTION 7. The regular meeting of the board of directors shall be held on
the first Wednesday after the first Tuesday of each month. When any regular
meeting of the board of directors falls upon a holiday, the meeting shall be
held on such other day as the board may previously designate. Special meetings
may be called by the president, any vice-president, the secretary or the
cashier, or at the request of three or more directors.
MINUTE BOOK
SECTION 8. The organization papers of this bank, the returns of the
elections, the proceedings of all regular and special meetings of the directors
and of the shareholders, the by-laws and any amendments thereto, and reports of
the committees of directors shall be recorded in the minute book; and the
minutes of each meeting shall be signed by the chairman and attest by the
secretary of the meeting.
TRANSFERS OF STOCK
SECTION 9. The stock of this bank shall be assignable and transferable
only on the books of this bank, subject to the restrictions and provisions of
the national banking laws; and a transfer book shall be provided in which all
assignments and transfers of stock shall be made.
SECTION 10. Certificates of stock, signed by the president or vice-
president, and the secretary or the cashier or any assistant cashier, may be
issued to shareholders, and when stock is transferred the certificates thereof
shall be returned to the association, cancelled, preserved, and new certificates
issued. Certificates of stock shall state upon the face thereof that the stock
is transferable only upon the books of the association, and shall meet the
requirements of section 5139, United States Revised Statutes, as amended.
EXPENSES
SECTION 11. All the current expenses of the bank shall be paid by the
cashier, except that the current expenses of each branch shall be paid by the
manager thereof; and such officer shall, every six months, or more often if
required, make to the board a report thereof.
Association By-Laws
<PAGE> 15
EXAMINATIONS
SECTION 12. There shall be appointed by the board of directors a committee
of three members, exclusive of the active officers of the bank, whose duty it
shall be to examine, at least once in each period of eighteen months, the
affairs of each branch as well as the head office of the association, count its
cash, and compare its assets and liabilities with the accounts of the general
ledgers, ascertain whether the accounts are correctly kept and that the
condition of the bank corresponds therewith, and whether the bank is in a sound
and solvent condition, and to recommend to the board such changes in the manner
of doing business, etc., as shall seem to be desirable, the result of which
examination shall be reported in writing to the board at the next regular
meeting thereafter, provided that the appointment of such committee and the
examinations by it may be dispensed with if the board shall cause such
examination to be made and reported to the board by accountants approved by it.
CHANGES IN BY-LAWS
SECTION 13. These by-laws may be changed or amended by the vote of a
majority of the directors at any regular or special meeting of the board,
provided, however, that the directors shall have been given 10 days notice of
the intention to change or offer an amended thereto.
REPEAL
SECTION 14. All by-laws heretofore adopted are repealed.
Association By-Laws
<PAGE> 16
<TABLE>
<CAPTION>
First Security Bank, W.A. EXHIBIT 7 Call Date 03/31/97 ST-BC: 49-0290 FFEEC 031
P.O. Box 30011
Salt Lake City, UT 84130 Vendor ID: D CERT: 13718 Page R1 - 10
Transit Number: 12403031 Transmitted to EDS as 0042861 on 04/30/97 at 19:02:11 CST 12
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
<S> <C> <C> <C>
13. Deposits:
a. In domestic offices (sum of totals of RCOH
columns A and C from Schedule RC-E, part 1) ____________________________________2200.. 7,079,084 13.a
RCON
(1) Noninterest-bearing (1)__________________6631......1,582,595 ........... 13.a.1
(2) Interest-bearing ________________________6636......5,496,489 ........... 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from RCFH
Schedule RC-E, part II)________________________________________________________2200 51,656 13.b
RCFN
(1) Noninterest-bearing______________________6631...... 0 ........... 13.b.1
(2) Interest-bearing_________________________6636...... 51,656 ........... 13.b.2
RCFD
14. Federal funds purchased and securities sold under agreements to repurchase__________2800.. 1,987,674 14.
RCOH
15. a. Demand notes issued to the U.S. Treasury_________________________________________2840.. 20,244 15.a
RCFD
b. Trading liabilities (from Schedule RC-D)_________________________________________3548.. 130 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less____________________________________2332.. 552,757 16.a
b. With a remaining maturity of more than one year__________________________________2333.. 353,202 16.b
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding____________________________2920.. 803 18.
19. Subordinated notes and debentures (2)_______________________________________________3200.. 45,000 19.
20. Other liabilities from Schedule RC-G)_______________________________________________2930.. 362,343 20.
21. Total liabilities (sum of items 13 through 20)______________________________________2948.. 10,452,893 21.
22. Not applicable.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus_______________________________________3838.. 0 23.
24. Common stock________________________________________________________________________3230.. 59,270 24.
25. Surplus (exclude all surplus related to preferred stock)____________________________3839.. 285,944 25.
26. a. Undivided profits and capital reserves___________________________________________3632.. 590,530 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities___________8434.. (14,857) 26.b
27. Cumulative foreign currency translation adjustments_________________________________3284.. 0 27.
28. Total equity capital (sum of items 23 through 27)__________________________________3230.. 920,887 28.
29. Total liabilities, limited-life preferred stock, and security capital (sum of
items 21 and 28)____________________________________________________________________3300.. 11,373,780 29.
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes
the most comprehensive level of auditing work performed for the bank by RCFR Number
independent external auditors as of any date during 1996___________________________6724.. 2 4.1
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ---------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
Association By-Laws
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
First Security Bank, N.A. EXHIBIT 7 Call date: 03/31/97 ST-BK: 49-0293 EFIEC C31
P.O. Box 30011 Page 21-9
Salt Lake City, UT 84130 Vendor ID: D CERT: 13718 11
Transit Number: 12400001 Transmitted to EDS as 0042861 on 04/30/97 at 19:02:11 CST
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR MARCH 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
Quarter.
SCHEDULE RC - BALANCE SHEET
<TABLE>
<CAPTION>
C400 <-
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
------
a. Noninterest bearing balances and currency and coin (1)_________________________0081. . 655,052 1.a
b. Interest-bearing balances (2)__________________________________________________0071. . 67 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)_____________________1794. . 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)___________________1773. . 2,180,112 2.b
3. Federal funds sold and securities purchased under agreements to resell____________1350. . 66,178 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
------
(from Schedule RC-C)______________________________2122. . 7,516,685 . . . . . . . 4.a
b. LESS: Allowance for loan and lease losses_________3123. . 99,148 . . . . . . . 4.b
c. LESS: Allocated transfer risk reserve_____________3128. . 0 . . . . . . . 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)____________________________2125. . 7,417,537 4.d
5. Trading assets (from Schedule RC-D)_______________________________________________3545. . 388,486 5.
6. Premises and fixed assets (including capitalized leases)__________________________2145. . 174,816 6.
7. Other real estate owned (from Schedule RC-M)______________________________________2150. . 825 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)____________________________________________________________________2130. . 0 8.
9. Customers' liability to this bank on acceptences outstanding______________________2155. . 803 9.
10. Intangible assets (from Schedule RC-M)____________________________________________2143. . 157,257 10.
11. Other assets (from Schedule RC-F)_________________________________________________2160. . 332,647 11.
12. Total assets (sum of items 1 through 11)__________________________________________2170. . 11,373,780 12.
- -----------
(1) Includes cash items in process of collection and deposited debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
UNITED AIR LINES, INC.
OFFER TO EXCHANGE
ENHANCED PASS THROUGH CERTIFICATES, SERIES 1997-1A AND
SERIES 1997-1B WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING ENHANCED PASS THROUGH CERTIFICATES,
SERIES 1997-1A AND SERIES 1997-1B
PURSUANT TO THE PROSPECTUS DATED , 1998.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERED
OLD CERTIFICATES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION
DATE.
- --------------------------------------------------------------------------------
Deliver to:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By Hand, Registered or Certified Mail or Overnight Courier:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
By Facsimile:
(801) 246-5053
Confirm by Telephone:
(801) 246-5657
Dianne Diaz
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID
DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus, dated ________,
1998 (the "Prospectus"), of United Air Lines, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal, which together constitute the offer
(the "Exchange Offer") to exchange an aggregate principal amount of up to
$445,826,000 of Enhanced Pass Through Certificates, Series 1997-1A and an
aggregate principal amount of up to $106,607,000 of Enhanced Pass Through
Certificates, Series 1997-1B, which have been registered under the Securities
Act of 1933, as amended (collectively, the "New Certificates"), for an equal
principal amount of the outstanding Enhanced Pass Through Certificates, Series
1997-1A and Enhanced Pass Through Certificates, Series 1997-1B (collectively,
the "Old Certificates"). The Exchange Offer is being made in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement, dated as of December 23, 1997, between the Company and the Initial
Purchasers named therein (the "Registration Rights Agreement").
For each Old Certificate accepted for exchange, the holder of such Old
Certificate will receive a New Certificate having a principal amount equal to
that of the surrendered Old Certificate. New Certificates will accrue interest
at the applicable per annum rate for such New Certificates as set forth on the
cover page of the Prospectus, from the most recent date to which interest was
paid on the Old Certificates or, if no interest has been paid, from December 23,
1997 (the "Issuance Date"). Interest on the New Certificates is payable on March
2, June 2, September 2 and December 2 of each year, commencing upon the
consummation of the Exchange Offer, subject to the terms of the Intercreditor
Agreement (as defined in the Prospectus). If neither the consummation of the
Exchange Offer nor the declaration by the Securities and Exchange Commission of
a Shelf Registration Statement relating to the sale of the Old Certificates to
be effective (each a "Registration Event") occurs on or prior to the 180th
calendar day after the Issuance Date, the interest rate per annum passed through
to holders of Old Certificates shall be increased by 0.50% from and including
July 1, 1998 to but excluding the date on which a Registration Event occurs. If
such Shelf Registration Statement ceases to be effective at any time during the
period specified by the Registration Rights Agreement for more than 60 days,
whether or not consecutive, during any 12-month period, the interest rate per
annum passed through to the holders of Old Certificates shall be increased by
0.50% from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective until such time as such Shelf
Registration Statement again becomes effective (or, if earlier, the end of such
period specified by the Registration Rights Agreement). The Company reserves the
right, at any time or from time to time, to extend the Exchange Offer at its
discretion, in which event the term "Expiration Date" shall mean the latest time
and date to which the Exchange Offer is extended. The Company shall notify the
holders of the Old Certificates of any extension by means of a press release or
other public announcement prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Certificates if Old
Certificates are to be forwarded herewith or if a tender of Old Certificates, if
available, is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedure set forth in "The Exchange Offer" section
of the Prospectus and an Agent's message is not delivered. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by the Book-Entry Transfer Facility to and received by the Exchange Agent and
forming a part of a Book-Entry Confirmation (as defined below), which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by, and makes the
representations and warranties contained in this Letter of Transmittal and that
the Company may enforce this Letter of Transmittal against such participant.
Holders of Old Certificates whose certificates are not immediately available, or
who are unable to deliver their certificates or confirmation of the book-entry
tender of their Old Certificates into the Exchange Agent's account at the
Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Certificates according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
-2-
<PAGE> 3
List below the Old Certificates to which this Letter of Transmittal
relates. If the space provided below is inadequate, list the certificate numbers
and principal amount on a separate signed schedule and attach that schedule to
this Letter of Transmittal.
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<CAPTION>
DESCRIPTION OF OLD CERTIFICATES TENDERED
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER
(FILL IN, IF BLANK) OLD CERTIFICATES TENDERED
AGGREGATE
CERTIFICATE OR PRINCIPAL AMOUNT
REGISTRATION REPRESENTED BY PRINCIPAL AMOUNT
NUMBER(S)* OLD CERTIFICATES TENDERED **
$
<S> <C> <C> <C>
TOTAL AMOUNT TENDERED: $ $
</TABLE>
- ----------
* Need not be completed by book-entry holders. Such holders should check the
appropriate box below and provide the requested information.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Old Certificates. All
tenders must be in integral multiples of $1,000.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Certificates must
complete this letter in its entirety.
-3-
<PAGE> 4
(THE FOLLOWING BOXES ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY.)
[ ] CHECK HERE IF TENDERED OLD CERTIFICATES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:_________________________________________
DTC Account Number: ___________________________________________________
Transaction Code Number:_______________________________________________
[ ] CHECK HERE IF TENDERED OLD CERTIFICATES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_______________________________________
Date of Execution of Notice
of Guaranteed Delivery:________________________________________________
Name of Eligible Institution Which Guaranteed Delivery:________________
If Guaranteed Delivery is to be made by book-entry transfer:
DTC Account Number:____________________________________________________
Transaction Code Number:_______________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD CERTIFICATES FOR
YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:__________________________________________________________________
Address:_______________________________________________________________
_______________________________________________________________
Telephone Number and Contact Person:___________________________________
-4-
<PAGE> 5
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described principal amount
of Old Certificates in exchange for an identical principal amount of New
Certificates. Subject to, and effective upon, the acceptance for exchange of the
Old Certificates tendered herewith, the undersigned hereby exchanges, assigns
and transfers to or upon the order of the Company all right, title and interest
in and to such Old Certificates as are being tendered herewith, including all
rights to accrued and unpaid interest thereon as of the Expiration Date. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent as
its agent and attorney-in-fact (with full knowledge that the Exchange Agent is
also acting as agent of the Company in connection with the Exchange Offer) to
cause the Old Certificates to be assigned, transferred and exchanged.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, ASSIGN AND TRANSFER THE OLD
CERTIFICATES TENDERED HEREBY AND TO ACQUIRE NEW CERTIFICATES ISSUABLE UPON THE
EXCHANGE OF SUCH TENDERED OLD CERTIFICATES, AND THAT, WHEN THE OLD CERTIFICATES
ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND
UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES
AND ENCUMBRANCES, AND THAT THE OLD CERTIFICATES TENDERED HEREBY ARE NOT SUBJECT
TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED HEREBY FURTHER REPRESENTS THAT
ANY NEW CERTIFICATES ACQUIRED IN EXCHANGE FOR OLD CERTIFICATES TENDERED HEREBY
WILL HAVE BEEN ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH CERTIFICATES, WHETHER OR NOT SUCH PERSON IS THE UNDERSIGNED, THAT
NEITHER THE HOLDER OF SUCH OLD CERTIFICATES NOR ANY SUCH OTHER PERSON IS ENGAGED
IN, OR HAS AN ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE
DISTRIBUTION OF SUCH NEW CERTIFICATES, AND THAT NEITHER THE HOLDER OF SUCH OLD
CERTIFICATES NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED IN RULE 405
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OF THE
COMPANY. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL
DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR
DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD
CERTIFICATES TENDERED HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE
TERMS OF THE EXCHANGE OFFER.
The undersigned understands that tenders of Old Certificates pursuant
to any one of the procedures described in "The Exchange Offer--Procedures for
Tendering Old Certificates" in the Prospectus and in the instructions herein
will, upon the Company's acceptance for exchange of such tendered Old
Certificates, constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Exchange Offer.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Old Certificates or transfer ownership of such Old Certificates on the
account books maintained by a book-entry transfer facility. The undersigned
further agrees that acceptance of any tendered Old Certificates by the Company
and the issuance of New Certificates in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement and that the Company shall have no further obligations or
liabilities thereunder for the registration of the Old Certificates or the New
Certificates.
The Exchange Offer is not conditioned upon any principal amount of Old
Certificates being tendered for exchange. However, the Exchange Offer is subject
to certain conditions set forth in the Prospectus under the caption "The
Exchange Offer--Conditions." The undersigned recognizes that as a result of
these conditions (which may be waived, in whole or in part, by the Company), as
more particularly set forth in the Prospectus, the Company may not be required
to exchange any of the Old Certificates tendered hereby and, in such event, the
Old
-5-
<PAGE> 6
Certificates not exchanged will be returned to the undersigned at the address
shown below the signature of the undersigned.
The name(s) and addressee(s) of the registered holder(s) of the Old
Certificates tendered hereby should be printed above, if they are not already
set forth above, as they appear on the certificates representing such Old
Certificates. The certificate number(s) and the Old Certificates that the
undersigned wishes to tender should be indicated in the appropriate boxes above.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on the position of the staff of the Security and Exchange Commission
(the "Commission") as set forth in certain interpretive letters addressed to
third parties in other transactions substantially similar to the Exchange Offer,
which lead the Company to believe that New Certificates issued pursuant to the
Exchange Offer to a holder in exchange for Old Certificates may be offered for
resale, resold and otherwise transferred by a holder (other than (i) a
broker-dealer who purchased Old Certificates directly from the Company for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act, (ii) an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act, or (iii) a broker-dealer who acquired the Old
Certificates as a result of market-making or other trading activities) without
further compliance with the registration and prospectus delivery provisions of
the Securities Act, provided, that such holder is acquiring the New Certificates
in the ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Certificates. Accordingly, the undersigned represents that (i) it is
not an "affiliate" of the Company as defined in Rule 405 of the Securities Act,
(ii) it is not a broker-dealer that acquired Old Certificates directly from the
Company in order to resell them pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act, (iii) it will acquire
the New Certificates in the ordinary course of business and (iv) it is not
participating, and does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Certificates. The undersigned acknowledges that if it is unable to make these
representations to the Company, it will not be able to rely on the
interpretations of the staff of the Commission described above and therefore
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Certificates unless such sale is made pursuant to an exemption from
such requirements. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Certificates. If the undersigned is a broker-dealer that
will receive New Certificates for its own account in exchange for Old
Certificates, it represents that it acquired the Old Certificates for its own
account as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Certificates; however,
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of Section 2(11)
of the Securities Act. Failure to comply with any of the above-mentioned
requirements could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified by
the Company.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all New Certificates delivered in exchange for
tendered Old Certificates, and any Old Certificates delivered herewith but not
exchanged, will be registered in the name of the undersigned and shall be
delivered to the undersigned at the address shown below the signature of the
undersigned. If a New Certificate is to be issued to a person other than the
person(s) signing this Letter of Transmittal, or if the New Certificate is to be
mailed to someone other than the person(s) signing this Letter of Transmittal or
to the person(s) signing this Letter of Transmittal at an address different than
the address shown on this letter of Transmittal, the appropriate boxes of this
Letter of Transmittal should be completed. If Old Certificates are surrendered
by holder(s) that have completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, signature(s) on this Letter of Transmittal must be guaranteed by
an Eligible Institution (as defined in Instruction 3).
All authority herein conferred or agreed to be conferred in this Letter
of Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and
-6-
<PAGE> 7
assigns of the undersigned. Tendered Old Certificates may be withdrawn in
accordance with Instruction 2 hereto at any time prior to the Expiration Date.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
CERTIFICATES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OLD CERTIFICATES AS SET FORTH IN SUCH BOX.
REGISTERED HOLDERS OF OLD CERTIFICATES SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
PLEASE SIGN HERE PLEASE SIGN HERE
___________________________________ ___________________________________
Authorized Signature of Authorized Signature of
Registered Holder Registered Holder
Must be signed by registered holder(s) exactly as name(s) appear(s) on the Old
Certificates or on a security position listing as the owner of the Old
Certificates or by person(s) authorized to become registered holder(s) by
properly completed bond powers transmitted herewith. See Instruction 3. If
signature is by attorney-in-fact, trustee, executor, administrator, guardian,
officer of a corporation or other person acting in a fiduciary capacity, please
provide the following information:
Name:______________________________ Name:______________________________
Title:_____________________________ Title:_____________________________
Address:___________________________ Address:___________________________
___________________________________ ___________________________________
Telephone Number:__________________ Telephone Number:__________________
Dated:_____________________________ Dated:_____________________________
___________________________________ ___________________________________
Taxpayer Identification or Taxpayer Identification or
Social Security Number Social Security Number
-7-
<PAGE> 8
SIGNATURE GUARANTEE
(IF REQUIRED--SEE INSTRUCTION 3)
Signature(s) Guaranteed by an
Eligible Institution: ________________________________Date:_____________________
Authorized Signature
Name of Eligible Institution
Guaranteeing Signature:_________________________________________________________
Address:________________________________________________________________________
Capacity (full title):__________________________________________________________
Telephone Number:_______________________________________________________________
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if the New Certificates or any Old Certificates that are
not tendered or not accepted are to be issued in the name of someone other than
the undersigned.
Issue:
[ ] New Certificates to:
[ ] Old Certificates, to:
Name(s)_________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
Book-Entry Transfer Facility Account:___________________________________________
________________________________________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if the New Certificates or any Old Certificates that are
not tendered or not accepted are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown above
under "Description of Old Certicates Tendered."
Mail:
[ ] New Certificates to:
[ ] Old Certificates, to:
Name(s)_________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
-8-
<PAGE> 9
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer to Exchange
Enhanced Pass Through Certificates, Series 1997-1A and Series 1997-1B, which
have been registered under the Securities Act of 1933, as amended, for any and
all outstanding Pass Through Certificates, Series 1997-1A and Series 1997-1B.
1. DELIVERY OF THIS LETTER AND OLD CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
This Letter is to be completed by holders of Old Certificates if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is
not delivered. Tenders by book-entry transfer may also be made by delivering an
Agent's Message in lieu of this Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by, and makes the
representations and warranties contained in, the Letter of Transmittal and that
the Company may enforce the Letter of Transmittal against such participant.
Certificates for all physically tendered Old Certificates, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof or an Agent's Message in
lieu thereof) and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at the address set forth herein on or
prior to the Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedures set forth below. Old Certificates tendered hereby
must be in denominations of $100,000 and integral multiples of $1,000 in excess
thereof.
Holders of Old Certificates whose certificates for Old Certificates are
not immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date, or
who cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Certificates pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Certificates and the
amount of Old Certificates tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Certificates, or a Book-Entry
Confirmation, as the case may be, together with a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof or an Agent's Message in
lieu thereof), with any required signature guarantees and any other documents
required by this Letter will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Certificates, in proper form for transfer, or Book-Entry Confirmation, as the
case may be, together with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof), with
any required signature guarantees and all other documents required by this
Letter, are received by the Exchange Agent within three NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER, THE OLD CERTIFICATES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS,
but the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Certificates are sent by mail, it is suggested that
the mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
-9-
<PAGE> 10
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER); WITHDRAWAL OF TENDER.
If less than all of the Old Certificates evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Old Certificates to be tendered in the box above
entitled "Description of Old Certificates--Principal Amount Tendered." A
reissued certificate representing the balance of nontendered Old Certificates
will be sent to such tendering holder, unless otherwise provided in the
appropriate box on this Letter, promptly after the Expiration Date. All of the
Old Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Tenders of Old Certificates may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. For a withdrawal to be
effective, a written notice of withdrawal must be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must specify the name of the person having tendered the Old
Certificates to be withdrawn, identify the Old Certificates to be withdrawn
(including the principal amount of such Old Certificates) and (where
certificates for Old Certificates have been transmitted) specify the name in
which such Old Certificates are registered, if different from that of the
withdrawing holder. If certificates for Old Certificates have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Certificates and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination will be final and binding on all parties. Any
Old Certificates so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer.
3. SIGNATURES OF THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter of Transmittal is signed by the registered holder of the
Old Certificates tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates without any change whatsoever.
If any tendered Old Certificates are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Certificates are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder of
the Old Certificates specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the New
Certificates are to be issued, or any untendered Old Certificates are to be
reissued, to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required.
Signatures on such certificates must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of any certificates specified herein, such certificates must
be endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name of the registered holder appears on the certificates and the
signatures on such certificates must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
-10-
<PAGE> 11
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
Endorsements on certificates for Old Certificates or signatures on bond
powers required by this Instruction 3 must be guaranteed by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., by a commercial bank or trust company
having an office or correspondent in the United States or by an "eligible
guarantor" institution within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934 (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Certificates are tendered: (i) by a
registered holder of Old Certificates (which term, for purposes of the Exchange
Offer, includes any participant in the Book-Entry Transfer Facility system whose
name appears on a security position listing as the holder of such Old
Certificates) tendered who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the
account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Certificates should indicate in the applicable
box the name and address to which New Certificates issued pursuant to the
Exchange Offer and/or substitute certificates evidencing Old Certificates not
exchanged are to be issued or sent, if different from the name or address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. A holder of Old Certificates tendering old
Certificates by book-entry transfer may request that Old Certificates not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder of Old Certificates may designate hereon. If no such
instructions are given, such Old Certificates not exchanged will be returned to
the name or address of the person signing this Letter of Transmittal.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
Old Certificates are accepted for exchange must provide the Exchange Agent with
such Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which, in the case of a tendering holder who is an individual, is his
or her social security number. If a tendering holder does not provide the
Exchange Agent with its current TIN or an adequate basis for an exemption, such
tendering holder may be subject to backup withholding in an amount equal to 31%
of all reportable payments made after the exchange. If withholding results in an
overpayment of taxes, a refund may be obtained.
Exempt holders of Old Certificates (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed Guidelines of
Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9
Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Old
Certificates must provide its correct TIN by completing the "Substitute Form
W-9" set forth below, certifying that the TIN provided is correct (or that such
holder is awaiting a TIN) and that (i) the holder is exempt from backup
withholding, (ii) the holder has not been notified by the Internal Revenue
Service that such holder is subject to a backup withholding as a result of a
failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the tendering holder of Old Certificates is a nonresident alien
or foreign entity not subject to backup withholding, such holder must give the
Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms
may be obtained from the Exchange Agent. If the Old Certificates are in more
than one name or are not in the name of the actual owner, such holder should
consult the W-9 Guidelines for information on which TIN to report. If such
holder does not have a TIN, such holder should consult the W-9 Guidelines for
instructions on applying for a TIN, check the box in Part 2 of the Substitute
Form W-9 and write
-11-
<PAGE> 12
"applied for" in lieu of its TIN. Note: checking this box and writing "applied
for" on the form means that such holder has already applied for a TIN or that
such holder intends to apply for one in the near future. If such holder does not
provide its TIN to the Exchange Agent within 60 days, backup withholding will
begin and continue until such holder furnishes its TIN to the Exchange Agent.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Certificates to it or its order pursuant to the Exchange Offer.
If, however, New Certificates and/or substitute Old Certificates not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Certificates tendered hereby,
or if tendered Old Certificates are registered in the name of any person other
than the person signing this Letter, or if a transfer tax is imposed for any
reason other than the transfer of Old Certificates to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 6, it is not necessary for
transfer tax stamps to be affixed to the Old Certificates specified in this
Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Certificates, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
their Old Certificates for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Certificates nor shall any of them incur any liability for failure
to give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD CERTIFICATES.
Any holder whose Old Certificates have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. IRREGULARITIES.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Certificates will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Certificates not properly tendered or any Old Certificates the acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the absolute right to waive any irregularities or conditions of
tender as to particular Old Certificates. The Company's interpretation of the
terms and conditions of the Exchange Offer will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Certificates must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person will be
under any duty to give notification of defects or irregularities with respect to
tenders of Old Certificates, nor will any of them incur any liability for
failure to give such notification. Tenders of Old Certificates will not be
deemed to have been made until such irregularities have been cured or waived.
Any Old Certificates received by the Exchange Agent that are not properly
tendered and as to which the defects or
-12-
<PAGE> 13
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Old Certificates
as soon as practicable following the Expiration Date.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent, at the address and telephone number indicated
above.
-13-
<PAGE> 14
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS:
PAYOR'S NAME: UNITED AIR LINES, INC.
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN ON THE
FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING
DEPARTMENT OF THE AND DATING BELOW
TREASURY
INTERNAL REVENUE SOCIAL SECURITY NUMBER OR
SERVICE EMPLOYER IDENTIFICATION NUMBER
PAYOR'S ______________________________
REQUEST FOR
TAXPAYER'S
IDENTIFICATION
NUMBER (TIN)
PART 2--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding; (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends; or (c) the IRS
has notified me that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true and correct.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return and you have not been
notified by the IRS that you are no longer subject to backup withholding.
SIGNATURE _______________________________________ PART 3 --
Awaiting TIN [ ]
DATE ____________________________________________
NOTE:FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) 1 intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the Exchange Certificates shall be retained
until I provide a taxpayer identification number to the Exchange Agent and that,
if I do not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31% of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
SIGNATURE:___________________________________________ DATE: __________________
-14-
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
UNITED AIRLINES ENHANCED PASS THROUGH
CERTIFICATES, SERIES 1997-1A AND 1997-1B
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) of
United Air Lines, Inc., a Delaware corporation (the "Company"), made pursuant to
the Prospectus, dated , 1998 (the "Prospectus"), if certificates for the
outstanding Old Certificates are not immediately available, or time will not
permit all required documents to reach First Security Bank, National Association
(the "Exchange Agent") on or prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined below), or if Holders cannot complete the procedure
for book-entry transfer on a timely basis. Such form may be delivered or
transmitted by facsimile transmission, mail or hand delivery to the Exchange
Agent as set forth below. In addition in order to utilize the guaranteed
delivery procedure to tender the Old Certificates pursuant to the Exchange
Offer, a completed signed and dated Letter of Transmittal (or facsimile thereof)
must also be received by the Exchange Agent prior to 5:00 p.m., New York City
time, at least within three New York Stock Exchange trading days after the
Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______ ___,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERED OLD CERTIFICATES MAY BE
WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE.
Deliver to:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By Hand, Registered or Certified Mail or Overnight Courier:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
By Facsimile:
(801) 246-5053
Confirm by Telephone:
(801) 246-5657
Dianne Diaz
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF
GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If
a signature on a Letter of Transmittal is required to be guaranteed by an
"Eligible Institution" under the instructions thereto, such signature guarantee
must appear in the applicable space provided in the signature box on the Letter
of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
are hereby acknowledged, the aggregate principal amount of Old Certificates set
forth below pursuant to the guaranteed delivery procedure described in "The
Exchange Offer--Guaranteed Delivery Procedures" section in the Prospectus and
Instruction 1 of the Letter of Transmittal.
Name(s) of Registered Holder(s):_______________________________________________
(Please Print or Type)
Principal Amount of Old Certificate No(s). (if available):
Certificates Tendered:*
$ ____________________ ____________________
$ ____________________ ____________________
$ ____________________ ____________________
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
If Old Certificates will be delivered by book-entity transfer to The
Depository Trust Company ("DTC"), provide the DTC account number.
DTC Account Number:________________________________________-
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned.
PLEASE SIGN HERE
Must be signed by the holder(s) of Old Certificates as their name(s)
appear(s) on certificates for Old Certificates or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
________________________________ ________________________________
________________________________ ________________________________
Signature(s) of Holder(s) or Date
Authorized Signatory
Area Code and Telephone Number:________________________________________
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s) of Holder(s) _________________________________________
_________________________________________
_________________________________________
Title/Capacity: _________________________________________
Address(es): _________________________________________
-2-
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or a correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Old Certificates being tendered hereby in proper form for
transfer (or a confirmation of book-entry transfer of such Old Certificates into
the Exchange Agent's account at the book-entry transfer facility of DTC) with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message (as defined in "The Exchange Offer -- Procedures for Tendering" in the
Prospectus), and any other required documents, all within three New York Stock
Exchange trading days after the Expiration Date.
Name of Firm ___________________________________________________________________
(Authorized Signature)
Address_____________________________ Name_____________________________________
Please Print or Type
____________________________________ Title____________________________________
Zip Code
Dated____________________________________
Telephone Number____________________
The institution that completes this form must communicate the guarantee
to the Exchange Agent and must deliver the certificates representing any Old
Certificates (or a confirmation of book-entry transfer of such Old Certificates
into the Exchange Agent's account at DTC) and the Letter of Transmittal (or an
Agent's Message in lieu thereof) to the Exchange Agent within the time period
shown herein. Failure to do so could result in a financial loss to such
institution.
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD CERTIFICATES WITH THIS FORM.
CERTIFICATES REPRESENTING OLD CERTIFICATES SHOULD ONLY BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
-3-
<PAGE> 1
EXHIBIT 99.3
UNITED AIR LINES, INC.
OFFER TO EXCHANGE
ENHANCED PASS THROUGH CERTIFICATES,
SERIES 1997-1A AND SERIES 1997-1B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL ENHANCED PASS THROUGH CERTIFICATES,
SERIES 1997-1A AND SERIES 1997-1B
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERED OLD CERTIFICATES MAY BE
WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE.
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Upon and subject to the terms and conditions set forth in the
Prospectus, dated __________, 1998 (the "Prospectus"), and the enclosed Letter
of Transmittal (the "Letter of Transmittal"), an offer to exchange (the
"Exchange Offer") the registered Enhanced Pass Through Certificates, Series
1997- 1A and Series 1997-1B (collectively, the "New Certificates") for any and
all outstanding Pass Through Certificates, Series 1997-1A and Series 1997-1B
(collectively, the "Old Certificates") (CUSIP Nos. 909317 AK 5, U90951 AA 9 and
U90951 AB 7) is being made pursuant to such Prospectus. The Exchange Offer is
being made in order to satisfy certain obligations of United Air Lines, Inc.
(the "Company") contained in the Registration Rights Agreement dated as of
December 23, 1997, between the Company and the Initial Purchasers named therein.
We are requesting that you contact your clients for whom you hold Old
Certificates regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Old Certificates registered in your
name or in the name of your nominee, or who hold Old Certificates registered in
their own names, we are enclosing the following documents:
1. Prospectus dated _________ __, 1998;
2. The Letter of Transmittal for your use and for the
information of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the
Exchange Offer if certificates for Old Certificates are not immediately
available or time will not permit all required documents to reach the
Exchange Agent prior to the Expiration Date or if the procedure for
book-entry transfer cannot be completed on a timely basis; and
4. A form of letter which may be sent to your clients for
whose account you hold Old Certificates registered in your name or the
name of your nominee, with space provided for obtaining such clients'
instructions with regard to the Exchange Offer.
<PAGE> 2
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on __________, 1998 (the "Expiration Date") (30
calendar days following the commencement of the Exchange Offer), unless extended
by the Company. The Old Certificates tendered pursuant to the Exchange Offer may
be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or an Agent's Message in
lieu thereof), with any required signature guarantees and any other required
documents, should be sent to the Exchange Agent and certificates representing
the Old Certificates should be delivered to the Exchange Agent, all in
accordance with the instructions et forth in the Letter of Transmittal and the
Prospectus.
If holders of Old Certificates wish to tender, but it is impracticable
for them to forward their certificates for Old Certificates prior to the
expiration of the Exchange Offer or to comply with the book-entry transfer
procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures described in the Prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Certificates held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Certificates pursuant to the Exchange Offer,
except as set forth in Instruction 6 of the Letter of Transmittal.
Additional, copies of the enclosed material may be obtained from First
Security Bank, National Association, the Exchange Agent, at 79 South Main
Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department, phone
(801) 246-5657 and facsimile (801) 246-5053.
UNITED AIR LINES, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON
AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY PERSON
TO USE ANY DOCUMENTS OR MAKE ANY STATEMENT ON BEHALF OF EITHER OF THEM WITH
RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
-2-
<PAGE> 1
EXHIBIT 99.4
UNITED AIR LINES, INC.
OFFER TO EXCHANGE
ENHANCED PASS THROUGH CERTIFICATES,
SERIES 1997-1A AND SERIES 1997-1B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL ENHANCED PASS THROUGH CERTIFICATES,
SERIES 1997-1A AND SERIES 1997-1B
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERED OLD
CERTIFICATES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE.
To Our Clients:
Enclosed for your consideration is a Prospectus of United Air Lines,
Inc., a Delaware corporation (the "Company"), dated , 1998 (the "Prospectus"),
and the enclosed Letter of Transmittal (the "Letter of Transmittal"), relating
to the offer to exchange (the "Exchange Offer") the registered Enhanced Pass
Through Certificates, Series 1997-1A and Series 1997-B (collectively, the "New
Certificates") for any and all outstanding Enhanced Pass Through Certificates,
Series 1997- 1A and Series 1997-B (collectively, the "Old Certificates") (CUSIP
Nos. 909317 AK 5, U90951 AA9 and U90951 AB 7), upon the terms and subject to the
conditions described in the Prospectus. The Exchange Offer is being made in
order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated as of December 23, 1997, between the Company
and the Initial Purchasers named therein.
This material is being forwarded to you as the beneficial owner of the
Old Certificates carried by us in your account but not registered in your name.
A TENDER OF SUCH OLD CERTIFICATES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD
AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to
tender on your behalf the Old Certificates held by us for your account, pursuant
to the terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Certificates on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 p.m., New York City time, on , 1998 (the "Expiration Date") (30 calendar
days following the commencement of the Exchange Offer), unless extended by the
Company. Any Old Certificates tendered pursuant to the Exchange Offer may be
withdrawn at any time before 5:00 p.m., New York City time on the Expiration
Date.
<PAGE> 2
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Certificates.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Conditions."
3. Any transfer taxes incident to the transfer of Old Certificates from
the holder to the Company will be paid by the Company, except as
otherwise provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on the
Expiration Date unless extended by the Company.
If you wish to have us tender your Old Certificates, please so instruct
us by completing, executing and returning to us the instruction form set forth
below. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND
MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD CERTIFICATES.
-2-
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein, relating to the Exchange Offer made by United Air
Lines, Inc. with respect to its Old Certificates.
This will instruct you as to the action to be taken by you relating to
the Exchange Offer with respect to the Old Certificates held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the Letter of Transmittal.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
[ ] To TENDER the following Old Certificates held by you for the account of
the undersigned (insert aggregate principal amount at maturity by Old
Certificates to be tendered, in integral multiples of $1,000):
$____________________ of the Enhanced Pass Through Certificates, Series 1997-1A
$____________________ of the Enhanced Pass Through Certificates, Series 1997-1B
[ ] NOT to tender any Old Certificates held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Certificates held by
you for the account of the undersigned, it is understood that you are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations, warranties and agreements
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as beneficial owner.
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Names(s) (please print):________________________________________________________
Address:________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer Identification or Social Security Number(s):___________________________
Date:___________________________________________________________________________
None of the Old Certificates held by us for your account will be
tendered unless we receive written instructions from you to do so. Unless a
specific contrary instruction is given in the space provided, your signature(s)
hereon shall constitute an instruction to us to tender all the Old Certificates
held by us for your account.
-3-
