<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 3, 1994
REGISTRATION NO. 33-54987
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PHILLIPS PETROLEUM COMPANY
(Exact name of Registrant as specified in its charter)
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<TABLE>
<S> <C>
DELAWARE 73-0400345
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
---------------------
PHILLIPS BUILDING
BARTLESVILLE, OKLAHOMA 74004
(918) 661-6600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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T.C. MORRIS
SENIOR VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
17 PHILLIPS BUILDING
BARTLESVILLE, OKLAHOMA 74004
(918) 661-8266
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
<TABLE>
<S> <C> <C>
DALE J. BILLAM, ESQ. MARTIN D. JACOBSON, ESQ. JAMES C. VARDELL, ESQ.
PHILLIPS PETROLEUM COMPANY SIMPSON THACHER & BARTLETT CRAVATH, SWAINE & MOORE
1234 ADAMS BUILDING 425 LEXINGTON AVENUE WORLDWIDE PLAZA
BARTLESVILLE, OKLAHOMA 74004 NEW YORK, NEW YORK 10017 825 EIGHTH AVENUE
(918) 661-5638 (212) 455-7023 NEW YORK, NEW YORK 10019
(212) 474-1900
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
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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, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<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
PRELIMINARY PROSPECTUS DATED OCTOBER 3, 1994
PROSPECTUS
PHILLIPS PETROLEUM COMPANY
PASS THROUGH CERTIFICATES
Up to $110,000,000 aggregate amount of Pass Through Certificates (the "Pass
Through Certificates") may be offered for sale from time to time pursuant to
this Prospectus and one or more Prospectus Supplements. The Pass Through
Certificates may be offered in one or more series (each, a "Series") in amounts,
at prices and on terms to be determined at the time of sale. For each Series of
Pass Through Certificates offered pursuant to this Prospectus and a Prospectus
Supplement, a separate Pass Through Trust (a "Pass Through Trust") will be
formed pursuant to a separate Pass Through Trust Agreement (a "Pass Through
Agreement") between Phillips Petroleum Company (the "Company") and Shawmut Bank
Connecticut, National Association, as the Pass Through Trustee under such Pass
Through Trust. Each Pass Through Certificate in a Series will evidence a
fractional undivided interest in the related Pass Through Trust and will have no
rights, benefits or interest in respect of any other Pass Through Trust or the
Trust Property held in any other such Pass Through Trust. The Trust Property of
each Pass Through Trust will consist of equipment notes (the "Equipment Notes")
issued as nonrecourse obligations by one or more Owner Trusts, in connection
with leveraged lease transactions. The Equipment Notes will be issued to
refinance or finance a portion of the payment made or to be made by each such
Owner Trust to the Company for the acquisition cost of specified items of
transportation equipment sold and leased back by the Company (the "Equipment").
The Prospectus Supplement relating to each offering will describe certain terms
of the Pass Through Certificates offered thereby, the respective Pass Through
Trusts, the Equipment Notes to be purchased by such Pass Through Trusts, the
leveraged lease transactions and the Equipment relating to such Equipment Notes.
With respect to one or more items of Equipment, the Owner Trustee may issue
one or more Equipment Notes, each of which may have a different interest rate
and final maturity date. For each Series of Pass Through Certificates, the Pass
Through Trustee will purchase one or more Equipment Notes issued with respect to
one or more items of Equipment such that all of the Equipment Notes held in the
related Pass Through Trust will have identical interest rates, in each case
equal to the rate applicable to the Pass Through Certificates issued by such
Pass Through Trust, and such that the latest maturity date for such Equipment
Notes will occur on or before the final distribution date for such Pass Through
Certificates. For any item of Equipment, the related Equipment Notes will be
secured by a security interest in the Lease relating thereto, including the
right to receive rent payable by the Company under such Lease and in the related
items of Equipment subject to such Lease (except that for certain vehicles
included in the Equipment the security interest in such vehicles may not be
perfected). None of the Equipment Notes held in the respective Pass Through
Trusts will be obligations of, or guaranteed by, the Company. The amounts
payable by the Company under the Leases from time to time will be at least equal
to the amounts of all principal, premium, if any, and interest payable on the
related Equipment Notes from time to time.
Interest paid on the Equipment Notes held in each Pass Through Trust will
be passed through to the registered holders of the Pass Through Certificates for
such Pass Through Trust (for each Pass Through Trust, the "Certificateholders")
on the dates and at the rate per annum set forth in the Prospectus Supplement
relating to such Pass Through Certificates until the final distribution date for
such Pass Through Trust. Principal paid on the Equipment Notes held in each Pass
Through Trust will be passed through to the Certificateholders in scheduled
amounts on the dates set forth in the Prospectus Supplement relating to such
Pass Through Certificates until the final distribution date for such Pass
Through Trust.
The Pass Through Certificates represent interests in the related Pass
Through Trust only, and all payments and distributions shall be made only from
the property of such Pass Through Trust. The Pass Through Certificates do not
represent an interest in or obligation of the Company.
The Pass Through Certificates may be sold to or through underwriters or
directly to other purchasers or through agents. The Prospectus Supplement
relating to each offering will set forth the names of any underwriters, dealers
or agents involved in the sale of the Pass Through Certificates in connection
with which this Prospectus is being delivered, the amounts, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents.
Prior to their issuance, there will have been no market for the Pass
Through Certificates of any Series and there can be no assurance that one will
develop. Unless otherwise indicated in the applicable Prospectus Supplement, the
Company does not intend to apply for the listing of any Series of Pass Through
Certificates on a national securities exchange. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of any Pass Through
Certificates unless accompanied by the Prospectus Supplement applicable to the
Pass Through Certificates being sold.
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THESE SECURITIES 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 COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is October , 1994.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
OFFERED HEREBY OR OTHER SECURITIES OF THE COMPANY AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
---------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any underwriter, dealer or agent. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company since
the date hereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy Securities by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to any person to whom it
is unlawful to make such offer or solicitation in such jurisdiction.
---------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Offices of the Commission
at Room 1024 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7
World Trade Center, New York, New York 10048. Copies of such material can also
be obtained 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. In addition, such material can be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, and the Pacific
Stock Exchange, Incorporated, 301 Pine Street, San Francisco, California 94104,
on which certain of the Company's securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1993, as amended, and its Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1994, all of which have previously been filed by the
Company with the Commission, are incorporated by reference in this Prospectus.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus or
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 subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Dale J. Billam,
Secretary, Phillips Petroleum Company, 1234 Adams Building, Bartlesville,
Oklahoma 74004 (telephone (918) 661-5638).
2
<PAGE> 4
PHILLIPS PETROLEUM COMPANY
Phillips Petroleum Company, incorporated in Delaware in 1917, is a fully
integrated oil company engaged in petroleum exploration and production on a
worldwide basis, petroleum refining and marketing, and natural gas gathering and
processing, principally in the United States. Phillips also produces and
distributes chemicals worldwide. Its principal executive offices are located in
the Phillips Building, Bartlesville, Oklahoma 74004 (telephone (918) 661-6600).
The words "Company" and "Phillips" as used in this Prospectus refer to
Phillips Petroleum Company or Phillips Petroleum Company and its consolidated
subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------- --------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..................... 2.8 3.0 2.3 2.1 2.0 2.8 1.9
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary items and
cumulative effect of change in accounting principle, plus fixed charges
(excluding capitalized interest and the portion of the preferred dividend
requirements of a subsidiary to the extent not deducted in determining pretax
income, but including amortization of interest previously capitalized), less
equity in undistributed earnings of companies owned less than 50 percent. Fixed
charges consist of interest (including capitalized interest) on all
indebtedness, amortization of debt discount and expense, that portion of rental
expense that the Company believes to be representative of interest and the
amounts accrued to cover the preferred stock dividend requirements of a
subsidiary. A statement setting forth the computation of the unaudited ratios of
earnings to fixed charges is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
OUTLINE OF PASS THROUGH TRUST STRUCTURE
For each Series of Pass Through Certificates (as such terms are defined
below) offered pursuant to this Prospectus and the related Prospectus
Supplement, a separate pass through trust (a "Pass Through Trust") will be
formed pursuant to a Pass Through Trust Agreement (a "Pass Through Agreement")
between the Company and Shawmut Bank Connecticut, National Association as pass
through trustee (the "Pass Through Trustee"), for the benefit of the registered
holders (the "Certificateholders") of the series (a "Series") of certificates
(the "Pass Through Certificates") evidencing fractional undivided interests in
such Pass Through Trust. The property held in each Pass Through Trust (the
"Trust Property") will consist of equipment notes issued in connection with one
or more leveraged lease transactions (the "Equipment Notes"), as specified in
the applicable Prospectus Supplement.
As more fully described below under "Use of Proceeds," in connection with
each leveraged lease transaction, one or more Equipment Notes may be issued,
each of which may have different interest rates and final maturity dates.
Concurrently with the execution and delivery of each Pass Through Agreement, the
Pass Through Trustee, on behalf of the related Pass Through Trust, will enter
into one or more participation agreements or a supplement thereto (each, a
"Participation Agreement") pursuant to which it will, among other things,
purchase one or more Equipment Notes, such that the Equipment Notes that
constitute the property of such Pass Through Trust will have identical interest
rates, in each case equal to the rate applicable to the Pass Through
Certificates issued by such Pass Through Trust, and such that the latest
maturity date for such Equipment Notes will occur on or before the final
distribution date applicable to such Pass Through Certificates. For each Pass
Through Trust, the aggregate amount of the related Series of Pass Through
Certificates will equal the aggregate principal amount of the Equipment Notes
constituting the Trust Property of such Pass Through Trust. The Pass Through
Trustee will distribute the amount of payments of principal, premium, if any,
and interest received by it as holder of the Equipment Notes to the
Certificateholders of the
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<PAGE> 5
Pass Through Trust in which such Equipment Notes are held. See "Description of
the Pass Through Certificates" and "Description of the Equipment Notes."
USE OF PROCEEDS
Each Series of Pass Through Certificates offered pursuant to this
Prospectus and a related Prospectus Supplement will be issued to facilitate the
refinancing or financing of the debt portion of one or more leveraged sale-lease
back transactions entered into or to be entered into by the Company, as seller
and lessee, with respect to one or more of the items of transportation
equipment, comprised of covered hopper and tank railroad cars (the "Rail Cars"),
corporate aircraft (the "Aircraft") and mobile aircraft refueling vehicles (the
"Vehicles"); (the Rail Cars, Aircraft and Vehicles, collectively, the
"Equipment"), as specified in the applicable Prospectus Supplement. At the time
of issuance of the applicable Series of Pass Through Certificates, none of the
related items of Equipment will represent collateral for an outstanding
liability of the Company. Each Prospectus Supplement will provide further
descriptive and identifying information with respect to the Equipment. The
proceeds from the sale of such Pass Through Certificates will be used by the
Pass Through Trustee on behalf of the related Pass Through Trust to purchase
Equipment Notes. The Equipment Notes will be issued as nonrecourse obligations
of one or more owner trusts (each, an "Owner Trust" created pursuant to a "Trust
Agreement") by Wilmington Trust Company, not in its individual capacity but
solely as the owner trustee (the "Owner Trustee") for the benefit of the owner
participant named therein (each, an "Owner Participant"), in connection with one
or more leveraged lease transactions, in each case to refinance or finance a
portion of the Owner Trust's acquisition cost of one or more items of Equipment
that are leased by such Owner Trust to the Company pursuant to a separate lease
agreement (each, a "Lease"), as specified in the applicable Prospectus
Supplement.
The Equipment Notes to be sold to any Pass Through Trust will be issued by
the Owner Trust and authenticated by Shawmut Bank Connecticut, National
Association, as indenture trustee (the "Indenture Trustee") under a separate
trust indenture and security agreement (each, an "Indenture") between the Owner
Trustee and the Indenture Trustee. Each Owner Participant will have provided or
will be obligated to provide, from sources other than the proceeds of the
related Equipment Notes, the portion of the acquisition cost for the related
Equipment specified in the applicable Prospectus Supplement. No Owner
Participant, however, will be personally liable for any amount payable under the
related Indenture or the Equipment Notes issued thereunder.
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
In connection with each offering of a Series of Pass Through Certificates,
a separate Pass Through Trust will be formed pursuant to a separate Pass Through
Agreement to be entered into between the Company and the Pass Through Trustee.
The following summary relates to each of the Pass Through Agreements, the Pass
Through Trusts to be formed thereby and the Pass Through Certificates to be
issued by each Pass Through Trust, except as otherwise described in the
applicable Prospectus Supplement.
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the Pass
Through Agreements and the Indentures, the forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
forms of the related Participation Agreements, Leases and Trust Agreements have
also been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. This summary makes use of terms defined in and is
qualified in its entirety by reference to the Pass Through Agreements.
GENERAL
Unless otherwise provided in the applicable Pass Through Agreement, the
Pass Through Certificates will be issued in fully registered, certificated form
only. Each Pass Through Certificate will represent a fractional undivided
interest in the separate Pass Through Trust formed by the Pass Through Agreement
pursuant to which such Pass Through Certificate is issued. The property of each
Pass Through Trust will consist of the Equipment Notes held in such Pass Through
Trust, all monies at any time paid thereon, all monies due and to
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<PAGE> 6
become due thereunder and funds from time to time deposited with the Pass
Through Trustee in accounts relating to such Pass Through Trust. Each Pass
Through Certificate will represent a pro rata share of the outstanding principal
amount of the Equipment Notes and other property held in the related Pass
Through Trust and will be issued, unless otherwise specified in the applicable
Prospectus Supplement, in minimum denominations of $1,000 or any integral
multiple of $1,000, except that one Pass Through Certificate with respect to
each Pass Through Trust may be in a multiple of less than $1,000. (Pass Through
Agreement, Articles II and III)
Interest will be passed through to Certificateholders of each Pass Through
Trust at the rate per annum payable on the Equipment Notes held in such Pass
Through Trust, as set forth for such Pass Through Trust on the cover page of the
applicable Prospectus Supplement.
The Pass Through Certificates represent interests in the related Pass
Through Trust only, and all payments and distributions shall be made only from
the Trust Property of such Pass Through Trust. The Pass Through Certificates do
not represent an interest in or obligation of the Company, the Pass Through
Trustee, any related Owner Participant, the Owner Trustee in its individual
capacity or any affiliate of any of the foregoing. Each Certificateholder by its
acceptance of a Pass Through Certificate agrees to look solely to the income and
proceeds from the property held in the related Pass Through Trust as provided in
the applicable Pass Through Agreement (Pass Through Agreement, Section 3.08)
The Pass Through Agreements, except as otherwise described in the
applicable Prospectus Supplement, the Participation Agreements, the Equipment
Notes, the Indentures and the Leases, do not contain any debt or other financial
covenants or any other provisions that would afford Certificateholders
protection in the event of a highly leveraged transaction involving the Company.
BOOK-ENTRY REGISTRATION
If specified in the applicable Prospectus Supplement, the Pass Through
Certificates will be subject to the provisions described below. Upon issuance,
each Series of the Pass Through Certificates will be represented by one fully
registered global certificate. Each global certificate will be deposited with,
or on behalf of, The Depository Trust Company ("DTC"), and registered in the
name of Cede & Co. ("Cede"), its nominee. No Certificateholder will be entitled
to receive a certificated Pass Through Certificate, except as set forth below.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Exchange Act. DTC was created to hold securities for its participants
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions among DTC Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. DTC
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a DTC Participant, either directly or indirectly.
Certificateholders that are not DTC Participants but desire to purchase,
sell or otherwise transfer ownership of, or other interests in, Pass Through
Certificates may do so only through DTC Participants. In addition,
Certificateholders will receive all distributions of principal and interest from
the Pass Through Trustee through the DTC Participants. Under the rules,
regulations and procedures creating and affecting DTC and its operation, DTC is
required to make book-entry transfers of Pass Through Certificates among DTC
Participants on whose behalf it acts and to receive and transmit distributions
of principal of, and premium, if any, and interest on, the Pass Through
Certificates. Under the book-entry system, Certificateholders may experience
some delay in their receipt of payments, since such payments will be forwarded
by the Pass Through Trustee to Cede, as nominee for DTC, and DTC in turn will
forward the payments to the appropriate DTC Participants. Distributions by DTC
Participants to Certificateholders will be the sole responsibility of such DTC
Participants and will be made in accordance with customary industry practices.
Accordingly, although Certificateholders will not have possession of the Pass
Through Certificates, the rules of
5
<PAGE> 7
DTC provide a mechanism by which DTC Participants will receive payments and will
be able to transfer their interests. Although the DTC Participants are expected
to convey the rights represented by their interests in any global security to
the related Certificateholders, because DTC can only act on behalf of DTC
Participants, the ability of Certificateholders to pledge Pass Through
Certificates to persons or entities that are not DTC Participants, or to
otherwise act with respect to such Pass Through Certificates, may be limited due
to the lack of physical certificates for such Pass Through Certificates.
Neither the Company, the Pass Through Trustee nor any other agent of the
Company or the Pass Through Trustee 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 Pass Through Certificates or for
supervising or reviewing any records relating to such beneficial ownership
interests. Since the only "Holder" will be Cede, as nominee of DTC,
Certificateholders will not be recognized by the Pass Through Trustee as
Holders, as such term is used in the applicable Pass Through Agreement, and
Certificateholders will be permitted to exercise the rights of Holders only
indirectly through DTC and DTC Participants.
The Pass Through Certificates will be issued in fully registered,
certificated form to Certificateholders, or their nominees, rather than to DTC
or its nominee, only if (i) DTC advises the Pass Through Trustee in writing that
it is no longer willing or able or qualified to discharge properly its
responsibilities as depository with respect to the Pass Through Certificates,
and the Pass Through Trustee and the Company are unable to locate a qualified
successor, (ii) the Company, at its option, elects to terminate the book-entry
system through DTC or (iii) after the occurrence of an Event of Default,
Certificateholders holding a majority of the beneficial ownership interests in
the Pass Through Certificates advise the Pass Through Trustee and DTC through
DTC Participants in writing that continuation of a book-entry system through DTC
is no longer in the best interest of the Certificateholders. In such event, the
Pass Through Trustee will notify all Certificateholders through DTC Participants
of the availability of such certificated Pass Through Certificates. Upon
surrender by DTC of the registered global certificate representing the affected
Series of Pass Through Certificates and receipt of instructions for
re-registration, the Pass Through Trustee will reissue the Pass Through
Certificates in certificated form to Certificateholders or their nominees. Such
certificated Pass Through Certificates will be freely transferable and
exchangeable at the office of the Pass Through Trustee upon compliance with the
requirements set forth in the related Pass Through Agreement. No service charge
will be imposed for any registration of transfer or exchange, but payment of a
sum sufficient to cover any tax or other governmental charge will be required.
All payments made under any Lease or any Indenture in respect of the
Equipment Notes will be in immediately available funds. Such payments will be
passed through to DTC in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Pass
Through Certificates will trade in DTC's Same Day Funds Settlement System until
maturity, and secondary market trading activity in the Pass Through Certificates
will therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Pass Through Certificates.
PAYMENTS AND DISTRIBUTIONS
Except under certain circumstances, after the Indenture Trustee has made
principal and interest payments to the Pass Through Trustee for each of the Pass
Through Trusts on the related Equipment Notes held in such Pass Through Trust,
the Indenture Trustee will pay the remaining balance, if any, of rental payments
received from the Company to the Owner Trustee for the benefit of the related
Owner Participant. The Pass Through Trustee for each such Pass Through Trust
will distribute to the Certificateholders of such Pass Through Trust payments
received on the Equipment Notes held in such Pass Through Trust as described
below.
Payments of principal of, and interest on the unpaid amount of, the
Equipment Notes held in each Pass Through Trust will be scheduled to be received
by the Pass Through Trustee on the dates specified in the applicable Prospectus
Supplement (such scheduled payments of principal of, and interest on, the
Equipment
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<PAGE> 8
Notes are referred to herein as "Scheduled Payments," and the dates specified
for distributions of Scheduled Payments to the Pass Through Trustee in the
applicable Prospectus Supplement are referred to herein as "Regular Distribution
Dates"). For each Pass Through Trust, the Pass Through Trustee will distribute
on each Regular Distribution Date to the related Certificateholders any
Scheduled Payment timely received by the Pass Through Trustee. If a Scheduled
Payment is not received by the Pass Through Trustee on or before a Regular
Distribution Date but is received within five days thereafter, it will be
distributed on the date received to the Certificateholders. Each such
distribution of a Scheduled Payment will be made by the Pass Through Trustee to
the Certificateholders of record of such Pass Through Trust on the fifteenth day
prior to such Regular Distribution Date, subject to certain exceptions. Each
such Certificateholder will be entitled to receive a pro rata share of any such
distribution. (Pass Through Agreement, Sections 4.01 and 4.02) If a Scheduled
Payment is received more than five days after the applicable Regular
Distribution Date, it will be treated as a Special Payment and will be
distributed as described below.
After any prepayment of principal, any redemption or any default with
respect to some or all of the Equipment Notes held in any Pass Through Trust,
any Certificateholder of such Pass Through Trust should refer to the Pool
Balance and the Pool Factor (as such terms are defined below) for such Pass
Through Trust reported periodically by the Pass Through Trustee, in order to
calculate such Certificateholder's pro rata share of such Pass Through Trust.
See "Pool Factors" and "Statements to Certificateholders" below.
For any Pass Through Trust, any payments of principal, premium, if any, or
interest, other than Scheduled Payments, received by the Pass Through Trustee on
any of the Equipment Notes held in such Pass Through Trust, including payments
received (i) for the prepayment of such Equipment Notes in connection with
certain events specified in the applicable Prospectus Supplement, (ii) upon an
Indenture Event of Default in respect of such Equipment Notes or the exercise of
remedies under the related Indenture, and (iii) on account of the sale of such
Equipment Notes by the Pass Through Trustee (such payments are referred to
herein as "Special Payments"), will be distributed on the dates determined as
set forth in the applicable Prospectus Supplement (each, a "Special Distribution
Date" and, together with the Regular Distribution Dates, the "Distribution
Dates"). Prior to any Special Payment for any Pass Through Trust, the Pass
Through Trustee will notify the Certificateholders of record of such Pass
Through Trust of such Special Payment and the anticipated Special Distribution
Date therefor in accordance with the Pass Through Agreement. Each distribution
of a Special Payment, other than the final distribution, for any Pass Through
Trust will be made by the Pass Through Trustee to the Certificateholders of
record of such Pass Through Trust on the fifteenth day prior to such Special
Distribution Date, unless otherwise specified in the applicable Prospectus
Supplement. Each such Certificateholder will be entitled to receive a pro rata
share of any such distribution. (Pass Through Agreement, Section 4.02)
Each Pass Through Agreement requires that the Pass Through Trustee
establish and maintain, for the related Pass Through Trust and for the benefit
of the related Certificateholders, one or more non-interest bearing accounts
(each a "Certificate Account") for the deposit of Scheduled Payments on the
Equipment Notes held in such Pass Through Trust and one or more accounts which
will, except in connection with Permitted Investments as discussed below, be
non-interest bearing (each a "Special Payments Account") for the deposit of
Special Payments on such Equipment Notes. The Pass Through Trustee is required
to deposit any Scheduled Payments relating to a Pass Through Trust received by
it in the related Certificate Account and to deposit any Special Payments so
received by it in the related Special Payments Account pending distribution
thereof. (Pass Through Agreement, Section 4.01) Special Payments that are not
promptly distributed by the Pass Through Trustee will, to the extent
practicable, be invested by the Pass Through Trustee in Permitted Investments
pending the distribution of such funds on a Special Distribution Date, and the
income and earnings on such investments will be distributed with such Special
Payment. "Permitted Investments" are obligations of the United States of America
(for the payment of which its full faith and credit is pledged) maturing in not
more than 60 days or such lesser time as is necessary for the distribution of
any such funds on a Special Distribution Date. (Pass Through Agreement, Article
I and Section 4.04)
Distributions by the Pass Through Trust from the Certificate Account or the
Special Payments Account of any Pass Through Trust on any Distribution Date will
be paid to each Certificateholder of record of such Pass Through Trust on the
applicable record date at its address appearing on the register maintained for
such
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Pass Through Trust. (Pass Through Agreement, Section 4.02) The final
distribution for each Pass Through Trust, however, will be made only upon
presentation and surrender of the Pass Through Certificates for such Pass
Through Trust at the office or agency of the Pass Through Trustee specified in
the notice of such final distribution given by the Pass Through Trustee. The
Pass Through Trustee will mail such notice of the final distribution to the
Certificateholders of such Pass Through Trust, specifying the date set for such
final distribution and the amount of such distribution. (Pass Through Agreement,
Section 11.01) See "Termination of Pass Through Trusts" below.
If any Distribution Date is not a Business Day, distributions scheduled to
be made on such Distribution Date may be made on the next succeeding Business
Day without additional interest. (Pass Through Agreement, Section 12.09)
POOL FACTORS
Except as provided below, the Pool Factor (as defined below) for any Pass
Through Trust will decline in proportion to the scheduled repayments of
principal on the Equipment Notes held in such Pass Through Trust as described in
the applicable Prospectus Supplement. Where any Equipment Note held in a Pass
Through Trust has been prepaid, a scheduled repayment of principal thereon has
not been made or certain actions have been taken following a default thereon, as
discussed in the applicable Prospectus Supplement or below in "Events of Default
and Certain Rights Upon an Event of Default," the Pool Factor and the Pool
Balance (as defined below) of such Pass Through Trust will be recomputed after
giving effect thereto and notice thereof will be mailed to the
Certificateholders of such Pass Through Trust. Each Pass Through Trust will have
a separate Pool Factor.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Pass Through Trust indicates, as of any date, the
aggregate unpaid principal amount of the Equipment Notes held in such Pass
Through Trust on such date plus any amounts in respect of principal on such
Equipment Notes held by the Pass Through Trustee and not yet distributed. The
Pool Balance for each Pass Through Trust as of any Distribution Date will be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes held in such Pass Through Trust and the distribution thereof
being made on that date. (Pass Through Agreement, Article I)
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Pass Through Trust as of any Distribution Date is the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance by (ii) the aggregate original principal amount of the Pass Through
Certificates issued in respect of such Pass Through Trust. The Pool Factor for
each Pass Through Trust as of any Distribution Date shall be computed after
giving effect to the payment of principal, if any, on the Equipment Notes held
in such Pass Through Trust and the distribution thereof being made on that date.
The Pool Factor for each Pass Through Trust will initially be 1.0000000;
thereafter, the Pool Factor for each Pass Through Trust will decline as
described above to reflect reductions in the Pool Balance of such Pass Through
Trust. For any Pass Through Trust, the amount of any Certificateholder's pro
rata share of the Pool Balance of such Pass Through Trust can be determined by
multiplying the original denomination of such Certificateholder's Pass Through
Certificate by the Pool Factor for such Pass Through Trust as of the applicable
Distribution Date. (Pass Through Agreement, Article I)
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Pass Through Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
record of the related Pass Through Trust a statement, giving effect to such
distribution being made on such Distribution Date, setting forth the following
information (per $1,000 in aggregate amount of Pass Through Certificates for
such Pass Through Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and
allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Pass Through
Trust.
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In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each person who at any time during the preceding calendar year
was a Certificateholder of record a report containing the sum of the amounts
determined pursuant to clauses (i) and (ii) above with respect to the related
Pass Through Trust for such calendar year or, in the event such person was a
Certificateholder during a portion of such calendar year, for the applicable
portion of such calendar year. (Pass Through Agreement, Section 4.03)
VOTING OF EQUIPMENT NOTES
The Pass Through Trustee, as holder of the Equipment Notes held in each
Pass Through Trust, has the right to vote and give consents and waivers in
respect of such Equipment Notes under the related Indentures. Each Pass Through
Agreement sets forth the circumstances in which the Pass Through Trustee shall
direct any action or cast any vote as the holder of the Equipment Notes held in
such Pass Through Trust at its own discretion and the circumstances in which the
Pass Through Trustee shall seek instructions from the Certificateholders of such
Pass Through Trust. Prior to an Event of Default (as defined below) with respect
to any Pass Through Trust, the principal amount of the Equipment Notes held in
such Pass Through Trust directing any action or being voted for or against any
proposal will be in proportion to the principal amount of Pass Through
Certificates held by the Certificateholders of such Pass Through Trust taking
the corresponding position. (Pass Through Agreement, Article VI and Section
10.01)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
Each Pass Through Agreement defines an event of default for the
corresponding Pass Through Trust (an "Event of Default") as the occurrence and
continuance of an event of default under one or more of the related Indentures
(an "Indenture Event of Default"). The Indenture Events of Default under the
Indentures will be described in the applicable Prospectus Supplement and will
include events of default under the related Leases ("Lease Events of Default").
Since the Equipment Notes outstanding under an Indenture may be held in more
than one Pass Through Trust, a continuing Indenture Event of Default under such
Indenture would result in an Event of Default with respect to each such Pass
Through Trust. All of the Equipment Notes issued under the same Indenture will
relate to the items of Equipment identified and described in a Prospectus
Supplement. There will be no cross-collateralization or cross-default provisions
in the Indentures; consequently, events resulting in an Indenture Event of
Default under any particular Indenture will not necessarily result in an
Indenture Event of Default occurring under any other Indenture. If an Indenture
Event of Default occurs in fewer than all of the Indentures related to a Pass
Through Trust, the Equipment Notes issued pursuant to the related Indentures
with respect to which an Indenture Event of Default has not occurred will
continue to be held in such Pass Through Trust and payments of principal of,
premium, if any, and interest on such Equipment Notes will continue to be
distributed to the Certificateholders of such Pass Through Trust as originally
scheduled.
Under each Indenture the Owner Trustee has the right under certain
circumstances to cure an Indenture Event of Default that results from the
occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee chooses to exercise such cure right, the Indenture Event of Default and
consequently the Event of Default under any Pass Through Trust holding the
related Equipment Notes will be deemed to be cured. See the applicable
Prospectus Supplement for a more detailed discussion of certain provisions
described in this paragraph.
Each Pass Through Agreement provides that if an Indenture Event of Default
under an Indenture relating to Equipment Notes held in the corresponding Pass
Through Trust shall have occurred and be continuing, the Pass Through Trustee
(i) may vote all of the Equipment Notes issued under such Indenture that are
held in such Pass Through Trust, and (ii) upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the Pass Through Certificates at the time
outstanding in respect of such Pass Through Trust shall vote a corresponding
majority of such Equipment Notes, in each case in favor of directing the related
Indenture Trustee to declare the unpaid principal amount of all Equipment Notes
issued under such Indenture and any accrued and unpaid interest
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thereon to be due and payable. Each Pass Through Agreement also provides that if
an Indenture Event of Default under an Indenture relating to Equipment Notes
held in the corresponding Pass Through Trust shall have occurred and be
continuing, the Pass Through Trustee may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the Pass Through Certificates at the time
outstanding in respect of such Pass Through Trust shall, vote Equipment Notes
issued under such Indenture that are held in such Pass Through Trust in favor of
directing the related Indenture Trustee as to the time, method and place of
conducting any proceeding for any remedy available to such Indenture Trustee or
of exercising any trust or power conferred on such Indenture Trustee under such
Indenture. (Pass Through Agreement, Sections 6.01 and 6.04)
If the Equipment Notes outstanding under an Indenture are held by more than
one Pass Through Trust, then the ability of the Certificateholders of any one
Pass Through Trust to cause the Indenture Trustee for any Equipment Notes held
in such Pass Through Trust to accelerate the payment on such Equipment Notes
under the related Indenture or to direct the exercise of remedies by such
Indenture Trustee under the related Indenture will depend, in part, upon the
proportion between the aggregate principal amount of the Equipment Notes
outstanding under such Indenture and held in such Pass Through Trust and the
aggregate principal amount of all Equipment Notes outstanding under such
Indenture. If the Equipment Notes outstanding under an Indenture are held by
more than one Pass Through Trust, then each such Pass Through Trust will hold
Equipment Notes with different terms from those of the Equipment Notes held in
any other Pass Through Trust and, therefore, the Certificateholders of a Pass
Through Trust may have divergent or conflicting interests from those of the
Certificateholders of the other Pass Through Trusts holding Equipment Notes
relating to the same Indenture. In addition, so long as the same institution or
an affiliate of such institution acts as Pass Through Trustee of each Pass
Through Trust, in the absence of instructions from the Certificateholders of any
such Pass Through Trust, the Pass Through Trustee for such Pass Through Trust
could for the same reason be faced with a potential conflict of interest upon an
Indenture Event of Default. In such event, the initial Pass Through Trustee has
indicated that it would resign as Pass Through Trustee of one or all of such
Pass Through Trusts, and a successor pass through trustee would be appointed in
accordance with the terms of the applicable Pass Through Agreement. See "The
Pass Through Trustee; the Indenture Trustee" below for a discussion of
resignation procedures.
As an additional remedy, if an Indenture Event of Default under an
Indenture has occurred and is continuing, each Pass Through Agreement provides
that the Pass Through Trustee of the corresponding Pass Through Trust holding
Equipment Notes issued under such Indenture may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the Pass Through Certificates at the time
outstanding in respect of such Pass Through Trust will, sell all or part of such
Equipment Notes for cash to any person at a price or prices that it may
reasonably deem advisable. Any proceeds received by such Pass Through Trust upon
any such sale will be deposited in the Special Payments Account for such Pass
Through Trust and will be distributed to the Certificateholders of such Pass
Through Trust on a Special Distribution Date. (Pass Through Agreement, Sections
6.01 and 6.02) The market for Equipment Notes in default may be very limited and
there can be no assurance that they could be sold for a reasonable price.
Furthermore, so long as the same institution or any affiliate of such
institution acts as Pass Through Trustee of each Pass Through Trust, it may be
faced with a conflict in deciding from which Pass Through Trust to sell
Equipment Notes to available buyers. If the Pass Through Trustee sells any such
Equipment Notes with respect to which an Indenture Event of Default exists for
less than the outstanding principal amount thereof, the Certificateholders of
such Pass Through Trust will receive a smaller amount of principal distributions
than anticipated and will not have any claim for the shortfall against the Pass
Through Trustee, the Company, the Owner Trust, the Owner Trustee or any related
Owner Participant. Furthermore, neither the Pass Through Trustee nor the
Certificateholders of such Pass Through Trust could take any action with respect
to any remaining Equipment Notes held in such Pass Through Trust so long as no
Indenture Event of Default existed with respect thereto.
For any Pass Through Trust, any amount distributed to the Pass Through
Trustee by the Indenture Trustee under any Indenture on account of the Equipment
Notes held in such Pass Through Trust following an Indenture Event of Default
under such Indenture will be deposited in the Special Payments Account for
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such Pass Through Trust and will be distributed to the Certificateholders of
such Pass Through Trust on a Special Distribution Date. In addition, if,
following an Indenture Event of Default under any Indenture, the related Owner
Trustee exercises its option, if any, to prepay or purchase the outstanding
Equipment Notes issued under such Indenture as described in the related
Prospectus Supplement, the price paid by such Owner Trustee to the Pass Through
Trustee for such Equipment Notes held in such Pass Through Trust will be
deposited in the related Special Payments Account and will be distributed to the
Certificateholders of such Pass Through Trust on a Special Distribution Date.
Such price must be at least equal to the outstanding principal amount of such
Equipment Notes plus accrued and unpaid interest thereon. (Pass Through
Agreement, Sections 4.01 and 4.02)
Any funds representing payments received with respect to any Equipment
Notes held in a Pass Through Trust in default, or the proceeds from the sale by
the Pass Through Trustee of any such Equipment Notes, held by the Pass Through
Trustee in the Special Payments Account for such Pass Through Trust will, to the
extent practicable, be invested by the Pass Through Trustee in Permitted
Investments pending the distribution of such funds on a Special Distribution
Date. (Pass Through Agreement, Article I and Section 4.04)
Each Pass Through Agreement provides that the Pass Through Trustee will,
within 90 days after the occurrence of a default (as defined below) under the
corresponding Pass Through Trust, notify the Certificateholders of such Pass
Through Trust by mail of all uncured or unwaived defaults with respect to such
Pass Through Trust known to it. The Pass Through Trustee will 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, except in the case
of default in the payment of principal of, premium, if any, or interest on any
of the Equipment Notes held in such Pass Through Trust. The term "default," for
the purpose of the provision described in this paragraph only, means the
occurrence of any Event of Default with respect to a Pass Through Trust as
described above, except that in determining whether any such Event of Default
has occurred any grace period or notice in connection therewith shall be
disregarded. (Pass Through Agreement, Section 7.02)
Each Pass Through Agreement provides that for the corresponding Pass
Through Trust, subject to the duty of the Pass Through Trustee during a default
to act with the required standard of care, the Pass Through Trustee is entitled
to be indemnified by the Certificateholders of such Pass Through Trust before
proceeding to exercise any right or power under such Pass Through Trust at the
request of such Certificateholders. (Pass Through Agreement, Section 7.03)
In certain cases, the Certificateholders of a Pass Through Trust evidencing
fractional undivided interests aggregating not less than a majority in interest
of the Pass Through Certificates at the time outstanding in respect of such Pass
Through Trust may on behalf of all the Certificateholders of such Pass Through
Trust waive any past default or Event of Default with respect to such Pass
Through Trust and thereby annul any direction given by such Certificateholders
to the Pass Through Trustee or the related Indenture Trustee with respect
thereto, except (i) a default in the deposit or distribution of any Scheduled
Payment or Special Payment, (ii) a default in payment of the principal of,
premium, if any, or interest on any of the Equipment Notes held in such Pass
Through Trust and (iii) a default in respect of any covenant or provision of the
corresponding Pass Through Agreement that cannot be modified or amended without
the consent of each Certificateholder of such Pass Through Trust affected
thereby. Any such waiver, however, will be effective to waive any such past
default or Event of Default if, but only if, the correlative Indenture Event of
Default has been waived under the related Indenture by the requisite holders of
the Equipment Notes outstanding thereunder. (Pass Through Agreement, Section
6.05)
Each Indenture provides that, with certain exceptions, the holders of a
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
Event of Default thereunder. If, as described above, the Certificateholders of a
Pass Through Trust elect to waive a past default or Event of Default with
respect to such Pass Through Trust, the principal amount of the Equipment Notes
issued under the related Indenture and held in such Pass Through Trust will be
counted in favor of the waiver of the corresponding past default or Indenture
Event of Default under the related Indenture when the Indenture Trustee
determines whether such past default or Indenture Event of Default has been
waived by the requisite majority in aggregate unpaid principal amount of
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Equipment Notes under such Indenture. If, for example, the Equipment Notes
issued under an Indenture held in a Pass Through Trust constitute only 45% in
aggregate unpaid principal amount of the Equipment Notes issued and unpaid under
such Indenture, even if all the Certificateholders of such Pass Through Trust
were to instruct the Pass Through Trustee not to waive a past default or Event
of Default with respect to such Pass Through Trust and, consequently, to vote
such Equipment Notes against the waiver of the corresponding past default or
Indenture Event of Default under such Indenture, the Equipment Notes so voted by
the Pass Through Trustee on behalf of such Pass Through Trust would not alone be
sufficient under the terms of such Indenture to compel the Indenture Trustee to
refrain from giving such waiver. Moreover, there would be no assurance that the
Certificateholders of any other Pass Through Trust holding Equipment Notes
issued under such Indenture would at such time vote such Equipment Notes against
such waiver. Therefore, if the Certificateholders of a Pass Through Trust or
Pass Through Trusts waive a past default or Event of Default such that the
principal amount of the Equipment Notes held either individually in such Pass
Through Trust or in the aggregate in such Pass Through Trusts constitutes the
required majority in aggregate unpaid principal amount under the applicable
Indenture, such past default or Indenture Event of Default under such Indenture
will be waived whether or not the Certificateholders of any other Pass Through
Trust holding Equipment Notes issued under such Indenture waive such past
default or Event of Default with respect to such other Pass Through Trust.
MODIFICATIONS OF THE AGREEMENTS
Each Pass Through Agreement contains provisions permitting the Company and
the Pass Through Trustee to enter into an agreement supplemental to the
corresponding Pass Through Trust, without the consent of the Certificateholders
of such Pass Through Trust, to (i) evidence the succession of another
corporation to the Company and the assumption by such corporation of the
Company's obligations under such Pass Through Agreement, (ii) add to the
covenants of the Company for the protection of the related Certificateholders,
(iii) surrender any right or power conferred upon the Company in such Pass
Through Agreement, (iv) cure any ambiguity or correct or supplement any
defective or inconsistent provision of such Pass Through Agreement, or make any
other provisions in regard to matters or questions arising thereunder, provided
that such action will not adversely affect the interests of the related
Certificateholders, (v) correct or amplify the description of property that
constitutes Trust Property or the conveyance of such property to the Pass
Through Trustee, (vi) evidence and provide for a successor Pass Through Trustee
for such Pass Through Trust, (vii) modify, eliminate or add to the provisions of
such Pass Through Agreement to the extent necessary to qualify such Pass Through
Agreement under the Trust Indenture Act or any similar federal statute enacted
thereafter, or (viii) add, eliminate or change any provision under such Pass
Through Agreement that will not adversely affect the interests of the
Certificateholders, provided that in each case such modification does not cause
the corresponding Pass Through Trust to become taxable as an "association,"
within the meaning of Treasury Regulation Section 301.7701-4 (Pass Through
Agreement, Section 9.01).
Each Pass Through Agreement also provides that the Company and the Pass
Through Trustee, with the consent of the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in interest
of the Pass Through Certificates at the time outstanding in respect of the
corresponding Pass Through Trust, may execute supplemental agreements adding any
provisions to or changing or eliminating any of the provisions of such Pass
Through Agreement or modifying the rights of such Certificateholders. No such
supplemental agreement may, however, without the consent of each such
Certificateholder so affected, (a) reduce in any manner the amount of, or delay
the timing of, any receipt by the Pass Through Trustee of payments on the
Equipment Notes held in such Pass Through Trust, or distributions in respect of
any Pass Through Certificate of such Pass Through Trust, or change any date of
payment on any such Pass Through Certificate or change the place of payment
where, or the coin or currency in which, such Pass Through Certificates are
payable, or impair the right of any such Certificateholder to institute suit for
the enforcement of any payment when due, (b) except as provided in such Pass
Through Agreement, permit the disposition of any Equipment Note held in such
Pass Through Trust, or permit the creation of any lien on the Trust Property or
otherwise deprive any Certificateholder of the benefit of the ownership of the
Equipment Notes held in such Pass Through Trust or the lien of the related
Indenture, (c) reduce the percentage of the aggregate fractional undivided
interests of such Pass Through Trust that is required to approve any
supplemental agreement or any
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waiver provided for in such Pass Through Agreement or (d) cause the Pass Through
Trust to become taxable as an "association," within the meaning of Treasury
Regulation Section 301.7701-4. (Pass Through Agreement, Section 9.02)
MODIFICATIONS, CONSENTS AND WAIVERS UNDER THE INDENTURES AND RELATED AGREEMENTS
If the Pass Through Trustee, as the holder of any Equipment Notes held in a
Pass Through Trust, receives a request for its consent to any amendment,
modification, waiver or supplement under the Indenture or other document
relating to such Equipment Notes (including any Lease), the Pass Through Trustee
will mail a notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder of such Pass Through Trust as of the date
of such notice. The Pass Through Trustee will request instructions from such
Certificateholders as to whether or not to consent to such amendment,
modification, waiver or supplement. The Pass Through Trustee will vote or
consent with respect to such Equipment Notes in the same proportion as the Pass
Through Certificates of such Pass Through Trust are actually voted by such
Certificateholders by a certain date specified in such notice to
Certificateholders. If an Event of Default relating to such Indenture has
occurred and is continuing under such Pass Through Trust, the Pass Through
Trustee may, in the absence of instructions from Certificateholders holding a
majority in interest of the Pass Through Certificates at the time outstanding in
respect of such Pass Through Trust, in its own discretion consent to such
amendment, modification, waiver or supplement, and may so notify the related
Indenture Trustee. (Pass Through Agreement, Section 10.01)
TERMINATION OF PASS THROUGH TRUSTS
The obligations of the Company and the Pass Through Trustee with respect to
a Pass Through Trust will terminate upon the distribution to the
Certificateholders of such Pass Through Trust of all amounts required to be
distributed to them pursuant to the corresponding Pass Through Agreement and the
disposition of all property held in such Pass Through Trust. The Pass Through
Trustee will notify each Certificateholder of record of such Pass Through Trust
by mail of, among other things, the termination of such Pass Through Trust, the
amount of the proposed final payment and the proposed date for the distribution
of such final payment for such Pass Through Trust. The final distribution for
each Certificateholder of such Pass Through Trust will be made only upon
surrender of such Certificateholder's Pass Through Certificates at the office or
agency of the Pass Through Trustee specified in such termination notice. (Pass
Through Agreement, Section 11.01)
THE PASS THROUGH TRUSTEE; THE INDENTURE TRUSTEE
Shawmut Bank Connecticut, National Association will be the initial Pass
Through Trustee for each of the Pass Through Trusts. The Pass Through Trustee
and any of its affiliates may hold Pass Through Certificates in their own names.
(Pass Through Agreement, Section 7.05)
Unless otherwise specified in the related Prospectus Supplement, Shawmut
Bank Connecticut, National Association may also be the Indenture Trustee under
the Indentures under which the Equipment Notes have been or will be issued.
Shawmut Bank Connecticut, National Association may act as trustee under other
indentures with respect to other indebtedness of the Company. The Company from
time to time may borrow from, and maintain deposit accounts with, Shawmut Bank
Connecticut, National Association and its affiliates.
The Pass Through Trustee may resign under any or all of the Pass Through
Trusts at any time. The Pass Through Trustee is required to resign with respect
to a Pass Through Trust if it obtains knowledge of an Avoidable Tax (generally,
a state or local tax on such Pass Through Trust or its Certificateholders that
would be avoided if the Pass Through Trustee were located in another state)
unless the Company or the Owner Trustee pays such tax. If the Pass Through
Trustee fails to comply with Section 310 of the Trust Indenture Act or ceases to
be eligible to continue as Pass Through Trustee with respect to a Pass Through
Trust and, in either such case, fails to so comply or to resign after written
request by any Certificateholder that has been a bona fide Certificateholder of
the applicable Pass Through Trust for at least six months or if the Pass Through
Trustee becomes incapable of acting as Pass Through Trustee or becomes
insolvent, then the Company may
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remove such Pass Through Trustee, or any Certificateholder of such Pass Through
Trust 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 such
Pass Through Trustee and the appointment of a successor trustee. In addition,
the Pass Through Trustee of any Pass Through Trust may be removed without cause
by the Certificateholders holding more than 50% in aggregate amount of the
related Pass Through Certificates. In the case of the resignation or removal of
the Pass Through Trustee, the Company will appoint a successor, subject to the
right of the Certificateholders holding more than 50% in aggregate amount of the
related Pass Through Certificates to appoint a different successor within one
year thereafter. If no successor Pass Through Trustee is appointed and accepts
its appointment, then any Certificateholder that has been a bona fide
Certificateholder of the relevant Pass Through Trust for at least six months
may, or the resigning Pass Through Trustee may, petition a court for the
appointment of a successor. The resignation or removal of the Pass Through
Trustee for any Pass Through Trust and the appointment of the successor trustee
for such Pass Through Trust does not become effective until acceptance of the
appointment by the successor trustee. (Pass Through Agreement, Section 7.09)
Pursuant to such resignation and successor trustee provisions, it is possible
that a different trustee could be appointed to act as the successor trustee with
respect to each Pass Through Trust. All references in this Prospectus to the
Pass Through Trustee are to the respective trustees acting in such capacity
under each of the Pass Through Trusts and should be read to take into account
the possibility that each of the Pass Through Trusts could have a different
successor trustee in the event of such a resignation or removal.
Each Pass Through Agreement provides that the Company will pay the Pass
Through Trustee's fees and expenses. Each Pass Through Agreement further
provides that the Pass Through Trustee in its individual capacity will be
entitled to indemnification by the Company for, and will be held harmless
against, any loss, liability or expense and any tax (other than taxes
attributable to the Pass Through Trustee's compensation) incurred by the Pass
Through Trustee in its individual capacity in connection with the acceptance or
administration of the corresponding Pass Through Trust to the extent provided in
the applicable Participation Agreement (see "Description of the Equipment
Notes -- The Participation Agreements"). In certain circumstances, the Pass
Through Trustee will be entitled to be reimbursed from, and will have a lien
prior to the Pass Through Certificates upon, the applicable Pass Through Trust
for any tax (other than income or similar taxes) incurred in its trust capacity
in connection with the acceptance or administration of such Pass Through Trust.
(Pass Through Agreement, Section 7.07)
DESCRIPTION OF THE EQUIPMENT NOTES
The discussion that follows is a summary that does not purport to be
complete and is qualified in its entirety by the detailed information appearing
in the applicable Prospectus Supplement. The following summary includes
descriptions of the material terms of the Equipment Notes and the Indentures.
Except as otherwise indicated below or as described in the applicable Prospectus
Supplement, the following summary applies to the Equipment Notes, the
Indentures, the Leases and the Participation Agreements related to the
Equipment. Additional provisions with respect to the Equipment Notes, the
Indentures, the Leases and the Participation Agreements relating to any
particular offering of Pass Through Certificates will be described in the
applicable Prospectus Supplement. To the extent that any provision in any
Prospectus Supplement is inconsistent with any provision of this summary, the
provision of such Prospectus Supplement will control.
GENERAL
The Equipment Notes will be issued as nonrecourse obligations of the
applicable Owner Trust, in each case by the Owner Trustee under such Owner Trust
for the benefit of the Owner Participant under such Owner Trust, and will be
authenticated under an Indenture by the Indenture Trustee. All of the Equipment
Notes issued under the same Indenture will relate to, and will be secured by,
one or more items of Equipment identified and described in the relevant
Prospectus Supplement which are or will be leased to the Company pursuant to a
Lease between the Owner Trustee under the applicable Owner Trust and the
Company. The Equipment subject to each Lease and the Equipment Notes issued
under the related Indenture will be identified and described in the applicable
Prospectus Supplement. Under each Lease of Equipment, the Company will be
obligated to make rental payments that will be at least equal to the scheduled
payments of
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<PAGE> 16
principal of and interest on the related Equipment Notes when, and as scheduled
to be, due and payable. The Equipment Notes will not, however, be obligations
of, or guaranteed by, the Company. The Company's obligations to pay rent and to
cause other payments to be made under each Lease will be general obligations of
the Company.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Pass Through Trustee on the Equipment Notes
constituting Trust Property of each Pass Through Trust will be passed through to
the Certificateholders of such Pass Through Trust on a pro rata basis on the
dates and at the rate per annum set forth in the applicable Prospectus
Supplement. Interest on the Equipment Notes will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
Each Pass Through Trust will hold Equipment Notes on which principal is
payable in scheduled amounts and on specified dates as set forth in the
applicable Prospectus Supplement. Principal received by the Pass Through Trustee
on such Equipment Notes will be passed through to the Certificateholders of such
Pass Through Trust on a pro rata basis as set forth in the applicable Prospectus
Supplement.
PREPAYMENT
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Notes may or
must be prepaid prior to the stated maturity date thereof, in whole or in part,
the premium, if any, applicable upon certain prepayments and other terms
applying to the prepayment of such Equipment Notes.
SECURITY
The Equipment Notes issued under each of the Indentures will be secured by
(i) an assignment by the related Owner Trust to the Indenture Trustee of such
Owner Trust's rights (except for certain limited rights described below) under
the Lease or Leases to which it is a party covering the related item or items of
Equipment including the right to receive rent and other payments thereunder,
(ii) a security interest granted to the Indenture Trustee in such related
Equipment, subject to the rights of the Company under such Lease or Leases and
to certain other permitted liens and encumbrances. The assignment by the Owner
Trust to the Indenture Trustee of its rights under each Lease will exclude
rights of the Owner Trustee and the related Owner Participant relating to (i)
indemnification by the Company for certain matters, (ii) proceeds of public
liability insurance payable to the Owner Trustee and the Indenture Trustee in
their respective individual capacities and to the Owner Participant under
insurance maintained by the Company under such Lease and (iii) proceeds of any
insurance policies separately maintained by such Owner Trustee in its individual
capacity or by such Owner Participant. The right of the Indenture Trustee,
however, to exercise any of the rights of the Owner Trustee under the related
Lease, except the right to receive payments of rent due thereunder, will be
subject to certain limitations as described in the applicable Prospectus
Supplement.
There will be no cross-collateralization provisions in the Indentures and
consequently the Equipment Notes issued by an Owner Trust will not be secured by
any items of Equipment held by any other Owner Trust or the Leases relating
thereto. There will be no cross-default provisions in the Indentures and
consequently events resulting in an Indenture Event of Default under any
particular Indenture may not result in an Indenture Event of Default occurring
under any other Indenture.
PAYMENTS AND LIMITATIONS OF LIABILITY
All payments of principal, of premium, if any, and interest on any
Equipment Notes will be made only from the assets subject to the lien of the
related Indenture or the income and proceeds received by the Indenture Trustee
therefrom, including rent payable by the Company under the related Lease. The
Equipment Notes will not be direct obligations of, or guaranteed by, the
Company. The Company's obligations to pay rent and to cause other payments to be
made under each Lease will be general obligations of the Company.
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<PAGE> 17
Neither the Owner Trustee nor the Indenture Trustee (in their individual
capacities) nor any Owner Participant will be liable to any Certificateholder
or, in the case of the Owner Trustee, in its individual capacity, to the Company
or the Indenture Trustee for any amounts payable under the Equipment Notes or
the Indentures or, except as provided in the Indentures and the Participation
Agreements and except for the gross negligence or willful misconduct of the
Owner Trustee, for any liability thereunder.
INDENTURE EVENTS OF DEFAULT AND REMEDIES
For any Pass Through Trust, the applicable Prospectus Supplement will
describe the Indenture Events of Default under the Indentures related to the
Equipment Notes to be held by such Pass Through Trust, the remedies that the
related Indenture Trustee may exercise with respect to the related Equipment,
either at their own initiative or upon instructions from holders of the related
Equipment Notes, and other provisions relating to the occurrence of an Indenture
Event of Default the exercise of remedies and any limitations or restrictions
thereon. There will be no cross-default provisions in the Indentures and events
resulting in an Indenture Event of Default under any particular Indenture will
not necessarily result in an Indenture Event of Default under any other
Indenture.
THE LEASES
The following terms are applicable to each Lease:
Terms and Rentals. Each item of Equipment is or will be leased by an
Owner Trust to the Company for a term commencing on the date of the Owner
Trustee's acceptance thereof pursuant to the related Participation
Agreement and expiring on a date not earlier than the latest maturity date
of the related Equipment Notes, unless previously terminated or extended,
as permitted by the related Lease. The scheduled rental payments by the
Company under each Lease will be payable on the dates specified in the
applicable Prospectus Supplement. Such rental payments will be assigned
under the related Indenture by the Owner Trust to the Indenture Trustee to
provide the funds necessary to make payments of principal and interest due
from such Owner Trust on the Equipment Notes issued under such Indenture.
Any Prospectus Supplement may provide that, under certain circumstances,
the scheduled rental payments under any applicable Lease may be adjusted;
in that case, however, each such Lease will provide that under no
circumstances will the adjusted rental payments that the Company will be
unconditionally obligated to make or cause to be made under such Lease and
any other Lease to which the same Owner Trust is a party, after such
adjustment be less than the scheduled payments of principal and interest on
the Equipment Notes issued under the Indenture relating to such Lease or
Leases. See "Description of the Equipment Notes -- Payments and Limitations
of Liability." Scheduled payments of principal and interest on the
Equipment Notes will be made on the dates specified in the applicable
Prospectus Supplement.
Net Lease. The Company's obligations under each Lease in respect of
the Equipment leased thereunder will be those of a lessee under a "net
lease." Accordingly, the Company will be obligated to pay all costs of
operating the Equipment and its expenses, to maintain, service, repair and
overhaul the Equipment so as to keep the Equipment in good condition,
ordinary wear and tear excepted, and in a manner consistent with the
Company's maintenance practices in respect of similar equipment owned or
leased by it. In the case of a Lease of an Aircraft, the Company will be
obligated to maintain the airworthiness certification of such Aircraft in
good standing at all times under the Federal Aviation Act. Generally, the
Company will be obligated to replace or cause to be replaced all parts that
may from time to time be incorporated or installed in or attached to any
item of Equipment and that may become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit
for use. The Company will be obligated to make all modifications to the
Equipment which are required by law and will have the right to make other
alterations, modifications and additions to the Equipment so long as such
alterations, modifications or additions do not materially decrease the
value, utility or remaining economic useful life of such Equipment. See the
applicable Prospectus Supplement for a description of certain limitations,
if any, applicable to provisions described in this paragraph.
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<PAGE> 18
Insurance. Unless otherwise indicated in the applicable Prospectus
Supplement the Company will, at its own expense, cause to be carried and
maintained with insurance companies (which may be captive insurance
companies affiliated with the Company) (i) physical damage insurance in
respect of all Equipment and (ii) public liability insurance with respect
to third-party personal injury and property damage, in such amounts and
against such risks at least equal to those customarily insured against by
the Company in respect of equipment owned or leased by it similar in type
to the Equipment. There is no assurance that any insurance will be carried
in the future, or, if it is carried, as to the amount of such insurance or
as to the amount of the deductible limits in respect of such insurance. See
the applicable Prospectus Supplement for a description of any insurance
obligations of the Company not described in this paragraph or any
limitations applicable to provisions described in this paragraph.
Lease Events of Default; Remedies. The applicable Prospectus
Supplement will describe the Lease Events of Default under the related
Leases, the remedies that the Owner Trustee may exercise with respect to
the related Equipment, and other provisions relating to the occurrence of a
Lease Event of Default and the exercise of remedies.
THE PARTICIPATION AGREEMENTS
In each Participation Agreement the Company makes certain representations
relating to itself and the related Equipment. Each Participation Agreement
provides that the Company will indemnify each Indenture Trustee, each Owner
Participant, the Owner Trustee and the Pass Through Trustee, and certain parties
affiliated with the foregoing (but not including holders of the Equipment Notes
or the Certificateholders), for certain liabilities, losses, fees and expenses
and for certain other matters arising out of the transactions described herein
or relating to the applicable Equipment or the use thereof. In addition, under
certain circumstances the Company will be required to indemnify such persons
against certain taxes, levies and duties and for certain other matters relating
to such transactions or the applicable Equipment. Subject to certain
restrictions, each Participation Agreement permits the related Owner Participant
to convey all of its right, title and interest in the related Owner Trust.
Moreover, if so provided in the applicable Prospectus Supplement, a
Participation Agreement may provide that, in certain circumstances the Company
may assume the related Owner Trust's obligation under the related Equipment
Notes on a full recourse basis upon a purchase of the related Equipment by the
Company.
Each Participation Agreement also provides that the Company will be
prohibited from consolidating with or merging into any other corporation under
circumstances in which the Company is not the surviving corporation, or from
conveying, transferring or leasing all or substantially all of its assets as an
entirety to any person, unless among other things, (i) the successor or
transferee corporation expressly assumes all the obligations of the Company
contained in such Participation Agreement, the related Lease and certain other
related agreements and (ii) immediately before and after giving effect to such
transaction, no Lease Event of Default under the related Lease shall be in
existence.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, tax counsel to the Company,
the following discussion accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Pass Through
Certificates, and should be read in conjunction with any additional discussion
of federal income tax consequences included in the applicable Prospectus
Supplement. This opinion is based on laws, regulations, rulings and decisions in
effect as of the date hereof. Changes to existing law, which could have
retroactive effect, may alter the consequences described below. This opinion
does not purport to address federal income tax consequences applicable to
particular categories of investors, some of which (for example, insurance
companies and foreign investors) may be subject to special rules. This summary
discusses only Pass Through Certificates held as capital assets for federal
income tax purposes. Persons considering purchasing interests in Pass Through
Certificates should consult their own tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state,
local or foreign jurisdiction. The Pass Through Trusts are not indemnified for
any
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federal income taxes that may be imposed upon them, and the imposition of any
such taxes on a Pass Through Trust would result in a reduction in the amounts
available for distribution to the Certificateholders of such Pass Through Trust.
GENERAL
The Pass Through Trusts will not be classified as associations taxable as
corporations, but rather, will be classified as grantor trusts under Section 671
of the Internal Revenue Code of 1986, as amended (the "Code"), and each
Certificateholder will be treated as the owner of a pro rata undivided interest
in each of the Equipment Notes and any other property held in the related Pass
Through Trust.
Each Certificateholder will be required to report on its federal income tax
return its pro rata share of the entire income from each of the Equipment Notes
and any other property held in the related Pass Through Trust in accordance with
such Certificateholder's method of accounting. A Certificateholder using the
cash method of accounting must take into account its pro rata share of income as
and when such income is considered to have been received by the Pass Through
Trustee. A Certificateholder using an accrual method of accounting must take
into account its pro rata share of income as it accrues or is received by the
Pass Through Trustee, whichever is earlier. Each Certificateholder will
generally be entitled to deduct its share of the Pass Through Trustee's fees and
expenses incurred in connection with its administration of the related Pass
Through Trust. However, a noncorporate Certificateholder's allocable share of
the Pass Through Trustee's fees and expenses may be a "miscellaneous itemized
deduction" as defined in Section 67 of the Code. Under that Section,
"miscellaneous itemized deductions" will be deductible by a noncorporate
Certificateholder only to the extent that the aggregate of such deductions
(including those arising from transactions unrelated to holding the Pass Through
Certificates) exceed 2% of such Certificateholder's adjusted gross income.
A purchaser of an interest in a Pass Through Certificate will be treated as
purchasing an interest in each Equipment Note and any other property in the
related Pass Through Trust at a price determined by allocating the purchase
price paid for the Pass Through Certificate among such Equipment Notes and other
property in proportion to their relative fair market values at the time of
purchase of the Pass Through Certificate. Unless otherwise indicated in a
Prospectus Supplement, the Company anticipates that when all the Equipment Notes
have been acquired by the related Pass Through Trust, the purchase price paid
for a Pass Through Certificate of such Pass Through Trust by an original
purchaser of such Pass Through Certificate should be allocated among the
Equipment Notes held in such Pass Through Trust in proportion to their
respective principal amounts.
If an Equipment Note held by a Pass Through Trust is prepaid, a
Certificateholder will be considered to have sold his pro rata share of that
Equipment Note, and will recognize gain or loss equal to the difference between
its aggregate adjusted basis in the Equipment Note and the amount realized on
the sale (except to the extent attributable to accrued interest, which would be
taxable as interest income if not previously included in income). Subject to the
market discount provisions of the Code (described below), any such gain or loss
will be long-term capital gain or loss if the Equipment Note is considered to
have been held for more than one year. Net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary income.
With respect to the Equipment Notes, although the matter is not entirely free
from doubt, an Owner Participant's conveyance of its interest in an Owner Trust
will not constitute a taxable event to the holders of interests in the related
Equipment Notes. If the Company were to assume an Owner Trust's obligations
under the related Equipment Notes upon a purchase of the related Equipment by
the Company, such assumption would be treated as a taxable exchange of the
respective Equipment Notes resulting in the recognition of taxable gain or loss
under the rules discussed above. For this purpose the amount realized will be
equal to the fair market value of the Certificateholder's pro rata share of the
respective Equipment Notes at such time. However, under proposed Treasury
regulations not currently in effect, the Company's assumption of the Owner
Trust's obligations under the circumstances described above would not be treated
as a taxable exchange of the Equipment Notes. It is impossible to predict
whether, or in what form, final or temporary regulations might be promulgated
and what the substance or effective date of such regulations might be.
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SALES OR EXCHANGES OF PASS THROUGH CERTIFICATES
A Certificateholder that sells or exchanges a Pass Through Certificate will
be considered to have sold his pro rata portion of the property held by the Pass
Through Trust, and will recognize gain or loss on the basis discussed in the
preceding paragraph.
MARKET DISCOUNT
A purchaser of a Pass Through Certificate generally will be considered to
have acquired an interest in an Equipment Note at a "market discount" to the
extent the remaining principal amount of such Equipment Note allocable to the
Pass Through Certificate exceeds the Certificateholder's tax basis allocable to
such Equipment Note, unless the excess does not exceed a prescribed de minimis
amount. In the event such excess exceeds the de minimis amount, the
Certificateholder will be subject to the market discount rules of Sections 1276
through 1278 of the Code with regard to its interest in such Equipment Note.
In the case of a sale or certain other disposition of indebtedness subject
to the market discount rules, Section 1276 of the Code requires that gain, if
any, from such sale or disposition be treated as ordinary income to the extent
such gain represents a market discount that has accrued during the period such
indebtedness was held. If such indebtedness is disposed of in a nontaxable
transaction (other than a nonrecognition transaction described in Code Section
1276(d)), accrued market discount will be includable as ordinary income as if
the Certificateholder had sold the Equipment Note at its then market value.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, Section 1276 of the Code requires that such payment be
included in gross income as ordinary income to the extent such payment does not
exceed the market discount that has accrued during the period such indebtedness
was held. The amount of any accrued market discount later required to be
included in income upon a disposition or subsequent partial principal payment
will be reduced by the amount of accrued market discount previously included in
income.
Generally, market discount accrues under a straight line method or, at the
election of the taxpayer, a constant interest method. However, in the case of
installment obligations (such as the Equipment Notes), the manner in which the
market discount is to be accrued has been left to Treasury regulations not yet
promulgated. Until such Treasury regulations are issued, the explanatory
Conference Report to the Tax Reform Act of 1986 (the "Conference Report")
indicates that holders of installment obligations with a market discount (which
do not have original issue discount) may elect to accrue the market discount
either on the basis of a constant interest rate or as follows: the amount of the
market discount that is deemed to accrue is the amount of the market discount
that bears the same ratio to the total amount of the remaining market discount
that the amount of stated interest paid in the accrual period bears to the total
amount of stated interest remaining to be paid on the installment obligation as
of the beginning of such period.
Under Section 1277 of the Code, if in any taxable year interest paid or
accrued on indebtedness incurred or continued to purchase or carry indebtedness
subject to the market discount rules exceeds the interest currently includable
in income with respect to such indebtedness, deduction of the excess interest
must be deferred to the extent of the market discount allocable to the taxable
year. The deferred portion of any interest expense will generally be deductible
when such market discount is included in income upon the sale or other
disposition (including repayment) of the indebtedness.
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in his gross income currently. If such election is made, the
rules of Sections 1276 and 1277 (described above) will not apply to the
taxpayer.
PREMIUM
A Certificateholder will be considered to have acquired an interest in an
Equipment Note at a premium to the extent such Certificateholder's tax basis
allocable to such Equipment Note exceeds the remaining principal amount of such
Equipment Note allocable to such Certificateholder's Pass Through Certificate.
In that event, a Certificateholder that holds such Pass Through Certificate as a
capital asset may elect (in
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accordance with applicable Code provisions) to amortize such premium as an
offset to interest income under Section 171 of the Code with corresponding
reductions in the Certificateholder's tax basis in such Equipment Note.
Generally, such amortization is on a constant yield basis. In the case of
installment obligations (such as the Equipment Notes), however, the Conference
Report indicates a Congressional intent that amortization will be in accordance
with the same rules that will apply to the accrual of market discount on
installment obligations. See "Market Discount."
Since the Equipment Notes may be called at a premium prior to maturity,
amortizable premium may be determined by reference to an early call date. Due to
the complexities of the amortizable premium rules, particularly where there is
more than one possible call date and the amount of any premium is uncertain,
Certificateholders are urged to consult their tax advisors as to the amount of
any such amortizable premium.
If a Certificateholder acquires an interest in an Equipment Note at a
premium and elects to amortize such premium, and the Internal Revenue Service
successfully challenges the amount of amortization claimed for a particular
period, then such Certificate Owner would be precluded from offsetting interest
income on the Equipment Note for such period with the amount of the disallowed
amortization, and the basis of such Equipment Note would be increased
accordingly.
ORIGINAL ISSUE DISCOUNT
Under a reasonable interpretation of applicable Treasury regulations on
original issue discount, it is not anticipated that the Equipment Notes (and,
consequently, the Pass Through Certificates) will be issued with original issue
discount.
BACKUP WITHHOLDING
Payments made on the Pass Through Certificates, and proceeds from the sale
or exchange of the Pass Through Certificates to or through certain brokers, may
be subject to a "backup" withholding tax of 31% unless the Certificateholder
complies with certain reporting procedures or is an exempt recipient under the
Code. Any such withholding amounts will be allowed as a credit against the
Certificateholder's federal income tax and may entitle such Certificateholder to
a refund, provided that the required information is furnished to the Internal
Revenue Service.
CERTAIN STATE TAXES
The Pass Through Trustee is a national banking association with its
corporate trust office in Hartford, Connecticut. Shipman & Goodwin, special
counsel for the Pass Through Trustee, has advised the Company that, in its
opinion, under currently applicable law, assuming that each Pass Through Trust
will not be classified as an association taxable as a corporation for federal
income tax purposes, but rather will be classified as a grantor trust under
Section 671 of the Code, and assuming that each Pass Through Trust does not
otherwise engage in business in Connecticut, (i) the Pass Through Trusts will
not be subject to any tax (including, without limitation, net or gross income,
tangible or intangible property, net worth, capital, franchise or doing business
tax), fee or other governmental charge under the laws of the State of
Connecticut or any political subdivision thereof and (ii) Certificateholders
that are not residents of or otherwise subject to tax in Connecticut will not be
subject to any tax (including, without limitation, net or gross income, tangible
or intangible property, net worth, capital, franchise or doing business tax),
fee or other governmental charge under the laws of the State of Connecticut or
any political subdivision thereof as a result of purchasing, owning (including
receiving payments with respect to) or selling a Pass Through Certificate.
Neither the Pass Through Trusts nor the Certificateholders will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Pass Through Trust would result in a reduction in the
amounts available for distribution to the Certificateholders of such Pass
Through Trust. In general, should a Certificateholder or a Pass Through Trust be
subject to any State or local tax which would not be imposed if the Trustee were
located in a different jurisdiction in the United States, the Trustee will
resign and a new Trustee in such other jurisdiction will be appointed.
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ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, Pass
Through Certificates may not be purchased by, or with the assets of, any
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or individual retirement account or
plan subject to Section 4975 of the Code unless such assets are subject to a
prohibited transaction exemption issued by the Department of Labor which
exemption applies to the purchase and holding of the Pass Through Certificates
by the applicable plan or account. In addition, certain governmental plans and
non-electing church plans are not subject to Title I of ERISA or Section 4975 of
the Code and, therefore, may purchase the Pass Through Certificates.
PLAN OF DISTRIBUTION
The Pass Through Certificates may be sold to or through underwriters,
directly to other purchasers or through agents.
The distribution of the Pass Through Certificates may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
In connection with the sale of Pass Through Certificates, underwriters or
agents may receive compensation from the Company or from purchasers of Pass
Through Certificates for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Pass Through Certificates to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of Pass Through Certificates may be deemed
to be underwriters, and any discounts or commissions received by them from the
Company and any profit on the resale of Pass Through Certificates by them may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Any such underwriter or agent will be identified, and any such compensation
received from the Company will be described, in the applicable Prospectus
Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Pass Through Certificates may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company does not intend to apply for the listing of any Series of Pass Through
Certificates on a national securities exchange. If the Pass Through Certificates
of any Series are sold to or through underwriters, the underwriters may make a
market in such Pass Through Certificates, as permitted by applicable laws and
regulations. No underwriter would be obligated, however, to make a market in
such Pass Through Certificates, and any such market-making could be discontinued
at any time at the sole discretion of the underwriters. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, the Pass
Through Certificates of any Series.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for, the Company in the
ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Pass Through Certificates offered hereby will be passed upon for
the Company by special counsel to the Company, Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, and for the underwriters and certain
other purchasers by Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue,
New York, New York 10019. Unless otherwise indicated in the applicable
Prospectus Supplement, both Simpson Thacher & Bartlett and Cravath, Swaine &
Moore may rely on the opinion of Shipman & Goodwin, counsel for Shawmut Bank
Connecticut, National Association, individually and as Pass Through Trustee, as
to matters relating to the
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authorization, execution and delivery of the Pass Through Agreement and of each
Series of Pass Through Certificates by the Pass Through Trustee.
EXPERTS
The consolidated financial statements and schedules of the Company
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, as amended, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedules are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 37,932
Printing and engraving expenses................................... 35,000
Accounting fees and expenses...................................... 20,000
Legal fees and expenses........................................... 300,000
Blue Sky expenses................................................. 1,000
Trustee's fees.................................................... 7,500
Fees of rating agencies........................................... 150,000
Miscellaneous..................................................... 7,068
--------
Total............................................................. $558,500
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article III, Section 14 of the Bylaws of the Company, as amended, provides
for indemnification of officers, directors and employees of the Company to the
extent authorized by the General Corporation Law of the State of Delaware.
Pursuant to Section 145 of the Delaware General Corporation Law, the Company
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are, or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. With respect to suits by or in the
right of a corporation, however, indemnification is not available if such person
is adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless the court determines that indemnification is
appropriate. In addition, the Company has the power to purchase and maintain
insurance for such persons. The statute also expressly provides that the power
to indemnify authorized thereby is not exclusive of any rights granted under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
Pursuant to authority conferred by stockholders at the annual meeting of
the Company on April 30, 1987, the Company has entered into Indemnity Agreements
with each of its directors. The Indemnity Agreements establish contract rights
in favor of the Company's directors and thus give them assurances that the
indemnity provided would continue despite possible future changes or amendments
to the Company's Bylaws or the Restated Certificate of Incorporation. The
Indemnity Agreements generally provide that the directors are entitled to
indemnification to the fullest extent permitted by law against liabilities
arising from any claims made against them arising from acts or omissions alleged
to have been committed while acting as directors and solely because of their
being directors.
Also at the annual meeting of the Company on April 30, 1987, stockholders
approved an amendment to the Company's Restated Certificate of Incorporation to
eliminate the personal liability of each director of the Company to the Company
or its shareholders for monetary damages for breach of fiduciary duty under
certain circumstances. The amendment is consistent with amendments to the
Delaware General Corporation Law effective July 1, 1986.
In addition to the indemnification provision of the Company's Bylaws and
the Indemnity Agreements, the Company's directors and officers are covered by
Directors' and Officers' liability insurance with a limit of $100 million, which
insurance is subject to exclusions, deductibles and conditions.
II-1
<PAGE> 25
The above discussion of the Company's Bylaws, Section 145 of the Delaware
General Corporation Law and the Company's Indemnity Agreements with its
directors is not intended to be exhaustive and is respectively qualified in its
entirety by such Bylaws, statute and Agreements.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------
<C> <C> <S>
1* -- Form of Underwriting Agreement relating to Pass Through Certificates
4(a)(1)* -- Form of Pass Through Trust Agreement between Phillips Petroleum Company and
the Pass Through Trustee
4(a)(2)* -- Form of Pass Through Certificate (included in Exhibit 4(a)(1))
4(b)(1)* -- Form of Trust Indenture and Security Agreement between the Owner Trustee and
the Indenture Trustee
4(b)(2)* -- Form of Equipment Note (included in Exhibit 4(b)(1))
4(c)(1)* -- Form of Participation Agreement (Rail Cars) among Phillips Petroleum Company,
as Lessee, an Owner Participant, the Owner Trustee, the Indenture Trustee and
the Interim Loan Participant
4(c)(2)* -- Form of Participation Agreement (Aircraft) among Phillips Petroleum Company,
as Lessee, an Owner Participant, the Owner Trustee, the Indenture Trustee and
the Interim Loan Participant
4(c)(3)* -- Form of Participation Agreement (Vehicles) among Phillips Petroleum Company,
as Lessee, the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Interim Loan Participant
4(c)(4)* -- Form of Participation Agreement Supplement with the Pass Through Trustee
4(d)* -- Form of Trust Agreement between an Owner Participant and the Owner Trustee
4(e)(1)* -- Form of Lease Agreement (Rail Cars) between the Owner Trustee, as the Lessor,
and Phillips Petroleum Company, as Lessee
4(e)(2)* -- Form of Lease Agreement (Aircraft) between the Owner Trustee, as the Lessor,
and Phillips Petroleum Company, as Lessee
4(e)(3)* -- Form of Lease Agreement (Vehicles) between the Owner Trustee, as the Lessor,
and Phillips Petroleum Company, as Lessee
5(a)* -- Opinion of Simpson Thacher & Bartlett, special counsel for Phillips Petroleum
Company
5(b)* -- Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee
8(a)* -- Tax Opinion of Simpson Thacher & Bartlett, counsel for Phillips Petroleum
Company (included in Exhibit 5(a))
8(b)* -- Tax Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee
(included in Exhibit 5(b))
12 -- Computation of Ratio of Earnings to Fixed Charges (incorporated by reference
to Exhibit 12 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
23(a)* -- Consent of Simpson Thacher & Bartlett, counsel for Phillips Petroleum Company
(included in Exhibit 5(a))
23(b)* -- Consent of Shipman & Goodwin, counsel for the Pass Through Trustee (included
in Exhibit 5(b))
23(c)* -- Consent of Ernst & Young LLP (included on page II-5 of the Registration
Statement)
24** -- Powers of Attorney
25* -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of Shawmut Bank Connecticut, National Association as Pass Through
Trustee
</TABLE>
- ---------------
* Filed Herewith.
** Previously filed.
II-2
<PAGE> 26
ITEM 17. UNDERTAKINGS.
(a) 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, as amended (the "Securities Act"); (ii) To reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (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; (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:
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do
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, as amended (the "Exchange Act") 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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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
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 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 whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bartlesville, State of Oklahoma, on the 30th day
of September, 1994.
PHILLIPS PETROLEUM COMPANY
By: /s/ W. W. ALLEN
------------------------------------
(W. W. Allen, Chairman of the Board
of Directors and Chief Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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/ W. W. ALLEN Chairman of the Board of September 30, 1994
- --------------------------------------------- Directors and Chief
(W. W. Allen) Executive Officer;
Principal Executive
Officer
/s/ T. C. MORRIS Senior Vice President, September 30, 1994
- --------------------------------------------- Treasurer and Chief
(T. C. Morris) Financial Officer;
Principal Financial
Officer
/s/ L. F. FRANCIS Controller and General Tax September 30, 1994
- --------------------------------------------- Officer; Principal
(L. F. Francis) Accounting Officer
W.W. ALLEN, NORMAN R. AUGUSTINE,
GEORGE B. BEITZEL, CHARLES L.
BOWERMAN, ROBERT E. CHAPPELL, JR.,
LAWRENCE S. EAGLEBURGER, JAMES B. Director September 30, 1994
EDWARDS, LARRY D. HORNER, E.
DOUGLAS KENNA, J.J. MULVA, RANDALL
L. TOBIAS, VICTORIA J. TSCHINKEL, J.L.
WHITMIRE
By /s/ T. C. MORRIS
- ---------------------------------------------
(T. C. Morris, Attorney-in-fact)
</TABLE>
II-4
<PAGE> 28
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3, Registration No.
33-54987) and related Prospectus of Phillips Petroleum Company for the
registration of Phillips Petroleum Company's Pass Through Certificates and to
the incorporation by reference therein of our report dated March 8, 1994, with
respect to the consolidated financial statements and schedules of Phillips
Petroleum Company included in its Annual Report (Form 10-K) for the year ended
December 31, 1993, as amended, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
Tulsa, Oklahoma
September 30, 1994
II-5
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------
<C> <C> <S>
1* -- Form of Underwriting Agreement relating to Pass Through Certificates
4(a)(1)* -- Form of Pass Through Trust Agreement between Phillips Petroleum Company and
the Pass Through Trustee
4(a)(2)* -- Form of Pass Through Certificate (included in Exhibit 4(a)(1))
4(b)(1)* -- Form of Trust Indenture and Security Agreement between the Owner Trustee and
the Indenture Trustee
4(b)(2)* -- Form of Equipment Note (included in Exhibit 4(b)(1))
4(c)(1)* -- Form of Participation Agreement (Rail Cars) among Phillips Petroleum Company,
as Lessee, an Owner Participant, the Owner Trustee, the Indenture Trustee and
the Interim Loan Participant
4(c)(2)* -- Form of Participation Agreement (Aircraft) among Phillips Petroleum Company,
as Lessee, an Owner Participant, the Owner Trustee, the Indenture Trustee and
the Interim Loan Participant
4(c)(3)* -- Form of Participation Agreement (Vehicles) among Phillips Petroleum Company,
as Lessee, the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Interim Loan Participant
4(c)(4)* -- Form of Participation Agreement Supplement with the Pass Through Trustee
4(d)* -- Form of Trust Agreement between an Owner Participant and the Owner Trustee
4(e)(1)* -- Form of Lease Agreement (Rail Cars) between the Owner Trustee, as the Lessor,
and Phillips Petroleum Company, as Lessee
4(e)(2)* -- Form of Lease Agreement (Aircraft) between the Owner Trustee, as the Lessor,
and Phillips Petroleum Company, as Lessee
4(e)(3)* -- Form of Lease Agreement (Vehicles) between the Owner Trustee, as the Lessor,
and Phillips Petroleum Company, as Lessee
5(a)* -- Opinion of Simpson Thacher & Bartlett, special counsel for Phillips Petroleum
Company
5(b)* -- Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee
8(a)* -- Tax Opinion of Simpson Thacher & Bartlett, counsel for Phillips Petroleum
Company (included in Exhibit 5(a))
8(b)* -- Tax Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee
(included in Exhibit 5(b))
12 -- Computation of Ratio of Earnings to Fixed Charges (incorporated by reference
to Exhibit 12 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
23(a)* -- Consent of Simpson Thacher & Bartlett, counsel for Phillips Petroleum Company
(included in Exhibit 5(a))
23(b)* -- Consent of Shipman & Goodwin, counsel for the Pass Through Trustee (included
in Exhibit 5(b))
23(c)* -- Consent of Ernst & Young LLP (included on page II-5 of the Registration
Statement)
24** -- Powers of Attorney
25* -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of Shawmut Bank Connecticut, National Association as Pass Through
Trustee
</TABLE>
- ---------------
* Filed Herewith.
** Previously filed.
II-6
<PAGE> 1
Exhibit 1
Phillips Petroleum Company
$[ ]
Pass Through Certificates
Underwriting Agreement
[Date]
Chemical Securities Inc.
270 Park Avenue
New York, NY 10017
Dear Sirs:
Phillips Petroleum Company (the "Company") proposes to cause
to be sold to Chemical Securities Inc., as underwriter (the "Underwriter"),
Phillips Petroleum Company Pass Through Certificates of the series and in the
principal amount specified in Schedule I hereto (collectively, the
"Certificates") to be issued pursuant to the provisions of one or more Pass
Through Trust Agreements specified in Schedule I hereto (each a "Pass Through
Trust Agreement") between the Company and Shawmut Bank Connecticut, National
Association, a national banking association, as the initial trustee (the "Pass
Through Trustee"). The Certificates will be of the type and have the terms set
forth in Schedule I hereto. Subject to the terms and conditions set forth
herein, the Company agrees to cause to be sold to the Underwriter and the
Underwriter agrees to purchase, at the purchase price set forth in Schedule I
hereto, the principal amount of the Certificates set forth in Schedule I
hereto. As consideration therefor, the Company agrees to pay to the
Underwriter, contemporaneously with such purchase, the underwriting fee
specified in Schedule I hereto.
ARTICLE I
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
33-54987) relating to one or more series of pass through trust certificates
(including the Certificates), which has become effective under the Securities
Act of 1933, as amended (the "Securities Act"),
<PAGE> 2
2
and has filed with, or transmitted for filing to, the Commission (or
will promptly after the date hereof so file or transmit for filing) a
prospectus supplement specifically relating to the Certificates pursuant to
Rule 424 under the Securities Act. The term "Registration Statement" means the
registration statement as amended to the date of this Underwriting Agreement.
The term "Basic Prospectus" means the prospectus included in the Registration
Statement. The term "Prospectus" means the Basic Prospectus together with the
prospectus supplement specifically relating to the Certificates, as filed with,
or transmitted for filing to, the Commission pursuant to Rule 424. The term
"preliminary prospectus" means a preliminary prospectus supplement specifically
relating to the Certificates together with the Basic Prospectus. As used
herein, each of the terms "Registration Statement", "Basic Prospectus",
"Prospectus" and "preliminary prospectus" shall include in each case the
material incorporated by reference therein.
ARTICLE II
The Company is advised by the Underwriter that it proposes to
make a public offering of the Certificates as soon after this Agreement is
entered into as, in its judgment, is advisable. The terms of the public
offering of the Certificates are set forth in the Prospectus.
ARTICLE III
The Company will cause the Pass Through Trustee to deliver the
Certificates to the Underwriter against payment of the purchase price therefor
to the order of the Pass Through Trustee in immediately available funds at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 8th Avenue, New York,
New York 10019. The Certificates so delivered will be registered in such names
and in such denominations as the Underwriter shall request in writing not less
than two full business days prior to the date of delivery. The time and date
of such payment and delivery with respect to the Certificates are herein
referred to as the "Closing Date". The Closing Date shall be as specified on
Schedule I hereto, provided that the Closing Date so specified may be postponed
by agreement between the Company and the Underwriter.
<PAGE> 3
3
ARTICLE IV
The obligations of the Underwriter hereunder are subject to
the following conditions:
(a) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for such
purpose shall be pending before or threatened by the Commission;
(ii) subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have occurred
any downgrading, nor shall any notice have been given of (A) any
intended or potential downgrading or (B) any review or possible change
that does not indicate the direction of a possible change, in the
rating accorded any of the Company's securities by any "nationally
recognized statistical rating organization", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act;
(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 Prospectus, that is material and adverse and that makes
it, in the reasonable judgment of the Underwriter, impracticable to
market the Certificates on the terms and in the manner contemplated in
the Prospectus; and
(iv) the Underwriter shall have received on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in clauses
(i) and (ii) above, to the effect that the representations and
warranties of the Company contained herein and in the Participation
Agreement(s) described in the prospectus supplement relating to the
Certificates are true and correct as of the Closing Date and to the
effect that 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 the Prospectus.
<PAGE> 4
4
The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened by the
Commission.
(b) The Underwriter shall have received on the Closing Date an
opinion of counsel for the Company identified in Exhibit A hereto,
dated the Closing Date, to the effect set forth in Exhibit A.
(c) The Underwriter shall have received on the Closing Date an
opinion of Simpson Thacher & Bartlett, tax counsel to the Company,
dated the Closing Date, in form and substance satisfactory to the
Underwriter, confirming the accuracy of the opinion attributed to such
counsel in the Basic Prospectus under the caption "Federal Income Tax
Consequences" (and any additional opinion attributed to such counsel
in the prospectus supplement relating to the Certificates).
(d) The Underwriter shall have received on the Closing Date an
opinion of Shipman & Goodwin, special counsel to the Trustee, dated
the Closing Date, in form and substance satisfactory to the
Underwriter, confirming the accuracy of the opinion attributed to such
counsel in the Basic Prospectus under the caption "Certain State
Taxes" (and any additional opinion attributed to such counsel in the
prospectus supplement relating to the Certificates).
(e) The Underwriter shall have received on the Closing Date
copies of the opinions and certificates executed and delivered
pursuant to the Participation Agreement(s) described in the prospectus
supplement relating to the Certificates.
(f) The Underwriter shall have received on the Closing Date an
opinion of Cravath, Swaine & Moore, counsel for the Underwriter, dated
the Closing Date, with respect to the issuance and sale of the
Certificates and other related matters as the Underwriter may
reasonably request, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass on such matters.
(g) The Underwriter shall have received on the Closing Date a
letter, dated the Closing Date, in form and substance satisfactory to
the Underwriter, from
<PAGE> 5
5
Ernst & Young LLP, independent auditors, 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 contained in or incorporated by
reference into the Registration Statement and the Prospectus.
ARTICLE V
In further consideration of the agreements of the Underwriter
contained in this Agreement, the Company covenants as follows:
(a) To furnish the Underwriter, without charge, two signed
copies of the Registration Statement (including exhibits thereto and
documents incorporated by reference therein) and, during the period
mentioned in paragraph (c) below, as many copies of the Prospectus,
any documents incorporated by reference therein and any supplements
and amendments thereto as the Underwriter may reasonably request. The
terms "supplement" and "amendment" or "amend" as used in this
Agreement shall include all documents filed by the Company with the
Commission subsequent to the date of the Basic Prospectus, pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which are deemed to be incorporated by reference in the Prospectus.
(b) Before amending or supplementing the Registration
Statement or the Prospectus with respect to the Certificates, to
furnish the Underwriter a copy of each such proposed amendment or
supplement.
(c) If, during such period after the first date of the public
offering of the Certificates as in the opinion of counsel for the
Underwriter the Prospectus is required by law to be delivered in
connection with sales by the Underwriter or a dealer, any event shall
occur as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of
the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and
furnish, at its own
<PAGE> 6
6
expense, to the Underwriter and to the dealers (whose names and
addresses the Underwriter will furnish to the Company) to which
Certificates may have been sold by the Underwriter, and to other
dealers on request, either amendments or supplements to the Prospectus
so that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus will
comply with applicable law.
(d) To qualify the Certificates for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Underwriter
shall reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification as
well as all filing fees payable in connection with the review (if any)
of the offering of the Certificates by the National Association of
Securities Dealers, Inc.
(e) To make generally available to the Company's security
holders as soon as practicable an earnings statement covering a
twelve-month period beginning after the date of this Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations (including Rule 158) of
the Commission thereunder.
(f) During the period beginning on the date of this
Underwriting Agreement and continuing to and including the Closing
Date, not to offer, sell, contract to sell or otherwise dispose of any
debt securities of the Company substantially similar to the Offered
Certificates, without the prior written consent of the Underwriter.
ARTICLE VI
The Company represents and warrants to the Underwriter that
(i) each document, if any, filed or to be filed pursuant to the Exchange Act
and incorporated by reference in the Prospectus complied or will comply in all
material respects with such Act and the rules and regulations of the Commission
thereunder, (ii) each part of the Registration Statement (including the
documents incorporated by reference therein), filed with the
<PAGE> 7
7
Commission pursuant to the Securities Act, when such part became effective, did
not contain any 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, (iii) each preliminary prospectus, if any, filed pursuant to
Rule 424 under the Securities Act complied when so filed in all material
respects with such Act and the applicable rules and regulations of the
Commission thereunder, (iv) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (v) the Registration Statement and
Prospectus do not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that these
representations and warranties do not apply to (a) that part of the
Registration Statement that constitutes the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939 of Shawmut
National Bank, National Association, trustee under each Pass Through Trust
Agreement and (b) statements or omissions in the Registration Statement or the
Prospectus or any preliminary prospectus based upon information furnished to
the Company in writing by the Underwriter expressly for use therein.
The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter 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 caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (if used within the period set forth in paragraph
(c) of Article V hereof and 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 required to be
stated therein or necessary to make the statements therein 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 furnished in writing to the Company by the Underwriter
expressly for use therein; provided, however, that the foregoing indemnity
<PAGE> 8
8
agreement with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Certificates or any person controlling
the Underwriter, if a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Certificates to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.
The Underwriter agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
any person controlling the Company within the meaning of 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 the Underwriter, but only with
reference to information relating to the Underwriter furnished in writing by
the Underwriter expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus.
In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either of the two preceding paragraphs,
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
<PAGE> 9
9
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable 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 the Underwriter in the
case of parties indemnified pursuant to the second preceding paragraph and by
the Company in the case of parties indemnified pursuant to the first preceding
paragraph. The indemnifying party shall not be liable for any 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 third sentence 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 45 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.
If the indemnification provided for in this Article VI is
unavailable to an indemnified party under the second or third paragraphs hereof
or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party hereunder, 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 directly or indirectly by the Company and the Underwriter
from the
<PAGE> 10
10
offering of the Certificates 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 and of the Underwriter in connection
with the statement or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Underwriter in connection
with the offering of the Certificates shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such
Certificates (before deducting expenses) received by the Pass Through Trustee
and the total underwriting fees and commissions received by the Underwriter, in
each case as set forth in the table on the cover of the Prospectus, bear to the
aggregate public offering price of the Certificates. The relative fault of the
Company and of the Underwriter 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 Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriter agree that it would not be
just and equitable if contribution pursuant to this Article VI were determined
by pro rata allocation or by any other method of allocation which does not take
account of the considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph 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 Article VI, the Underwriter
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Certificates underwritten and distributed to the
public by the Underwriter were offered to the public exceeds the amount of any
damages which the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
<PAGE> 11
11
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 indemnity and contribution agreements contained in this
Article VI and the representations and warranties of the Company 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 the Underwriter or any person controlling the Underwriter or by or on behalf
of the Company, its directors or officers or any person controlling the Company
and (iii) acceptance of and payment for any of the Certificates.
ARTICLE VII
The Company agrees with the Underwriter to pay, or cause to be
paid, (a) the costs incident to the authorization, issuance, sale preparation
and delivery of each Pass Through Trust Agreement and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any preliminary prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided
in paragraphs (a) and (c) of Article V of this Agreement; (d) the fees and
expenses referred to in paragraph (d) of Article V of this Agreement; (e) all
fees and expenses of the Indenture Trustee and the Pass Through Trustee; (f)
the fees, expenses and disbursements of the Underwriter in connection with the
offer and sale of the Certificates (including the reasonable fees and expenses
of Cravath, Swaine & Moore, special counsel for the Underwriter), provided that
the Company shall not be required to pay such fees, expenses and disbursements
set forth in this item (f) in the event that this Agreement terminates upon the
default of the Underwriter; and (g) all other costs and expenses incident to
the performance of the obligations of the Company under this Agreement.
<PAGE> 12
12
ARTICLE VIII
This Agreement shall be subject to termination in the absolute
discretion of the Underwriter, by notice given 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 calamity or crises that, in the reasonable
judgment of the Underwriter, is material and adverse and (b) in the case of any
of the events specified in clauses (a)(i) through (iv), such event singly or
together with any other such event makes it, in the reasonable judgment of the
Underwriter, impracticable to market the Certificates on the terms and in the
manner contemplated in the Prospectus.
ARTICLE IX
This Agreement shall become effective upon signature.
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.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE> 13
13
Please confirm your agreement by having an authorized officer
sign a copy of this Agreement in the space set forth below. This Agreement may
be signed in any number of counterparts with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Very truly yours,
CHEMICAL SECURITIES INC.
By
----------------------------
Title:
Accepted: [ ], 199[ ]
PHILLIPS PETROLEUM COMPANY
By
------------------------
Title:
<PAGE> 14
14
EXHIBIT A
Opinion of Counsel for the Company
Dale J. Billam, Senior Counsel, for the Company, or Simpson
Thacher & Bartlett shall have furnished to the Underwriter his or its opinion,
dated the Closing Date to be delivered pursuant to Article IV, paragraph (b) of
the Underwriting Agreement to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State
of Delaware and is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to be so qualified
or in good standing, as the case may be, might materially and
adversely affect the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole;
(ii) each of [Phillips Gas Company, GPM Gas Corporation,
Phillips Investment Company, Phillips Petroleum International
Investment Company, Phillips Petroleum Company Norway and Phillips Oil
Company (Nigeria) Limited] (the "Significant Subsidiaries") has been
duly incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to be so qualified or in good
standing, as the case may be, might materially and adversely affect
the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(iii) [the] [each] Pass Through Trust Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other similar laws of general applicability
relating to or affecting creditors' rights, to general equity
principles, and to an implied covenant of good faith and fair dealing
and has been
<PAGE> 15
15
duly qualified under the Trust Indenture Act of 1939, as amended;
(iv) each of [identify applicable Participation Agreement(s)
and Lease(s)] has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject,
to bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights, to
general equity principles an implied covenant of good faith and other
standard qualifications concerning the exercise of remedies;
(v) no filing or recording of any financing statement under
the Uniform Commercial Code of New York (the "New York U.C.C.") or
other document is required to be made in the State of New York in
order to establish the Owner Trustee's right, title and interest in
the equipment or to establish and perfect the security interest
granted by the Owner Trustee to the Indenture Trustee under the Trust
Indenture (as supplemented by the Trust Indenture Supplements) with
respect to the applicable transaction agreements and the equipment, to
the extent provided therein. No opinion need be expressed with regard
to the priority of any such security interest.
(vi) no additional corporate action of the Company is required
for the due authorization of the Certificates. The Certificates have
been duly authorized and, when executed and authenticated in
accordance with the provisions of the [applicable] Pass Through Trust
Agreement and delivered to and paid for by the Underwriter pursuant to
the Underwriting Agreement, will constitute legal, valid and binding
obligations of the trust created by such Pass Through Trust Agreement,
entitled to the benefits of such Pass Through Trust Agreement;
(vii) the Underwriting Agreement has been duly authorized,
executed and delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Underwriting
Agreement, the Pass Through Trust Agreement(s), the Participation
Agreements(s) and
<PAGE> 16
16
the Lease(s) will not contravene any provision of applicable law or
the certificate of incorporation or by-laws of the Company or any
agreement or other instrument binding upon the Company and known to
such counsel, and no consent, approval or authorization of any
governmental body or agency is required for the performance by the
Company of its obligations under the Underwriting Agreement, the Pass
Through Trust Agreement(s), the Participation Agreement(s) and the
Lease(s), except such as are required under the Securities Act and the
Trust Indenture Act of 1939 and have been obtained and except that no
opinion is expressed as to the state securities or Blue Sky laws of
any state or the District of Columbia;
(ix) (a) the statements in the Basic Prospectus under the
captions "Description of the Pass Through Certificates" and
"Description of the Equipment Notes" and in the prospectus supplement
under [identify any other appropriate captions in the prospectus
supplement], insofar as they purport to constitute summaries of the
terms of documents referred to therein, constitute accurate summaries
of the terms of such documents in all material respects, and (b) the
statements in the Registration Statement under Item 15 (except as
rights to indemnity described thereunder may be limited by applicable
law), and (c) in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 and the Company's Reports on Form 10-Q for the
quarterly periods ended March 31, 1994 and June 30, 1994 under the
captions "Business Properties", "Legal Proceedings", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", "Executive Compensation" and "Certain Relationships and
Related Transactions", insofar as such statements constitute a summary
of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such legal
matters, documents and proceedings;
(x) after due inquiry, such counsel does not know (a) of any
legal or governmental proceeding pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject which
is required to be described in the Registration Statement or the
Prospectus and is not so described or (b) of any contract or other
document that
<PAGE> 17
17
is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
that is not described or filed as required; and
(xi) such counsel (a) is of the opinion that each document
incorporated by reference in the Prospectus (except as to financial
statements contained therein, as to which such counsel need not
express any opinion) complied when so filed as to form in all material
respects with the requirements of the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (b) believes that
(except for the financial statements contained therein, as to which
such counsel need not express any belief) the Registration Statement
relating to the Certificates (including the documents incorporated by
reference therein), filed with the Commission pursuant to the
Securities Act, when it became effective, did not contain any 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, (c) is of the opinion that the Registration Statement and
Prospectus, as amended or supplemented, if applicable (except as to
financial statements contained therein, as to which such counsel need
not express any opinion), comply as to form in all material respects
with the Securities Act and the applicable rules and regulations of
the Commission thereunder and (d) believes that (except for the
financial statements contained therein, as to which such counsel need
not express any belief) the Prospectus on the date of the Underwriting
Agreement did not, and the Prospectus, as amended or supplemented, if
applicable, on the Closing Date does not, contain any untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
<PAGE> 18
18
SCHEDULE I
Designation of Certificates: Phillips Petroleum Company
[ ]% Pass Through
Certificates, Series [ ]
Pass Through Trust Agreement(s):
Principal amount: $[ ]
Interest rate: [ ]%
Maturity date: [ ]
Purchase price (excluding
accrued interest, if any): 100%
Aggregate purchase price (excluding
accrued interest, if any): $[ ]
Underwriting discount: $[ ], representing [ ]% of the aggregate
principal amount, payable by the Company to the
Underwriter in immediately available funds on the
Closing Date.
Other provisions: Interest payable semiannually on each
[ ] and [ ], commencing [ ]
Closing Date: [ ], at [ ] A.M.
[Note: if multiple series, specify relevant information for each series.]
<PAGE> 1
EXHIBIT 4(A)(1)
PHILLIPS PETROLEUM COMPANY
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Trustee
---------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of [ ], 199__
---------------------------------------------
$[ ]
Phillips Petroleum Company
199__-[ ] Pass Through Trust
[ ]% Pass Through Certificates,
Series 199__
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . 2
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . 12
Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . 12
Section 1.04. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
ACQUISITION OF EQUIPMENT NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES . . . . . . . 14
Section 2.01. Issuance of Certificates; Acquisition of Equipment Notes . . . . . . . . . . . 14
Section 2.02. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.03. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
THE CERTIFICATES . . . . . . . . . . . 16
Section 3.01. Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . 16
Section 3.02. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.04. Registration of Transfer and Exchange of Certificates . . . . . . . . . . . . . 18
Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . 19
Section 3.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.08. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . 20
Section 3.09. Book-Entry and Definitive Certificates . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS . . . . . . . . . . 23
Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . 24
Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
THE COMPANY . . . . . . . . . . . . . 26
Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.02. Consolidation, Merger or Sale of Assets Permitted . . . . . . . . . . . . . . . . 26
ARTICLE VI
DEFAULT . . . . . . . . . . . . . . 27
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.03. Judicial Proceedings Instituted by Trustee . . . . . . . . . . . . . . . . . . . 29
Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.05. Waiver of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.06. Undertaking to Pay Court Costs . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.07. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . 32
Section 6.08. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . 33
Section 6.09. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
THE TRUSTEE . . . . . . . . . . . . . 34
Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . 37
Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.07. Compensation, Reimbursement and Indemnification . . . . . . . . . . . . . . . . . 37
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.09. Resignation and Removal: Appointment of Successor . . . . . . . . . . . . . . . . . 39
Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . 42
Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . 44
Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . 44
Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . 45
Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . 46
Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . 47
Section 8.02. Preservation of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.03. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.04. Reports by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS . . . . . . . . . . 48
Section 9.01. Supplemental Trust Agreement Without Consent of Certificateholders . . . . . . . . 48
Section 9.02. Supplemental Trust Agreements with Consent of Certificateholders . . . . . . . . . 49
Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . 50
Section 9.04. Execution of Supplemental Trust Agreements . . . . . . . . . . . . . . . . . . . . 50
Section 9.05. Effect of Supplemental Trust Agreements . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.06. Reference in Certificates to Supplemental Trust Agreements . . . . . . . . . . . . 51
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS . . . . . . 51
Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . 51
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XI
TERMINATION OF TRUST . . . . . . . . . . . . . . 52
Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE XII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . 53
Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.02. Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.04. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.05. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.06. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.07. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.08. Benefits of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.09. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SCHEDULE 1 List of Participation Agreements
EXHIBIT A Form of Pass Through Trust Certificate
</TABLE>
<PAGE> 6
CROSS REFERENCE
between
provisions of the Trust Indenture Act of 1939, as amended,
and the Pass Through Trust Agreement:
<TABLE>
<CAPTION>
Section of
Section of the Act the Agreement
------------------ -------------
<S> <C>
310(a)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08
310(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
310(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
310(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
310(b)(i) - (iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09, 7.10
310(b)(remainder) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.04
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.04
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.03
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
314(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a), (c) and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
316(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04, 6.05
316(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.03
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
</TABLE>
- ---------------
* Intentionally deleted.
<PAGE> 7
PASS THROUGH TRUST AGREEMENT, dated as
of [ ], 199_, with respect to the
formation of the Phillips Petroleum Company
199_-[ ] Pass Through Trust, between Phillips
Petroleum Company, a Delaware corporation,
and Shawmut Bank Connecticut, National
Association, a national banking association,
as Trustee.
W I T N E S S E T H :
WHEREAS, the Company owns certain Equipment (as such term and
certain other capitalized terms used herein are defined below);
WHEREAS, one or more Owner Trusts, each acting on behalf of an
Owner Participant, will purchase Equipment from the Company and lease such
Equipment to the Company pursuant to one or more Lease Transactions;
WHEREAS, pursuant to each Lease Transaction, an Owner Trust
will issue, on a non-recourse basis, Equipment Notes under an Indenture in
order to finance a portion of the purchase price for such Equipment;
WHEREAS, pursuant to the terms and conditions of this Trust
Agreement and the Participation Agreement relating to each Lease Transaction,
Equipment Notes are to be sold to the Trustee by the applicable Owner Trust,
and the Trustee will purchase such Equipment Notes and will hold such Equipment
Notes in trust for the benefit of the Certificateholders;
WHEREAS, the Trustee, upon the execution and delivery of this
Trust Agreement, hereby declares the creation of this Trust for the benefit of
the Certificateholders, and the initial Certificateholders as the grantors of
the Trust and by their respective acceptances of the Certificates join in the
creation of this Trust with the Trustee; and
WHEREAS, to facilitate the sale of the Equipment Notes to the
Trustee and the purchase of the Equipment Notes by the Trustee, the Company is
undertaking to perform certain administrative and ministerial duties hereunder
and is also undertaking to pay the fees and expenses of the Trustee.
<PAGE> 8
2
NOW, THEREFORE,
In consideration of the mutual agreements herein contained,
and of the 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 Trust
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms used herein that are defined in this
Article have the meanings assigned to them in this Article, and
include the plural as well as the singular;
(2) all references in this Trust Agreement to designated
"Articles", "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Trust Agreement; and
(3) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Trust Agreement as a whole
and not to any particular Article, Section or other subdivision.
Act: When used with respect to any Holder, has the meaning
specified in Section 1.04.
Affiliate: Of any specified Person, means any other Person
which directly or indirectly controls or is controlled by, or is under
common control with, such specified Person. For the purposes of this
definition, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Authorized Agent: Means any Paying Agent or Registrar.
Book-Entry Certificates: Means a beneficial interest in the
Certificates, ownership and transfers
<PAGE> 9
3
of which shall be made through book entries by a Clearing Agency as
described in Section 3.09.
Business Day: Means any day other than a Saturday, a Sunday,
or a day on which commercial banking institutions are authorized or
required by law, regulation or executive order to be closed in New
York, New York, Bartlesvill, Oklahoma the city and state in which the
Corporate Trust Office of any applicable Indenture Trustee or Owner
Trustee is located or the city and state in which the Corporate Trust
Office of the Trustee is located.
Certificate: Means any one of the certificates executed and
authenticated by the Trustee, substantially in the form of Exhibit A
hereto.
Certificate Account: Means that account or accounts created
and maintained pursuant to Section 4.01(a).
Certificate Owner: Means, when used in Section 3.09, the
Person for whom a Clearing Agency Participant acts.
Certificated Certificates: Has the meaning specified in
Section 3.01.
Certificateholder or Holder: Means the Person in whose name a
Certificate is registered in the Register, except that, when used in
Section 3.09, such term means the Certificate Owners.
Clearing Agency: Means an organization registered as a
"clearing Agency" pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended.
Clearing Agency Participant: Means a broker, dealer, bank,
other financial institution or other Person for whom from time to time
a Clearing Agency effects, directly or indirectly, book-entry
transfers and pledges of securities deposited with the Clearing
Agency.
Closing Date: Has the meaning specified in the applicable
Participation Agreement.
<PAGE> 10
4
Commission: Means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange
Act of 1934.
Company: Means Phillips Petroleum Company, a Delaware
corporation, or its successor in interest pursuant to Section 5.02.
Consideration: Has the meaning specified in Section 2.01.
Corporate Trust Office: With respect to the Trustee, any
Owner Trustee and 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.
Custody Agreement: Means the FAST Balance Certificate
Agreement dated as of [ ], 199__, between DTC and the
Trustee.
Default: Means any event which is, or after notice or lapse
of time or both would become, an Event of Default.
Definitive Certificates: Has the meaning specified in Section
3.09.
Direction: Has the meaning specified in Section 1.04(c).
Distribution Date: With respect to distributions of Scheduled
Payments, means each [ ] and [ ], until
payment of all the Scheduled Payments to be made under the Equipment
Notes has been made, commencing on [ ], 199_.
DTC: Means The Depository Trust Company and any successor
that is a Clearing Agency.
Equipment: Means any of the railroad rolling stock, aircraft
or vehicles that are the subject of a Lease Transaction.
Equipment Note: Means any one of the Equipment Notes (as
defined in each Indenture) issued under an Indenture, including any
Equipment Note (as so defined) issued under an Indenture in
replacement or substitution therefor, held by the Trustee.
<PAGE> 11
5
Event of Default: Has the meaning specified in Section 6.01.
Fractional Undivided Interest: Means the fractional undivided
interest in the Trust that is evidenced by a Certificate.
Global Certificate: Has the meaning specified in Section 3.01.
Holder: See Certificateholder.
Indenture: Means (i) a Trust Indenture and Security Agreement
between an Owner Trustee (on behalf of an Owner Trust) and Indenture
Trustee, entered into in connection with a Lease Transaction, as the
same may be amended or supplemented in accordance with its terms and
(ii) any Trust Indenture and Security Agreement, or analogous
document, between the company and an Indenture Trustee, entered into
in connection with the assumption by the Company of the indebtedness
evidenced by any Equipment Note, as the same may be amended or
supplemented in accordance with its terms. If there is more than one
Lease Transaction, the termIndenture refers to any one or all of such
Indentures, as the context requires.
Indenture Event of Default: Means any Indenture Event of
Default (as such term is defined in an Indenture).
Indenture Trustee: Means a bank or trust company acting as
indenture trustee under an Indenture; and any successor to such
Indenture Trustee as such trustee. If there is more than one Lease
Transaction, the term Indenture Trustee refers to any one or all of
such Indenture Trustees, as the context requires.
Lease: Means an Equipment Lease Agreement between an Owner
Trustee (on behalf of an Owner Trust), as the lessor, and the Company,
as the lessee, entered into in connection with a Lease Transaction, as
such Lease may be amended or supplemented in accordance with its
terms. If there is more than one Lease Transaction, the term Lease
refers to any one or all of such Leases, as the context requires.
Lease Transaction: Means a sale-leaseback transaction in
respect of Equipment between the Company
<PAGE> 12
6
and an Owner Trustee (on behalf of an Owner Trust) that is financed in
part by the issuance of Equipment Notes to the Trustee, as
contemplated by a Participation Agreement and the agreements and
instruments referred to therein.
Letter of Representations: Means the agreement among the
Company, the Trustee and the initial Clearing Agency, substantially in
the form attached hereto as Exhibit B.
Note Documents: Means, with respect to any Equipment Note,
the applicable Indenture, Participation Agreement and Lease.
Officer's Certificate: Means a certificate signed (i) in the
case of a corporation, by the Chairman of the Board of Directors, the
President, any Vice President, the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership, by the Chairman of the Board of Directors,
the President or any Vice President, the Treasurer or an Assistant
Treasurer of a corporate general partner, and (iii) in the case of an
Owner Trustee or Indenture Trustee, a certificate signed by a
Responsible officer of such Owner Trustee or Indenture Trustee.
Opinion of Counsel: Means an opinion in writing signed by
legal counsel, who may be counsel designated by the Company, an Owner
Trustee or an Indenture Trustee, whether or not such counsel is an
employee of any of them, and who shall be acceptable to the Trustee in
its reasonable discretion.
Outstanding: When used with respect to Certificates, means,
as of the date of determination, and subject to Section 1.04(c), all
Certificates theretofore authenticated and delivered under this Trust
Agreement, except:
(i) Certificates theretofore
canceled by the Registrar or delivered to the
Trustee or the Registrar for cancellation;
(ii) Certificates for which money
in the full amount has been theretofore
deposited with the Trustee or any Paying
Agent in trust for the Holders of such
Certificates as provided in
<PAGE> 13
7
Section 4.01 pending distribution of such
money to the Certificateholders pursuant to
the final distribution payment to be made
pursuant to Section 11.01; and
(iii) Certificates in exchange for
or in lieu of which other Certificates have
been authenticated and delivered pursuant to
this Trust Agreement.
Owner Participant: Means a beneficial owner of an interest in
an Owner Trust, identified as an "Owner Participant" in a
Participation Agreement, and any successors and assigns permitted by
the applicable Participation Agreement. If there is more than one
Lease Transaction, the termOwner Participant refers to any one or all
of such Owner Participants, as the context requires.
Owner Trust: Means a trust established in connection with a
Lease Transaction, pursuant to a trust agreement between an Owner
Participant and an Owner Trustee, for the purpose of issuing Equipment
Notes, purchasing Equipment and entering into a Lease, all as provided
in a Participation Agreement. If there is more than one Lease
Transaction, the termOwner Trust refers to any one or all of such
Owner Trusts, as the context requires.
Owner Trustee: Means a bank or trust company acting as
trustee of an Owner Trust, not in its individual capacity but solely
as trustee of such Owner Trust pursuant to a trust agreement with an
Owner Participant; and any successor to such Owner Trustee as such
trustee. If there is more than one Lease Transaction, the term Owner
Trustee refers to any one or all of such Owner Trustees, as the
context requires.
Participation Agreement: Means a Participation Agreement
among the Company, an Owner Participant, an Owner Trustee, an
Indenture Trustee and the Trustee, providing for a Lease Transaction.
If there is more than one Lease Transaction, the term Participation
Agreement refers to any one or all of such Participation Agreements,
as the context requires. Each Participation Agreement that provides
for a Lease Transaction which is to be financed with Equipment Notes
purchased by the Trustee hereunder, together with the identities of
the Owner Trustee, the Owner
<PAGE> 14
8
Participant and (if the Indenture Trustee is not Shawmut Bank
Connecticut, National Association) the Indenture Trustee that will be
parties thereto, is identified on Schedule 1 hereto.
Paying Agent: Means the paying agent maintained and appointed
pursuant to Section 7.12.
Permitted Government Investment: Means obligations of the
United States of America for the payment of which the full faith and
credit of the United States of America is pledged, maturing in not
more than 60 days or such lesser time as is necessary for payment of
any Special Payments on a Special Distribution Date.
Person: Means any individual, corporation, partnership,
association, trust, unincorporated organization, or government or any
agency or political subdivision thereof.
Pool Balance: Means, as of any date, the aggregate unpaid
principal amount of the Equipment Notes on such date plus the amount
of the principal payments on the Equipment Notes held by the Trustee
and not yet distributed. The Pool Balance as of any Distribution Date
or Special Distribution Date, if any, shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes and
distribution thereof to be made on that date.
Pool Factor: Means, as of any date, the quotient (rounded to
the seventh decimal place) computed by dividing (i) the aggregate
unpaid principal amount of the Equipment Notes on such date plus the
amount of the principal payments on the Equipment Notes held by the
Trustee and not yet distributed by (ii) the aggregate original
principal amount of the Certificates. The Pool Factor, as of any
Distribution Date or Special Distribution Date, if any, shall be
computed after giving effect to the payment of principal, if any, on
the Equipment Notes and distribution thereof to be made on that date.
Record Date: Means (i) for Scheduled Payments to be
distributed on any Distribution Date, other than the final
distribution, the day (whether or not a Business Day) which is 15 days
preceding such Distribution Date, and (ii) for Special Payments to be
distributed on any
<PAGE> 15
9
Special Distribution Date, other than the final distribution, and for
any Extraordinary Distribution, the day (whether or not a Business
Day) which is 15 days preceding such Special Distribution Date or the
Extraordinary Distribution Date, as the case may be.
Register and Registrar: Means the register maintained and the
registrar appointed pursuant to Sections 3.04 and 7.12.
Request: Means a request by the Company setting forth the
subject matter of the request accompanied by an Officer's Certificate
and an Opinion of Counsel as provided in Section 1.02.
Responsible Officer: When used with respect to the initial
Trustee, the initial Indenture Trustee or any Owner Trustee means any
officer in the Corporate Trust Office; when used with respect to any
successor Trustee, or successor Indenture Trustee, means the chairman
or vice-chairman of the board of directors or trustees, the chairman
or vice-chairman of the executive or standing committee of the board
of directors or trustees, the president, the chairman of the committee
on trust matters, any vice-president, any second vice-president, the
secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the comptroller and any assistant
comptroller; and, when used with respect to the Trustee and any
Indenture Trustee, also means any other officer of the Trustee or any
Indenture Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, when
used with respect to the Trustee, any Indenture Trustee or any Owner
Trustee with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
Scheduled Payment: With respect to a Distribution Date, means
any payment (other than a Special Payment) of principal and interest
on an Equipment Note, due from an Owner Trust, which payment
represents the payment of a regularly scheduled installment of
principal then due on such Equipment Note, or the payment of regularly
scheduled interest accrued on such Equipment Note.
<PAGE> 16
10
Special Distribution Date: Means (i) with respect to the
prepayment of any Equipment Notes, the [ ] day of the month on
which such prepayment is scheduled to occur pursuant to the terms of
the Indenture and (ii) with respect to any Special Payment relating to
an Equipment Note other than as described in clause (i) of the
definition of Special Payment, the earliest [ ] day of a month for
which it is practicable for the Trustee to give notice pursuant to
Section 4.02(c).
Special Payment: With respect to an Equipment Note, means (i)
any payment of principal, premium, if any, and interest on such
Equipment Note resulting from the prepayment of such Equipment Note
pursuant to the applicable provisions of the Indenture, (ii) any
payment of principal and interest (including any interest accruing
upon default) on, or any other amount in respect of, such Equipment
Note upon an Indenture Event of Default in respect thereof or upon the
exercise of remedies under the Indenture relating to such Equipment
Note, (iii) any Special Payment referred to in clause (i) of this
definition or any Scheduled Payment which is not in fact paid within
[five days] of the Special Distribution Date or Distribution Date
applicable thereto, or (iv) any proceeds from the sale of any
Equipment Note by the Trustee pursuant to Article VI hereof; and
Special Payments means all of such Special Payments.
Special Payments Account: Means the account or accounts
created and maintained pursuant to Section 4.01(b).
Specified Investments: Means (i) direct obligations of the
United States of America and agencies thereof for which the full faith
and credit of the United States is pledged, (ii) obligations fully
guaranteed by the United States of America, (iii) certificates of
deposit issued by, or bankers' acceptances of, or time deposits 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 (determined based on its most recently published
statement as of the date of investment) of at least $500,000,000
(including any financial institution serving as an Indenture Trustee
or Owner Trustee if such conditions are met), (iv) commercial paper of
companies, banks,
<PAGE> 17
11
trust companies or national banking associations incorporated or doing
business under the laws of the United States of America or one of the
States thereof and in each case having a rating assigned to such
commercial paper, as of the date of investment, by Standard & Poor's
Corporation or Moody's Investors Service, Inc. (or, if neither such
organization shall rate such commercial paper at any time, by any
nationally recognized rating organization in the United States of
America) equal to the highest rating assigned by such organization,
and (v) repurchase agreements with any financial institution having a
combined capital and surplus (determined based on its most recently
published statement as of the date of investment) of at least
$750,000,000 fully collateralized by obligations of the type described
in clauses (i) through (iv) above; provided 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 (iii)
above; and provided further that no investment shall be eligible as a
"Specified Investment" unless the final maturity or date of return of
such investment is 90 days or less from the date such investment is
made.
Transfer Date: Means the closing date of the public offering
of the Certificates.
Trust: Means the trust created by this Trust Agreement, the
estate of which consists of the Trust Property.
Trust Indenture Act: Means the Trust Indenture Act of 1939,
as amended from time to time.
Trust Property: Means the Equipment Notes held as the
property of the Trust created hereby and all monies at any time paid
thereon and all monies due and to become due thereunder, funds from
time to time deposited in the Certificate Account and the Special
Payments Account and any proceeds from the sale by the Trustee
pursuant to Article VI hereof of any Equipment Note.
Trustee: Means the institution executing this Trust Agreement
as Trustee, or its successor in interest, and any successor trustee
appointed as provided herein.
<PAGE> 18
12
Section 1.02. Compliance Certificates and Opinions. Upon any
application or request by the Company, any Owner Trustee or any Indenture
Trustee to the Trustee to take any action under any provision of this Trust
Agreement, the Company, such Owner Trustee or such Indenture Trustee, as the
case may be, shall furnish to the Trustee an Officers' Certificate stating
that, in the opinion of the signers, all conditions precedent, if any, provided
for in this Trust Agreement relating to the proposed action have been complied
with and, as to any legal matters involved, 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 Trust 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 Trust Agreement shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) 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;
(3) 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 informed opinion as to whether
or not such covenant or condition has been complied with; and
(4) 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
<PAGE> 19
13
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.
Any Opinion of Counsel stated to be based on the opinion of
other counsel shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Trust Agreement, they may, but need not, be
consolidated and form one instrument.
Section 1.04. Acts of Holders. (a) Any direction, consent,
waiver or other action provided by this Trust Agreement to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company or the Indenture Trustee. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Trust Agreement and (subject to
Section 7.01) conclusive in favor of the Trustee, the Company and the Indenture
Trustee, if made in the manner provided in this Section.
(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
<PAGE> 20
14
proved in any other reasonable manner which the Trustee deems sufficient.
(c) In determining whether the Holders of the requisite
Fractional Undivided Interests of Certificates Outstanding have given any
direction, consent or waiver (a "Direction"), under this Trust Agreement,
Certificates owned by the Company, the Owner Trustee, the Owner Participant or
any Affiliate of any such Person shall be disregarded and deemed not to be
Outstanding under this Trust Agreement 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 Outstanding, such Certificates shall not be so disregarded
as aforesaid, and (ii) if any amount of Certificates so owned by any such
Person have been pledged in good faith, such Certificates shall not be
disregarded as aforesaid 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, the Owner Trustee, the Owner Participant
or any Affiliate of any such Persons.
(d) Any Act 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 Act is made upon
such Certificate.
(e) Except as otherwise provided in Section 1.04(c),
Certificates owned by or pledged to any Person shall have an equal and
proportionate benefit under the provisions of this Trust Agreement, without
preference, priority or distinction as among all of the Certificates.
ARTICLE II
ACQUISITION OF EQUIPMENT NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. (a) Issuance of Certificates; Acquisition of
Equipment Notes. The Trustee, at or promptly following the execution and
delivery of this Trust Agreement, shall also execute and deliver the
Participation Agreement (or, if there is more than one Lease Transaction, the
Participation Agreements), in the form delivered to the
<PAGE> 21
15
Trustee on or prior to the date of the execution and delivery hereof. Upon
request of the Company and the satisfaction of the closing conditions with
respect to any Equipment to be delivered and Equipment Notes to be purchased on
the Transfer Date, on the Transfer Date the Trustee shall execute, deliver and
authenticate Certificates equalling in the aggregate the aggregate principal
amount of the Equipment Notes purchased by the Trustee for the Trust on the
Transfer Date. The Certificates so executed, delivered and authenticated on
the Transfer Date shall evidence the entire ownership of the Trust. The
Trustee shall issue and sell such Certificates on the Transfer Date, in
authorized denominations and in such Fractional Undivided Interests, so as to
result in the receipt of consideration (the "Consideration") in an amount equal
to the aggregate principal amount of such Equipment Notes referred to in the
second preceding sentence. The Trustee shall purchase Equipment Notes on the
Transfer Date at an aggregate purchase price equal to the amount of the
Consideration so received, less, if applicable, any Excess Consideration.
Except as provided in Sections 3.04 and 3.05 hereof, the Trustee shall not
execute or deliver Certificates in excess of the aggregate amount specified in
this paragraph.
(b) Company's Assumption of Equipment Notes. If the Company
shall assume the obligations of the Owner Trustee under any Equipment Note
pursuant to any Indenture, the Trustee shall surrender the Equipment Notes
issued pursuant to such Indenture to the Indenture Trustee in exchange for new
Equipment Notes of the same aggregate outstanding principal amount as the
Equipment Notes so surrendered, bearing interest at the same rate, and having
the same maturity and amortization schedule, and otherwise of similar tenor,
issued under such Indenture and any new Indenture entered into by the Company
and the Indenture Trustee in connection with such assumption, and thereafter
each reference to such Equipment Notes in this Trust Agreement shall be deemed
to include a reference to such new Equipment Notes.
Section 2.02. Acceptance by Trustee. The Trustee, upon the
execution and delivery of this Trust Agreement, acknowledges its acceptance of
all right, title, and interest in and to the Equipment Notes acquired pursuant
to Section 2.01 hereof and declares that the Trustee holds and will hold such
right, title, and interest, together with all other property constituting the
Trust Property, for the benefit of all present and future Certificateholders,
upon the trusts herein set forth. By its payment for and
<PAGE> 22
16
acceptance of each Certificate issued to it hereunder, each initial
Certificateholder as grantor of the Trust thereby joins in the creation and
declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is constituted
solely for the purpose of making the investment in the Equipment Notes, and,
except as set forth herein, the Trustee is not authorized or empowered to
acquire any other investments or engage in any other activities and, in
particular, the Trustee is not authorized or empowered to do anything that
would cause the Trust to fail to qualify as a "grantor trust" for federal
income tax purposes (including, as subject to this restriction, acquiring any
Equipment by bidding the Equipment Notes or otherwise, or taking any action
with respect to any such Equipment once acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Form, Denomination and Execution of
Certificates. The Certificates shall be in registered form without coupons.
The face of the Certificates shall be substantially in the form of Exhibit A
hereto and the reverse of the Certificates shall contain the Terms and
Conditions substantially as set forth in Exhibit A hereto (the "Terms");
provided that if a Certificate is to be issued to DTC or its nominee as a
global certificate, such global certificate will be issued in registered form
without interest coupons, with a face substantially in the form of Exhibit A
hereto with additions thereto as noted thereon (the "Global Certificate";
Certificates other than the Global Certificate are herein referred to as
"Certificated Certificates"). References herein to the "Certificates" shall be
deemed to include the Global Certificate and the Certificated Certificates
unless the context requires otherwise.
The Certificates may also have such additional provisions,
omissions, variations and insertions as are permitted by this Trust Agreement,
and may have such letters, numbers or other marks of identification and such
legends or endorsements printed, lithographed or engraved thereon, as may be
required to comply with the rules of any Clearing Agency or any securities
exchange on which the Certificates may be listed or to conform to any usage in
respect thereof, or as may, consistently herewith, be prescribed by the Trustee
or by the officer executing such
<PAGE> 23
17
Certificates, such determination by said officer to be evidenced by his signing
the Certificates.
The definitive Certificates shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any Clearing Agency or any
securities exchange on which the Certificates may be listed, all as determined
by the officer executing such Certificates, as evidenced by his execution of
such Certificates.
The Certificates shall be issued in denominations of $1,000
and integral multiples thereof, except that one Certificate may be in a
multiple of less than $1,000.
The Certificates shall be executed on behalf of the Trustee by
manual or facsimile signature of a Responsible Officer of the Trustee.
Certificates bearing the manual or facsimile signature of an individual who
was, at the time when such signatures was affixed, authorized to sign on behalf
of the Trustee shall be valid and binding obligations of the Trustee,
notwithstanding that such individual has ceased to be so authorized prior to
the authentication and delivery of such Certificates or did not hold such
office at the date of such Certificates. No Certificate shall be entitled to
any benefit under this Trust Agreement, or be valid for any purposes, unless
there appears on such Certificate a certificate of authentication substantially
in the form set forth in Exhibit A hereto executed by the Trustee by manual
signature, and such certificate upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the
date of their authentication.
Section 3.02. Authentication of Certificates. The Trustee on
the Transfer Date shall cause to be authenticated and delivered Certificates
duly authenticated by the Trustee, in authorized denominations equalling in the
aggregate the aggregate principal amount of the Equipment Notes purchased on
the Transfer Date and evidencing the entire ownership of the Trust.
Section 3.03. Temporary Certificates. Pending the
preparation of definitive Certificates, the Trustee may execute, authenticate
and deliver temporary Certificates which are printed, lithographed,
typewritten, or otherwise
<PAGE> 24
18
produced, in any denomination, containing substantially the same terms and
provisions as set forth in Exhibit A, except for such appropriate insertions,
omissions, substitutions and other variations relating to their temporary
nature as the officer executing such temporary Certificates may determine, as
evidenced by their execution of such temporary Certificates.
If temporary Certificates are issued, the Trustee will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the Corporate Trust Office of the Trustee, or at the office or
agency of the Trustee maintained in accordance with Section 7.12, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Certificates, the Trustee shall execute, authenticate and deliver in
exchange therefor definitive Certificates of authorized denominations of a like
aggregate Fractional Undivided Interest. Until so exchanged, such temporary
Certificates shall in all respects be entitled to the same benefits under this
Trust Agreement as definitive Certificates.
Section 3.04. Registration of Transfer and Exchange of
Certificates. (a) 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") in which, subject to the provisions of this Section
3.04 and the Certificates, the Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The Trustee shall initially be the registrar (the "Registrar") for the purpose
of registering Certificates and transfers and exchanges of Certificates as
herein provided.
(b) Upon surrender for registration of transfer of any
Certificate at the Corporate Trust Office or such other office or agency, the
Trustee shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates in authorized
denominations of a like aggregate Fractional Undivided Interest. At the option
of a Certificateholder, Certificates may be exchanged for other Certificates of
authorized denominations of a like aggregate Fractional Undivided Interest,
upon surrender of the Certificates to be exchanged at any such office or
agency. Whenever any Certificates are so surrendered for exchange, the Trustee
<PAGE> 25
19
shall execute, authenticate and deliver the Certificates that the
Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
(c) No service charge shall be made to a
Certificateholder for any registration of transfer or exchange of Certificates,
but the Trustee shall require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
(d) All Certificates surrendered for registration of
transfer and exchange shall be cancelled and subsequently destroyed by the
Trustee.
Section 3.05. 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) in the case of such
destruction, loss or theft, 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 and the Trust harmless, then, in the absence of notice to the Registrar or
the Trustee that such Certificate has been acquired by a bona fide purchaser,
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
of like Fractional Undivided Interest with the same final Distribution Date.
In connection with the issuance of any new Certificate under this Section 3.05,
the Trustee shall 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
3.05 shall constitute conclusive evidence of the appropriate Fractional
Undivided Interest in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 3.06. Persons Deemed Owners. Prior to due
presentation of a Certificate for registration of
<PAGE> 26
20
transfer, the Trustee, the Registrar and any Paying Agent may treat the person
in whose name any Certificate is registered as the owner of such Certificate
for the purpose of receiving distributions pursuant to Section 4.02 and for all
other purposes whatsoever, and neither the Trustee, the Registrar nor any
Paying Agent shall be affected by any notice to the contrary.
Section 3.07. Cancellation. All Certificates surrendered for
payment or transfer or exchange shall, if surrendered to any Person a party
hereto other than the Registrar, be delivered by such Person to the Registrar
for cancellation. No Certificates shall be authenticated in lieu of or in
exchange for any Certificates cancelled as provided in this Section, except as
expressly permitted by this Trust Agreement. All cancelled Certificates held
by the Registrar shall be destroyed and a certification of their destruction
delivered to the Trustee.
Section 3.08. Limitation of Liability for Payments. All
payments or distributions made to Certificateholders under this Trust 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 Article IV of this Trust
Agreement. Each Holder of a Certificate, by its acceptance of such
Certificate, agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to the Holder
thereof as provided in this Trust Agreement. Nothing in this Trust Agreement
shall be construed as an agreement, or otherwise creating an obligation, of the
Company to pay any of the principal, premium, if any, and interest due from
time to time under the Equipment Notes or in respect of the Certificates. The
liability of the Owner Trustee under the Equipment Notes shall be limited as
set forth therein and in the Indenture.
Section 3.09. Book-Entry and Definitive Certificates. (a)
If Schedule 1 hereto specifies that this Section is applicable to the
Certificates, then the Certificates will be issued in the form of one or more
typewritten Certificates representing the Book-Entry Certificates, to be
delivered to DTC, the initial Clearing Agency, by, or on behalf of, the
Company. In such case, then (A) the Certificates delivered to DTC shall
initially be registered on the Register in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Holder will thereafter receive a
definitive Certificate representing
<PAGE> 27
21
such Holder's interest in the Certificates, except as provided above and in
Section 3.09(c), and (B) unless and until definitive, fully registered
Certificates (the "Definitive Certificates") have been issued to Holders
pursuant to Section 3.09(c):
(i) the provisions of this Section 3.09 shall be in full force
and effect;
(ii) the Company, the Paying Agent, the Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including
the making of distributions on the Certificates) as the sole
registered owner of the Certificates and as the authorized
representative of the Holders;
(iii) to the extent that the provisions of this Section 3.09
conflict with any other provision of this Agreement or the Letter of
Representations, this Section 3.09 and the Letter of Representations
shall control;
(iv) the rights of Holders shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Holders and the Clearing Agency Participants
(until Definitive Certificates are issued pursuant to Section 3.09(c),
the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of
principal and interest and premium, if any, on the Certificates to
such Clearing Agency Participants); and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Fractional Undivided
Interests, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Certificate Owners and/or Clearing Agency
Participants owning or representing, respectively, such required
percentage of the Fractional Undivided Interests and has delivered
such instructions to the Trustee; and the Trustee shall have no
obligation to determine whether the Clearing Agency has in fact
received any such instructions.
<PAGE> 28
22
(b) If this Section 3.09 is applicable to the Certificates,
then whenever any notice or other communication (including, but not limited to,
statements issued pursuant to Section 4.03) to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Holders pursuant to Section 3.09(c), the Trustee shall give
all such notices and communications specified herein to be given to Holders to
the Clearing Agency and/or the Clearing Agency Participants, and shall make
available additional copies as requested by the Clearing Agency Participants.
(c) If (i) the Clearing Agency advises the Trustee in writing
that the Clearing Agency is no longer willing or able or qualified to properly
discharge its responsibilities and the Trustee and the Company are unable to
locate a qualified successor, (ii) the Company at its option advises the
Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default,
Holders of Book-Entry Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by Act of said
Holders delivered to the Company and the Trustee, advise the Trustee and the
Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Holders, then the Trustee shall notify all Holders,
through the Clearing Agency, of the occurrence of any such event and of the
availability of Definitive Certificates to Holders requesting the same. Upon
surrender to the Trustee of all the Certificates by the Clearing Agency,
accompanied by registration instructions from the Clearing Agency for
registration of Definitive Certificates in the names of Holders, the Trustee
shall issue the Definitive Certificates and deliver such Definitive
Certificates in accordance with the instructions of the Clearing Agency.
Neither the Company, the Registrar nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Trustee shall recognize the Holders of the Definitive
Certificates as registered Certificateholders. Neither the Company nor the
Trustee shall be liable if the Trustee or the Company is unable to locate a
qualified successor Clearing Agency.
(d) If Schedule 1 hereto specifies that this Section is
applicable to the Certificates, then the Trustee
<PAGE> 29
23
shall enter into the Letter of Representations and fulfill its responsibilities
thereunder.
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 the Certificate Account with the Trustee as one or more
non-interest bearing accounts. The Trustee shall hold the Certificate Account
in trust for the benefit of the Certificateholders, and shall make or permit
withdrawals therefrom only as provided in this Trust Agreement. On each day
when a Scheduled Payment is made under the Indenture to the Trustee, as holder
of the Equipment Notes issued under such Indenture, the Trustee upon receipt
shall immediately deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.
(b) The Trustee shall establish and maintain on behalf of
the Certificateholders the Special Payments Account with the Trustee as one or
more accounts, which shall be non-interest bearing except as provided in
Section 4.04. The Trustee shall hold the Special Payments Account in trust for
the benefit of the Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Trust Agreement. On each day when a Special
Payment (other than a Special Payment that represents the proceeds of any sale
pursuant to Article VI hereof by the Trustee of an Equipment Note) is made
under the Indenture to the Trustee, as holder of the Equipment Notes issued
under such Indenture, the Trustee upon receipt shall immediately deposit the
aggregate amounts of such Special Payments in the Special Payments Account.
Upon the sale of any Equipment Note by the Trustee pursuant to Article VI
hereof and the realization of any proceeds thereof, the Trustee shall deposit
the aggregate amount of such proceeds as a Special Payment in the Special
Payments Account.
(c) The Trustee shall present to the Indenture Trustee
each Equipment Note on the date of its stated final maturity, or in the case of
any Equipment Note which is to be prepaid in whole pursuant to the Indenture,
on the applicable prepayment date under such Indenture.
<PAGE> 30
24
Section 4.02. Distributions from Certificate Account and
Special Payments Account. (a) On each Distribution Date or as soon thereafter
as the Trustee has confirmed receipt of the payment of the Scheduled Payments
due on the Equipment Notes on such date, the Trustee shall distribute out of
the Certificate Account the entire amount deposited therein pursuant to Section
4.01(a). There shall be so distributed to each Certificateholder of record on
the Record Date with respect to such Distribution Date (other than as provided
in Section 11.01 concerning the final distribution) by (i) check mailed to such
Certificateholder at the address appearing in the Register or (ii) upon
application to the Trustee, by wire transfer in immediately available funds to
an account maintained by the Certificateholder with a bank, such
Certificateholder's pro rata share (based on the aggregate Fractional Undivided
Interest held by such Certificateholder) of the aggregate amount in the
Certificate Account.
(b) On each Special Distribution Date with respect to any
Special Payment or as soon thereafter as the Trustee has confirmed receipt of
the Special Payments due on the Equipment Notes or realized upon the sale of
any Equipment Note, the Trustee shall distribute out of the Special Payments
Account the entire amount deposited therein with respect to such Special
Payment pursuant to Section 4.01(b). There shall be so distributed to each
Certificateholder of record on the Record Date with respect to such Special
Distribution Date (other than as provided in Section 11.01 concerning the final
distribution) by (i) check mailed to such Certificateholder at the address
appearing in the Register or (ii) upon application to the Trustee, by wire
transfer in immediately available funds to an account maintained by the
Certificateholder with a bank, such Certificateholder's pro rata share (based
on the aggregate Fractional Undivided Interest held by such Certificateholder)
of the aggregate amount in the Special Payments Account on account of such
Special Payment.
(c) The Trustee shall at the expense of the Company cause
notice of each Special Payment to be mailed to each Holder of a Certificate at
his address as it appears in the Register. In the event of prepayment of
Equipment Notes, such notice shall be mailed not less than 20 days prior to the
date any such Special Payment is scheduled to be distributed. In the case of
any other Special Payments, such notice shall be mailed as soon as practicable
after the Trustee has confirmed that it has received funds for such
<PAGE> 31
25
Special Payment. 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 per $1,000
of face amount of Certificates and the amount thereof
constituting principal, premium, if any, and interest;
(iii) the reason for the Special Payment; and
(iv) if the Special Distribution Date is the same
date as a Distribution Date, the total amount to be received
on such date per $1,000 of face amount of Certificates.
If the amount of premium payable upon the prepayment 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 premium received will also be distributed.
Section 4.03. Statements to Certificateholders. (a) On each
Distribution Date and Special Distribution Date, the Trustee will include with
each distribution to Certificateholders a statement, giving effect to such
distribution to be made on such date, setting forth the following information
(per a $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 premium, if any;
(ii) the amount of such distribution allocable to
interest; and
(iii) the Pool Balance and the Pool Factor.
(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
<PAGE> 32
26
(a)(ii) with respect to the Trust for such calendar year or, in the event such
Person was a Certificateholder of record during a portion of such calendar
year, for the applicable 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 Federal income tax returns.
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 Government Investments by the Trustee
pending distribution of such Special Payment pursuant to Section 4.02. Any
investment made pursuant to this Section 4.04 shall be in such Permitted
Government Investments having maturities not later than the date that such
moneys are required to be paid to make the payment required under Section 4.02
on the applicable Special Distribution Date and the Trustee shall hold any such
Permitted Government 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, will 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 desirable in the conduct of the business of
the Company and that the loss thereof is not prejudicial in any material
respect to the Certificateholders.
Section 5.02. Consolidation, Merger or Sale of Assets
Permitted. (a) The Company covenants that it will not merge or consolidate
with or into any other corporation
<PAGE> 33
27
or sell, convey or otherwise dispose of all or substantially all of its assets
to any Person unless either (A) the Company shall be the continuing corporation
or (B) the successor corporation (if other than the Company) shall be a
corporation organized and existing under the laws of the United States of
America or a State thereof or the District of Columbia, and such corporation
shall expressly assume the due and punctual performance and observance of all
of the covenants and conditions of this Trust Agreement to be performed by the
Company by supplemental agreement given by such successor corporation to the
Trustee.
(b) In case of any such merger, consolidation, sale,
conveyance or other disposition and upon any such assumption by the successor
corporation, such successor corporation shall succeed to and be substituted for
the Company hereunder, with the same effect as if it had been named herein as
the party of the first part.
(c) The Trustee, subject to the provisions of Sections
7.01 and 7.02, may receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance, and any such assumption complies, with the provisions of this
Section 5.02.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. If any Indenture Event of
Default under any Indenture (an "Event of Default") shall occur and be
continuing, then, and in each and every case, so long as such Indenture Event
of Default shall be continuing, the Trustee may vote all of the Equipment Notes
issued under such Indenture held in the Trust, and upon the direction of the
Holders of Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest of the Fractional Undivided Interests
evidenced by all Certificates at the time Outstanding (determined as provided
in Section 1.04(c)), the Trustee shall vote a corresponding majority of such
Equipment Notes, in favor of directing the Indenture Trustee to declare the
unpaid principal amount of such Equipment Notes then outstanding and accrued
interest thereon to be due and payable under, and to the extent permitted by
and in accordance with the provisions of, such Indenture. In addition, if an
Indenture Event of Default shall have
<PAGE> 34
28
occurred and be continuing under any Indenture, the Trustee may, and upon the
direction of Holders as provided in Section 6.04 shall, in accordance with such
Indenture vote the Equipment Notes issued thereunder held in the Trust to
direct the Indenture Trustee regarding the exercise of remedies provided in
such Indenture and consistent with the terms thereof.
In addition, after an Event of Default shall have occurred and
be continuing, the Trustee may in its discretion, and upon the direction of the
Holders of Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest of the Fractional Undivided Interests
evidenced by all Certificates at the time Outstanding (determined as provided
in Section 1.04(c)) shall, by such officer or agent as it may appoint, sell,
convey, transfer and deliver all or a portion of such Equipment Note or
Equipment Notes issued under the Indenture with respect to which the Event of
Default has occurred, without recourse to or warranty by the Trustee or any
Certificateholder, to any Person. In any such case, the Trustee shall sell,
assign, contract to sell or otherwise dispose of and deliver such Equipment
Note or Equipment Notes in one or more parcels at public or private sale or
sales, at any location or locations at the option of the Trustee, all upon such
terms and conditions as it may reasonably deem advisable and at such prices as
it may reasonably deem advisable, for cash. If the Trustee so decides or is
required to sell or otherwise dispose of any Equipment Note pursuant to this
Section, the Trustee shall take such of the actions described above as it may
reasonably deem most effective to complete the sale or other disposition of
such Equipment Note, so as to provide for the payment in full of all amounts
due on the Certificates. The Trustee shall give notice to the Company promptly
after any such sale. Notwithstanding the foregoing, the Trustee shall not, and
shall not be required to, take any action under this Section that, in the
reasonable judgment of the Trustee, is adverse to the best interests of the
Certificateholders.
Section 6.02. Incidents of Sale of Equipment Notes. Upon any
sale of all or any part of the Equipment Notes made either under the power of
sale given under this Trust Agreement or otherwise for the enforcement of this
Trust Agreement, the following shall be applicable:
(1) Certificateholders and Trustee May Purchase Equipment
Notes. Any Certificateholder, the Trustee in its
<PAGE> 35
29
individual or any other capacity or any other Person, may bid for and purchase
any of the Equipment Notes, and upon compliance with the terms of sale, may
hold, retain, possess and dispose of such Equipment Notes in their or its or
his own absolute right without further accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The
receipt of the Trustee or of the officer making such sale shall be a sufficient
discharge to any purchaser for his purchase money, and, after paying such
purchase money and receiving such receipt, such purchaser or his personal
representative or assigns shall not be obliged to see to the application of
such purchase money, or be in any way answerable for any loss, misapplication
or non-application thereof.
(3) Application of Moneys Received upon Sale. Any moneys
collected by the Trustee upon any sale made either under the power of sale
given by this Trust Agreement or otherwise for the enforcement of this Trust
Agreement, shall be applied as provided in Section 4.02.
Section 6.03. Judicial Proceedings Instituted by Trustee.
(a) Trustee May Bring Suit. If there shall be a failure
to make payment of the principal of, premium, if any, or interest on any
Equipment Note, or if there shall be any failure to pay Rent (as defined in a
Lease) under the Lease related to any Equipment Note when due and payable, when
the Trustee, in its own name, and as trustee of an express trust, as holder of
such Equipment Notes, shall be, to the extent permitted by and in accordance
with the terms of the Note Documents, 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;
subject, however, to the limitations of liability set forth in the Equipment
Notes and the Note Documents.
(b) Trustee May File Proofs of Claim; Appointment of Trustee
as Attorney-in-Fact in Judicial Proceedings. The Trustee in its own name, or
as trustee of an express trust, or as attorney-in-fact for the
Certificateholders, or in any one or more of such capacities (irrespective of
whether distributions on the Certificates shall then be due and
<PAGE> 36
30
payable, or the payment of the principal on the Equipment Notes shall then be
due and payable, as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand to the Indenture
Trustee for the payment of overdue principal, premium (if any) or interest on
the Equipment Notes), shall, subject to the terms of the Indenture, be entitled
and empowered to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee and of the
Certificateholders allowed in any receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other judicial proceedings
relative to the Company, any Owner Trust, any Owner Trustee or any Owner
Participant, their respective creditors or property. Subject to the terms of
the Indenture, any receiver, assignee, trustee, liquidator or sequestrator (or
similar official) in any such judicial proceeding is hereby authorized by each
Certificateholder to make payments in respect of such claim to the Trustee, and
in the event that the Trustee shall consent to the making of such payments
directly to the Certificateholders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel. Nothing contained in this Trust Agreement
shall be deemed to give to the Trustee any right to accept or consent to any
plan of reorganization or otherwise by action of any character in any such
proceeding to waive or change in any way any right of any Certificateholder.
Section 6.04. Control by Certificateholders. The Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less
than a majority in interest of the Fractional Undivided Interests evidenced by
all Certificates at the time Outstanding (determined as provided in Section
1.04(c)) shall have the right to direct 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 Trust
Agreement, including any right of the Trustee as holder of the Equipment Notes,
provided that
(1) such direction shall not be in conflict with any rule of law
or with this Trust Agreement and would not involve the Trustee in
personal liability or expense,
<PAGE> 37
31
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Certificateholders not
taking part in such direction,
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction, and
(4) if an Indenture Event of Default shall have occurred
and be continuing, such direction shall not obligate the Trustee to
vote more than a corresponding majority of the related Equipment Notes
held by the Trust in favor of directing any action by the Indenture
Trustee with respect to such Indenture Event of Default.
Section 6.05. Waiver of Defaults. The Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less
than a majority in interest of the Fractional Undivided Interests evidenced by
all Certificates at the time Outstanding (determined as provided in Section
1.04(c)) may on behalf of the Certificateholders of all the Certificates waive
any Default hereunder and its consequences or may instruct the Trustee to waive
any default under an Indenture and its consequences, 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, or
(2) in the payment of the principal of, premium, if any, or
interest on any Equipment Notes, or
(3) in respect of a covenant or provision hereof which under
Article IX hereof cannot be modified or amended without the consent of
the Holder of each Outstanding Certificate affected.
Upon any such waiver, such Default shall cease to exist with
respect to this Trust Agreement, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Trust Agreement
and any direction given by the Trustee on behalf of such Holders to the
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 shall vote the
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Equipment Notes issued under the Indenture to waive the corresponding Indenture
Default or Indenture Event of Default.
With respect to consents, approvals, waivers and
authorizations which under the terms of Article IX of the Indenture may be
given by the Indenture Trustee without the necessity of the consent of any of
the holders of Equipment Notes, no consent, approval, waiver or authorization
shall be required hereunder on the part of the Trustee or the
Certificateholders.
Section 6.06. Undertaking to Pay Court Costs. All parties to
this Trust Agreement, and each Certificateholder by his acceptance of a
Certificate, shall be deemed to have agreed that any court may in its
discretion require, in any suit, action or proceeding for the enforcement of
any right or remedy under this Trust Agreement, or in any suit, action or
proceeding against the Trustee for any action taken or omitted by it as Trustee
hereunder, the filing by any party litigant in such suit, action or proceeding
of an undertaking to pay the costs of such suit, action or proceeding, and that
such court may, in its discretion, assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, action or
proceeding, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided, however, that the provisions of
this Section shall not apply to (a) any suit, action or proceeding instituted
by any Holder, or group of Holders, holding in the aggregate Certificates
evidencing Fractional Undivided Interests aggregating more than 10% of the
Trust, (b) any suit, action or proceeding instituted by any Certificateholder
for the enforcement of the distribution of payments pursuant to Section 4.02
hereof on or after the respective due dates expressed herein or (c) any suit,
action or proceeding instituted by the Trustee.
Section 6.07. Right of Certificateholders to Receive Payments
Not to Be Impaired. Anything in this Trust Agreement to the contrary
notwithstanding, the right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the Certificates when due,
or to institute suit for the enforcement of any such payment on or after the
applicable Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such Certificateholder.
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Section 6.08. Certificateholders May Not Bring Suit Except
Under Certain Conditions. A Certificateholder shall not have the right to
institute any suit, action or proceeding at law or in equity or otherwise with
respect to this Trust Agreement, for the appointment of a receiver or for the
enforcement of any other remedy under this Trust Agreement, unless:
(1) such Certificateholder previously shall have given
written notice to the Trustee of a continuing Event of Default;
(2) the Holders of Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at
the time Outstanding (determined as provided in Section 1.04(c)) shall
have requested the Trustee in writing to institute such suit, action
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
any such suit, action or proceeding for 60 days after receipt of such
notice, request and offer of indemnity; and
(4) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest of the Fractional Undivided Interests
evidenced by all Certificates at the time Outstanding (determined as
provided in Section 1.04(c)).
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Trust Property or the lien of any Indenture on
any property subject thereto, or the rights of the Certificateholders or the
holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or
preference to any other such Holder or (iii) enforce any right under this Trust
Agreement, except in the manner herein provided and for the equal, ratable and
common benefit of all the Certificateholders subject to the provisions of this
Trust Agreement.
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Section 6.09. Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders 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) Prior to an Event of Default,
(1) the Trustee shall not be liable except for the
performance of such duties as are specifically set out in this Trust
Agreement; and
(2) the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, in
the absence of bad faith on the part of the Trustee, upon certificates
or opinions conforming to the requirements of this Trust Agreement;
but the Trustee shall examine the evidence furnished to it pursuant to Section
314 of the Trust Indenture Act to determine whether or not such evidence
conforms to the requirements of this Trust Agreement.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Trust Agreement, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(c) No provision of this Trust Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
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35
(2) 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; and
(3) 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 Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest of the Fractional Undivided Interests evidenced by all
Certificates at the time Outstanding (determined as provided in
Section 1.04(c)) 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 Trust
Agreement.
(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.
Section 7.02. Notice of Defaults. The Trustee shall give to
the Certificateholders, in the manner and to the extent required by Section
313(c) of the Trust Indenture Act, and to the Company, the Owner Trustee and
the Indenture Trustee in accordance with Section 12.03, notice of all Defaults
known to the Trustee within 90 days after the occurrence thereof; provided,
however, that, except in the case of a Default in the payment of the principal
of, premium, 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 or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Certificateholders.
Section 7.03. Certain Rights of Trustee. Except as otherwise
provided in Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any Act, Direction,
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
<PAGE> 42
36
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Request;
(c) whenever in the administration of this Trust 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
Officers' Certificate of the Company, the Owner Trustee or the
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 Trust Agreement at the
request or direction of any of the Certificateholders pursuant to this
Trust 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 request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any Act, Direction, resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture or other paper or document;
and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder 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 by it hereunder with due care.
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Section 7.04. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except
the certificates of authentication, shall not be taken as the statements of the
Trustee, and the Trustee assumes no responsibility for their correctness.
Subject to Section 7.15, the Trustee makes no representations as to the
validity or sufficiency of this Trust Agreement, the Equipment Notes, the Note
Documents or the Certificates, except that the Trustee hereby represents and
warrants that this Trust Agreement has been, and each Certificate will be,
executed and delivered by one of its officers who is duly authorized to execute
and deliver such document on its behalf.
Section 7.05. May Hold Certificates. The Trustee, any Paying
Agent, Registrar or any other agent, in their respective individual or any
other capacity, may become the owner or pledgee of Certificates and may
otherwise deal with the Company, the Owner Trustee, the Owner Participant or
the Indenture Trustee with the same rights it would have if it were not
Trustee, Paying Agent, Registrar or such other agent, subject to Section 7.08
in the case of the Trustee.
Section 7.06. Money Held in Trust. Money held by the Trustee
or the Paying Agent in trust hereunder 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, Reimbursement and
Indemnification. The Company agrees
(1) to pay, or cause to be paid, to the Trustee from time to
time the compensation set forth in the schedule agreed to by the
Trustee and the Company 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, 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 Trust Agreement (including the reasonable compensation and the
expenses and
<PAGE> 44
38
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;
(3) to indemnify, or cause to be indemnified, the Trustee, in
its individual and trustee capacities, for any loss, liability or
expense (excluding taxes, indemnification for which is limited to that
provided in clause (4) below) arising out of or in connection with the
acceptance or administration of this Trust, including any costs and
expenses incurred in contesting any such liability asserted against
the Trustee, to the extent provided in Section 7.2 of the
Participation Agreement, which section, as it relates to the Trustee,
is hereby incorporated by reference herein; and
(4) to indemnify, or cause to be indemnified, the Trustee,
solely in its individual capacity, for and to hold it harmless
against, any tax (other than for or with respect to any tax referred
to in the next paragraph, provided that no indemnification shall be
available with respect to any tax attributable to the Trustee's
compensation for serving as such) incurred without negligence, willful
misconduct or bad faith, on its part, arising out of or in connection
with the acceptance or administration of this Trust, including any
costs and expenses incurred in contesting the imposition of any such
tax. The Trustee, in its individual capacity, shall notify the
Company promptly of any tax for which it may seek indemnity. The
Company shall defend against the imposition of such tax and the
Trustee, in its individual capacity, shall cooperate in the defense.
The Trustee, in its individual capacity, may have separate counsel
with the consent of the Company and the Company will pay the
reasonable fees and expenses of such counsel. The Company need not
pay for any taxes paid, in settlement or otherwise, without its
consent.
In addition, the Trustee shall be entitled to reimbursement
from, and shall have a lien prior to the Certificates upon, all property and
funds held or collected by the Trustee in its capacity as Trustee for any tax
incurred without negligence, bad faith or willful misconduct, on its part,
arising out of or in connection with the acceptance or administration of this
Trust (other
<PAGE> 45
39
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. If the Trustee reimburses itself for any such tax it will within 30
days mail a brief report setting forth the circumstances thereof to all
Certificateholders as their names and addresses appear in the Register.
Section 7.08. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which (a) shall be a Person eligible
to act as a trustee under Section 310(a) of the Trust Indenture Act and (b)
shall be a corporation organized and doing business under the laws of the
United States of America or of any state, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $100,000,000, and subject to supervision or examination by Federal or
state authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 7.09. Resignation and Removal: Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company, the Authorized Agents, the Owner Trustee, the
Owner Participant and the Indenture Trustee. If an instrument of acceptance by
a successor Trustee shall not have been delivered to the Company, the Owner
Trustee, the Owner Participant and the Indenture 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 by Act of the
Holders holding Certificates evidencing Fractional
<PAGE> 46
40
Undivided Interests aggregating not less than a majority in interest in the
Trust delivered to the Trustee and to the Company, the Owner Trustee and the
Indenture Trustee.
(d) If at any time:
(1) the Trustee fails to comply with the requirements of
Section 310 of the Trust Indenture Act after written request for such
compliance by a Certificateholder that has been a bona fide
Certificateholder for at least six months; or
(2) 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
(3) 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) subject to
Section 6.06, any Certificateholder who has been a bona fide Holder of a
Certificate for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall obtain
actual knowledge of an Avoidable Tax (as hereinafter defined) which has been or
is likely to be asserted, the Trustee shall promptly notify the Company thereof
and shall, within 30 days of such notification, resign 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
in a jurisdiction where there are no Avoidable Taxes. As used herein an
Avoidable Tax means a state or local tax: (i) upon (w) the Trust, (x) the Trust
Property, (y) Holders of the Certificates or (z) the Trustee for which the
Trustee is entitled to seek reimbursement from the Trust Property, and (ii)
that 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
<PAGE> 47
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Company or the Owner Trustee shall agree to pay, and shall pay, such tax.
(f) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Company shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust delivered to the
Company, the Owner Trustee, the Owner Participant, the Indenture Trustee and
the retiring Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Trustee and supersede
the successor Trustee 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
Holder of a Certificate 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.
(g) The successor Trustee 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 Holders of Certificates 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, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
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 to the successor
Trustee, such retiring Trustee shall execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder, subject
nevertheless to its
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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.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
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 at 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, without the execution 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
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Certificates so authenticated with the same
effect as if such successor Trustee had itself authenticated such Certificates.
Section 7.12. Maintenance of Agencies. (a) There shall at
all times be maintained in the Borough of Manhattan, The City of New York, an
office or agency where Certificates 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 the Certificates or of
this Trust Agreement may be served. Such office or agency shall be initially
at [ ]. 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, the Owner Trustee, the Owner Participant, the
Indenture Trustee and the Certificateholders. 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.
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(b) There shall at all times be a Registrar and a Paying
Agent hereunder. 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
$100,000,000, 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. 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.
(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, 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.
(d) Any Authorized Agent may at any time resign by giving
written notice of resignation to the Trustee, the Company, the Owner Trustee,
the Owner Participant and the Indenture Trustee. 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 (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. The Company shall give
written notice of any such appointment made by it to the Trustee, the Owner
Trustee and the Indenture Trustee; and in each case the Trustee shall mail
notice of such appointment to all Holders as their names and addresses appear
on the Register.
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(e) The Company agrees to pay, or cause to be paid, from time
to time to each Authorized Agent the compensation as set forth in the schedule
agreed to by each Authorized Agent and the Company 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 Holders of the Certificates entitled to such payment, subject to the
provisions of this Section. Moneys so deposited and held in trust shall
constitute a separate trust fund for the benefit of the Holders of the
Certificates with respect to which such money was deposited.
The Trustee will cause each Paying Agent other than the
Trustee to execute and deliver to it an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will
(1) hold all sums held by it for payments on Certificates in
trust for the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided;
(2) give the Trustee notice of any default by any obligor
upon the Certificates in the making of any such payment; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Trust 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 Trustee's
Name. The Trustee agrees that all Equipment Notes and Permitted Government
Investments, if any, shall be
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issued in the name of the Trustee or its nominee and held by the Trustee, or,
if not so held, the Trustee or its nominee shall be reflected as the owner of
such Equipment Notes or Permitted Government Investments, as the case may be,
in the register of the issuer of such Equipment Notes or Permitted Government
Investments under the applicable provisions of the Uniform Commercial Code in
effect where the Trustee holds such Equipment Notes or Permitted Government
Investments, or other applicable law then in effect.
Section 7.15. Representations and Warranties of Trustee. The
Trustee hereby represents and warrants that:
(i) the Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States of America;
(ii) the Trustee has full power, authority and legal right
to execute, deliver, and perform this Trust Agreement and the
Participation Agreement and has taken all necessary action to
authorize the execution, delivery and performance by it of this Trust
Agreement and the Participation Agreement;
(iii) the execution, delivery and performance by the
Trustee of this Trust Agreement and the Participation Agreement (a)
will not violate any provision of any United States or Connecticut law
or regulation 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,
(b) will not violate any provision of the articles of association or
by-laws of the Trustee, (b) will 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 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;
(iv) the execution, delivery and performance by the
Trustee of this Trust Agreement and the Participation Agreement will
not require the
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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 United States or Connecticut governmental authority or
agency regulating the banking and corporate trust activities of the
Trustee; and
(v) this Trust Agreement and the Participation Agreement
have been duly executed and delivered by the Trustee and constitute
the legal, valid and binding agreements of the Trustee, enforceable in
accordance with their respective terms, provided that enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and general principles of equity.
Section 7.16. Withholding Taxes; Information Reporting. The
Trustee, as trustee of a grantor trust, shall exclude and withhold from each
distribution of principal, premium, if any, and interest and other amounts due
hereunder or under the Certificates 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, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the Holders
of the Certificates, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each Holder of a Certificate appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Holders 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 will 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 which is either
(i) attributable to the Trustee in its individual capacity and which is
unrelated to the transactions contemplated by this Agreement or any Note
Document, or (ii) which is attributable to the Trustee as
<PAGE> 53
47
trustee hereunder or in its individual capacity and which arise out of acts or
omissions which are prohibited by this Agreement.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS
Section 8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders. The Company will 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, 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 Holders of
Certificates, 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, no such list need be furnished; and provided further, however,
that no such list need be furnished for so long as a copy of the Register is
being furnished to the Trustee pursuant to Section 7.12(b).
Section 8.02. Preservation of Information. The Trustee shall
preserve, in as current a form as is reasonably practicable, the names and
addresses of Holders of Certificates contained in the most recent list
furnished to the Trustee as provided in Section 7.12(b) or Section 8.01, as the
case may be, and the names and addresses of Holders of Certificates 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(b) or Section
8.01, as the case may be, upon receipt of a new list so furnished.
Section 8.03. Reports by the Company. The Company shall
comply with Section 314 of the Trust Indenture Act and shall file, furnish and
deliver the reports, information, documents, certificates and opinions required
thereunder, and acknowledges and agrees that, for purposes of Section 314 of
the Trust Indenture Act, the Company shall be considered to be the "obligor"
upon the Certificates. Without limiting the generality of the foregoing, the
Company shall deliver to the Trustee the annual certificate required under
clause (4) of Section 314(a) of the Trust Indenture Act within 120 days
following the end of each fiscal year of the Company ending after the date
hereof. The provisions of this Section shall not be construed to
<PAGE> 54
48
impose any obligation or liability on the Company to pay any of the principal,
premium, if any, or interest in respect of the Equipment Notes or the
Certificates.
Section 8.04. Reports by the Trustee. On or before each May
15, the Trustee shall transmit, in the manner and to the extent required by
section 313(c) of the Trust Indenture Act, any report required by section
313(a) of the Trust Indenture Act to be transmitted by the Trustee to the
Certificateholders.
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS
Section 9.01. Supplemental Trust Agreement Without Consent of
Certificateholders. Without the consent of the Holder of any Certificates, the
Company may, and the Trustee (subject to Section 9.03) shall, at any time and
from time to time enter into one or more agreements supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the obligations of
the Company herein contained;
(2) to add to the covenants of the Company, for the protection
of the Holders of the Certificates;
(3) to surrender any right or power herein conferred upon the
Company;
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein or to make any other provisions with respect to
matters or questions arising under this Trust Agreement; provided that
any such action will not adversely affect the interests of the Holders
of the Certificates;
(5) to correct or amplify the description of property that
constitutes Trust Property or the conveyance of such property to the
Trustee;
(6) to evidence and provide for a successor Trustee for such
Pass Through Trust;
<PAGE> 55
49
(7) to modify, eliminate or add to the provisions of this
Trust Agreement to the extent as shall be necessary to qualify this
Trust Agreement (including any supplemental agreement) under the Trust
Indenture Act or under any similar Federal statute hereafter enacted,
or add to this Trust 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 instrument was
executed or any corresponding provision in any similar Federal statute
hereafter enacted; or
(8) to add, eliminate, or change any provision under this
Trust Agreement that will not adversely affect the interests of the
Certificateholders;
provided that in each case such supplemental agreement does not cause the Trust
to become taxable as an "association" within the meaning of Treasure Regulation
Section 301.770-4.
Section 9.02. Supplemental Trust Agreements with Consent of
Certificateholders. With the consent of the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.04(c)), by Act of said Holders
delivered to the Company and the Trustee, the Company may (with the consent of
the Owner Trustee, such consent not to 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 Trust Agreement or of
modifying in any manner the rights and obligations of the Holders of the
Certificates under this Trust Agreement; provided, however, that no such
supplemental agreement shall, without the consent of the Holder 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 the Trust, or distributions that are required to be made herein on
any Certificate of such Trust, or change any date of payment on any
such Certificate, or change the place of payment where, or the coin or
currency in which, any such Certificate is payable, or impair the
right of any Holder of any such Certificate to institute suit for the
enforcement of any such payment or distribution on or after the
Distribution Date or Special Distribution Date applicable thereto; or
(2) except as provided in this Trust Agreement, permit the
disposition of any Equipment Note in the
<PAGE> 56
50
Trust Property, or permit the creation of any lien on the Trust
Property, or otherwise deprive any Certificateholder of the benefit of
the ownership of the Equipment Notes held in the Trust or the lien of
the related Indenture; or
(3) reduce the percentage of the aggregate Fractional
Undivided Interests which is required to approve any such supplemental
agreement, or reduce such percentage required for any waiver provided
for in this Trust Agreement; or
(4) cause the Trust to become taxable as an "association",
within the meaning of Treasury Regulation Section 301.7701-4.
It shall not be necessary for any Act of Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Act 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 affects any interest, right,
duty, immunity or indemnity in favor of the Trustee under this Trust Agreement,
the Trustee may in its discretion decline to execute such document.
Section 9.04. Execution of Supplemental Trust Agreements. In
executing, or accepting the additional trusts created by, any supplemental
agreement permitted by this Article or the modifications thereby of the trusts
created by this Trust Agreement, the Trustee shall be entitled to receive, and
(subject to Section 7.01) 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 Trust Agreement.
Section 9.05. Effect of Supplemental Trust Agreements. Upon
the execution of any supplemental agreement under this Article, this Trust
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Trust Agreement for all purposes; and every
Holder of Certificates theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
<PAGE> 57
51
Section 9.06. Reference in Certificates to Supplemental Trust
Agreements. Certificates authenticated and delivered after the execution of
any supplemental agreement pursuant to this Article 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 after proper presentation and demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS
Section 10.01. Amendments and Supplements to Indenture and
Other Note Documents. In the event that the Trustee, as holder of any
Equipment Note in trust for the benefit of the Certificateholders, receives a
request for a consent to any amendment, modification, waiver or supplement
under any Indenture or other Note Document, that requires the consent of the
holder of such Equipment Note, the Trustee shall forthwith send a notice of
such proposed amendment, modification, waiver or supplement to each
Certificateholder registered on the Register as of such date. Any such notice
shall describe the proposed amendment, modification, waiver or supplement (or
attach a copy thereof). The Trustee shall request from the Certificateholders
Directions as to (i) whether or not to direct the Indenture Trustee to take or
refrain from taking any action which a holder of such Equipment Note has the
option to direct, (ii) whether or not to give or execute any waivers,
consents, amendments, modifications or supplements as a holder of such
Equipment Note and (iii) how to vote any Equipment Note if a vote has been
called for with respect thereto. Any such request shall specify a date by
which Certificateholders are requested to respond. Provided 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 Equipment Note, the
Trustee shall vote or consent with respect to such Equipment Note in the same
proportion as the Certificates were actually voted by Acts of Holders delivered
to the Trustee 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, in the case that an Event of Default
hereunder shall have occurred and be continuing, the Trustee may, in its own
discretion and at its own direction, consent and notify the Indenture Trustee
of such consent to any
<PAGE> 58
52
amendment, modification, waiver or supplement under an Indenture or other Note
Document.
With respect to consents, approvals, waivers and
authorizations which under the terms of Article IX of the Indenture may be
given by the Indenture Trustee without the necessity of the consent of any of
the holders of Equipment Notes, no consent, approval, waiver or authorization
shall be required hereunder on the part of the Trustee or the
Certificateholders.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The respective
obligations and responsibilities of the Company and the Trustee created hereby
and the Trust created hereby shall terminate upon the distribution to all
Certificateholders of all amounts required to be distributed to them pursuant
to this Trust Agreement and the disposition of all property held as part of the
Trust Property; provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of the board of directors of the Company living on
the date of this Trust Agreement.
Notice of any termination, specifying the Distribution Date
(or Special Distribution Date, as the case may be) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be mailed promptly by the
Trustee to Certificateholders not earlier than the 60th day and not later than
the 20th day next preceding such final distribution specifying (A) the
Distribution Date (or Special Distribution Date, as the case may be) upon which
final payment of the Certificates will be made upon presentation and surrender
of Certificates at the office or agency of the Trustee therein specified, (B)
the amount of any such final payment, and (C) that the Record Date otherwise
applicable to such 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 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. Upon presentation and surrender of
the
<PAGE> 59
53
Certificates, the Trustee shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date or Special Distribution Date,
as the case may be, pursuant to Section 4.02.
In the event that all of the Certificateholders 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 to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. In the event that any money held by the Trustee for the payment of
distributions on the Certificates shall remain unclaimed for two years (or such
lesser time as the Trustee shall be satisfied, after sixty 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 Indenture Trustee the appropriate amount of money relating to such
Indenture Trustee and shall give written notice thereof to the Owner Trustee,
the Owner Participant and the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to terminate
this Trust Agreement or the 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.
Certificateholders shall not be personally liable for obligations of the Trust,
the Fractional Undivided Interests represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and Certificates upon authentication thereof by the Trustee
pursuant to Section 3.02 are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly provided herein) to
vote or in any manner otherwise control the operation and management of the
Trust Property, the Trust established hereunder, or
<PAGE> 60
54
the obligations of the parties hereto, nor shall anything set forth herein, or
contained in the terms of the Certificates, be construed so as to constitute
the Certificateholders from time to time as partners or members of an
association.
Section 12.03. Notices. All demands, notices, and
communications hereunder shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, and shall be deemed to have been duly
given upon receipt, in the case of the Company, at the following address:
Phillips Petroleum Company, 3 A3 Phillips Building, Bartlesville, Oklahoma
74004, Attention: Assistant Treasurer, and, in the case of the Trustee, at the
following address: 777 Main Street, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration, or, in each case, at such other address as
shall be designated by such party in a written notice to the other parties.
Any notice required or permitted to be given to a Certificateholder hereunder
shall be mailed by first class mail, postage prepaid, at the address of such
Holder as shown in the Register. Any notice so mailed within the time
prescribed in this Trust Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder received such notice. The
Trustee shall promptly furnish the Company with a copy of each demand, notice
or written communication received by the Trustee hereunder from any
Certificateholder, any Owner Trustee or any Indenture Trustee.
Section 12.04. Governing Law. THIS TRUST AGREEMENT AND THE
CERTIFICATES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
If and to the extent that any provision of this Trust
Agreement limits, qualifies or conflicts with another provision incorporated in
or otherwise mandatorily applicable to this Trust Agreement by operation of
Sections 310 through 317 of the Trust Indenture Act, such incorporated
provision shall control. In addition, the parties intend that the terms and
conditions of this Trust Agreement and of the Certificates satisfy the
conditions specified in Rule 3a-7 under the Investment Company Act, and this
Trust Agreement shall be interpreted consistent with such intention.
<PAGE> 61
55
Section 12.05. Severability of Provisions. If any one or
more of the covenants, agreements, provisions or terms of this Trust 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 Trust Agreement and shall in
no way affect the validity or enforceability of the other provisions of this
Trust Agreement or the Trust, or of the Certificates or the rights of the
Holders thereof.
Section 12.06. 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 12.07. Successors and Assigns. All covenants,
agreements, representations and warranties in this Trust 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 12.08. Benefits of Trust Agreement. Nothing in this
Trust Agreement or in the Certificates, express or implied, shall give to any
person, other than the parties hereto and their successors hereunder, and the
Holders of Certificates, any benefit or any legal or equitable right, remedy or
claim under this Trust Agreement.
Section 12.09. Legal Holidays. In any case where any
Distribution Date or Special Distribution Date relating to any Certificate
shall not be a Business Day, then (notwithstanding any other provision of this
Trust 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
Distribution Date or Special Distribution Date and (provided that such payment
is made on such next succeeding Business Day) no interest shall accrue during
the intervening period.
Section 12.10. Counterparts. For the purpose of facilitating
the execution of this Trust Agreement and for other purposes, this Trust
Agreement may be executed simultaneously in any number of counterparts and by
the separate parties hereto on separate counterparts, each of which
counterparts shall be deemed to be an original, and
<PAGE> 62
56
all of which counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Trust Agreement to be duly executed by their respective officers and their
respective seals, duly attested, to be hereunto affixed, all as of the day and
year first above written.
PHILLIPS PETROLEUM COMPANY,
By:
------------------------
Name:
Title:
[SEAL]
Attest:
- -----------------------------
Assistant Corporate Secretary
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
As Trustee
By:
------------------------------
Name:
Title: Vice President
[SEAL]
Attest:
- ---------------------------
Trust Officer
<PAGE> 63
57
STATE OF CONNECTICUT)
: ss.
COUNTY OF HARTFORD )
On this day of , 199 , before me personally
appeared , to me personally known, who being by me duly sworn,
say that she is a Vice President of Shawmut Bank Connecticut, National
Association, that said instrument was signed on such date on behalf of said
association by authority of its Board of Directors, and she acknowledged that
the execution of the foregoing instrument was the free act and deed of said
association.
----------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
STATE OF DELAWARE )
: ss.
COUNTY OF )
On this day of , 199 , before me personally
appeared , to me personally known, who being by me duly
sworn, say that he is Trust Officer of WILMINGTON TRUST COMPANY, that said
instrument was signed on such date on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
----------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
<PAGE> 64
SCHEDULE 1
Participation Agreements
------------------------
The Participation Agreements providing for Lease Transactions
to be financed by the purchase of Equipment Notes hereunder, and the parties
thereto, are as follows:
Book-Entry Certificates
-----------------------
Section 3.09 is [not] applicable to the Certificates.
<PAGE> 65
EXHIBIT A
FORM OF CERTIFICATE
Phillips Petroleum Company
199__-[ ] PASS THROUGH TRUST
[ ]% Pass Through
Certificate, Series 199__-[ ]
CUSIP
Final Distribution Date: [ ]
evidencing a fractional undivided
interest in a trust, the property of
which includes certain equipment notes
secured by certain equipment leased to
Phillips Petroleum Company.
Certificate
No. __________
$_____________ Fractional Undivided
Interest representing [ ]%
of the Trust per $1,000 face amount
THIS CERTIFIES THAT ______________________________, for
value received, is the registered owner of a
$_____________________(____________________dollars) Fractional Undivided
Interest in Phillips Petroleum Company 199__-[ ] Pass Through Trust (the
"Trust") created by Shawmut Bank Connecticut, National Association, as trustee
(the "Trustee"), pursuant to a Pass Through Trust Agreement dated as of [ ],
199_ (the "Agreement") between the Trustee and Phillips Petroleum Company, a
corporation incorporated under Delaware law (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 "[ ]% Pass Through Certificates,
Series 199_-[ ]" (herein called the "Certificates"). This Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound. The property of
the Trust includes certain Equipment Notes (the "Trust Property"). The
Equipment Notes are secured by a security interest in railroad rolling stock,
aircraft or vehicles leased to the Company, and
<PAGE> 66
2
liability thereunder is limited to the income and proceeds of such security.
Subject to and in accordance with the terms of the Agreement,
from funds then available to the Trustee, there will be distributed on each
[ ] and [ ] (a "Distribution Date"), commencing on [ ],
to the person in whose name this Certificate is registered at the close of
business on the day of the month which is 15 days preceding the Distribution
Date, an amount in respect of the Scheduled Payments on the Equipment Notes due
on such Distribution Date, the receipt of which has been confirmed by the
Trustee, equal to the product of the percentage interest in the Trust 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, in the event that
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 day of the month which is 15 days
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 evidenced
by this Certificate and an amount equal to the sum of such Special Payments so
received. The Special Distribution Date shall be determined as provided in the
Agreement. If a Distribution Date or Special Distribution Date is not a
Business Day, distribution shall be made on the immediately following Business
Day. The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Holders of the Certificates.
Distributions on this Certificate will be made by the Trustee
by check mailed to the person entitled thereto, without the presentation or
surrender of this Certificate or the making of any notation hereon. Except as
otherwise provided in the Agreement and notwithstanding the above, the final
distribution on this Certificate will 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.
[THIS IS THE GLOBAL SECURITY REFERRED TO IN SECTION 3.01 OF
THE WITHIN MENTIONED AGREEMENT.
<PAGE> 67
3
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered
owner hereof, Cede & Co., has an interest herein.]1/
This Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the 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 executed.
PHILLIPS PETROLEUM COMPANY
199[ ] PASS THROUGH TRUST
By: SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------
Title:
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated:
- --------------------
1/ Add to Global Certificate only.
<PAGE> 68
4
This is one of the Certificates referred
to in the within-mentioned Agreement.
[This is the Global Certificate referred
to in the within-mentioned Agreement] 2/
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------
Authorized Officer
- --------------------
2/ For Global Certificate only.
<PAGE> 69
5
[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 affiliate thereof. The Certificates are limited in right of payment, all
as more specifically set forth 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 Holder of this Certificate, by its
acceptance hereof, agrees that it will look solely to the income and proceeds
from the Trust Property to the extent available for distribution to such Holder
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
Holders of Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest of the Fractional Undivided Interests
evidenced by all Certificates at the time Outstanding. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders 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 Holders 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
<PAGE> 70
6
Registrar, or by any successor Registrar, in the Borough of Manhattan, the City
of New York, duly endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Trustee and the Registrar duly executed by the
Holder hereof or such Holder'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 will be issued to
the designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $1,000 Fractional Undivided
Interest and any integral multiples of $1,000 in excess thereof except that one
Certificate may be in a denomination of less than $1,000. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of authorized denominations evidencing
the same aggregate Fractional Undivided Interest in the Trust, as requested by
the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee shall require payment 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.
<PAGE> 71
EXHIBIT B
FORM OF
LETTER OF REPRESENTATIONS
[DTC Printed Form]
<PAGE> 1
EXHIBIT 4(B)(1)
==============================================================================
TRUST INDENTURE AND SECURITY AGREEMENT
(Phillips Trust No. [ ])
Dated as of September 1, 1994
between
WILMINGTON TRUST COMPANY
as Owner Trustee
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Indenture Trustee
[ ]
Leased to Phillips Petroleum Company
==============================================================================
<PAGE> 2
TABLE OF CONTENTS 1/
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ARTICLE I
Definitions
-----------
SECTION 1.01. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
The Equipment Notes
-------------------
SECTION 2.01. Form of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02. Terms of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.03. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.04. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.05. Application of Payments to Principal
Amount and Interest . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.06. Termination of Interest in Indenture
Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.07. Transfer of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen
Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.09. Payment of Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.10. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.11. Equally and Ratably Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.12. Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.13. Agreement upon Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
Receipt, Distribution and Application
of Income from the Indenture Estate
-----------------------------------
SECTION 3.01. Basic Rent Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.02. Distribution in the Event of
Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.03. Payments After Indenture Event of
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
- --------------------------
1/ This Table of Contents is not part of the Indenture and is for
convenience of reference only.
<PAGE> 3
Contents, p. 2
<TABLE>
<S> <C> <C>
SECTION 3.04. Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.05. Distribution of Excepted Property . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV
Remedies of the Indenture Trustee
Upon an Indenture Event of Default
----------------------------------
SECTION 4.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.02. Acceleration; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.03. Remedies with Respect to Indenture
Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.04. Right To Cure; Option To Purchase; etc. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.05. Rights of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.06. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.07. Certain Limitations on
Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
Duties of the Indenture Trustee
-------------------------------
SECTION 5.01. Action Upon Indenture Event of
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.02. Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.03. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.04. No Duties Except as Specified in
Indenture or Instructions . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.05. No Action Except Under Lease,
Indenture or Instructions . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.06. Disposition of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.07. Indenture Supplements for
Replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.08. Effect of Replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.09. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
The Owner Trustee and the Indenture Trustee
-------------------------------------------
SECTION 6.01. Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.02. Absence of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.03. No Representations or Warranties as to
the Equipment or Documents . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
<PAGE> 4
Contents, p. 3
<TABLE>
<S> <C> <C>
SECTION 6.04. No Segregation of Moneys; No Interest;
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.05. Reliance; Agents; Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.06. Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.07. Certain Limitations on Owner Trustee's
and Indenture Trustee's Rights . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII
Assumption of Obligations . . . . . . . . . 46
-------------------------
ARTICLE VIII
Successor Trustees
------------------
SECTION 8.01. Notice of Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.02. Resignation of Indenture Trustee;
Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IX
Supplements and Amendments
to This Indenture and Other Documents
-------------------------------------
SECTION 9.01. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.02. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.03. Request of Substance, Not Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.04. Documents Mailed to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.05. Amendments, Waivers, etc. of Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Termination of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.02. No Legal Title to Indenture Estate in
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.03. Sale of Equipment by Indenture Trustee
Is Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.04. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.05. Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
<PAGE> 5
Contents, p. 4
<TABLE>
<S> <C> <C>
SECTION 10.06. Indenture and Equipment Notes for
Benefit of Owner Trustee, Indenture
Trustee, Owner Participant and
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.07. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.08. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 10.09. Separate Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.11. Indenture for Benefit of Owner Trustee,
Indenture Trustee, Owner Participant
and Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.12. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.14. Normal Commercial Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
ANNEX A Amortization Schedule
EXHIBIT A Form of Trust Indenture Supplement
Appendix A Definitions
<PAGE> 6
TRUST INDENTURE AND SECURITY AGREEMENT
TRUST INDENTURE AND SECURITY AGREEMENT
(Phillips Trust No.[ ]) dated as of September 1, 1994
(this "Indenture"), between WILMINGTON TRUST COMPANY,
a Delaware banking corporation, not in its individual
capacity, except as otherwise expressly set forth in
Section 6.03 hereof, but solely as trustee under the
Trust Agreement referred to below and any successor
appointed in accordance with the terms hereof and of
the Trust Agreement (herein in such trustee capacity
called the "Owner Trustee"), and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, national banking
association, as Indenture Trustee hereunder and any
successor appointed in accordance with the terms hereof
(herein called the "Indenture Trustee").
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 establishes the Owner Trust for the use and
benefit of the Owner Participant, and (ii) the Owner Trustee is authorized and
directed to execute and deliver this Indenture;
WHEREAS the Owner Trustee and the Indenture Trustee
desire by this Indenture, among other things, (i) to provide for the issuance
by the Owner Trust of the Equipment Notes, and (ii) to 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, and the
grant of a security interest in, certain of the Owner Trust's right, title and
interest in and to the transportation equipment described in the Indenture
Supplement hereto (the "Equipment") and the Equipment Lease Agreement (Phillips
Trust No. []) dated as of the date hereof (the "Lease"), relating to the
Equipment, between the Owner Trustee and Phillips Petroleum Company, and
certain payments and other amounts received hereunder or thereunder, in
accordance with the terms hereof, in trust, as security for, among other
things, the Owner Trust's obligations described herein for the equal and
ratable benefit of the holders of the Equipment Notes; and
<PAGE> 7
2
WHEREAS all things necessary to make this Indenture
the legal, valid and binding obligation of the Owner Trustee, on behalf of the
Owner Trust, 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 SECURITY
AGREEMENT WITNESSETH, that, to secure (a) the prompt payment of the principal
of and interest and premium, if any, on and all other amounts due with respect
to, the Equipment Notes from time to time outstanding hereunder, (b) the
payment, performance and observance by the Owner Trustee, on behalf of the
Owner Trust, of all the obligations, agreements, covenants and provisions
herein and in the Equipment Notes, and (c) the payment, performance and
observance of all the obligations, agreements and covenants of the Owner
Trustee in the Participation Agreement for the benefit of the Indenture Trustee
or the holders of the Equipment Notes, all for the benefit of the holders of
the Equipment Notes, 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 Loan
Participant, the Owner Trustee, on behalf of the Owner Trust, does hereby sell,
assign, transfer, convey, grant, mortgage, pledge, and confirm unto the
Indenture Trustee, its successors and assigns, for the security and benefit of
the holders of the Equipment Notes from time to time, a security interest in
and mortgage lien on all estate, right, title and interest of the Owner Trustee
and the Owner Trust in and to the following described property, rights,
interests and privileges insofar as it does not constitute Excepted Property
(which collectively, including all property hereafter specifically subjected to
the lien of this Indenture by any instrument supplemental hereto, but excluding
Excepted Property, being herein called the "Indenture Estate"), to wit:
(1) the Lease, including, without limitation, all
amounts of Basic Rent, Supplemental Rent, insurance proceeds and other payments
of any kind for or with respect to the Equipment, and the right to make all
amendments and modifications thereunder, to exercise all elections and options
thereunder, to grant all waivers, consents and approvals thereunder, to give
and receive all notices
<PAGE> 8
3
thereunder, to declare any Lease Default or Lease Event of Default thereunder,
to take any action or exercise any remedy (including, without limitation, the
commencement, conduct and consummation of legal proceedings) permitted
thereunder or by law, and to do any and all things whatsoever that the Owner
Trustee or any lessor is or may be entitled to do under the Lease;
(2) the Equipment (including all Parts thereof), and
all substitutions therefor and replacements thereof, and all modifications,
additions, improvements and accessions thereto, and all logs and records
relating thereto in which the Owner Trustee shall acquire an interest, in each
case whether now owned or hereafter acquired;
(3) all requisition proceeds with respect to the
Equipment or any Unit thereof (to the extent of the Owner Trustee's interest
therein pursuant to the terms of the Lease);
(4) the Bills of Sale, including, without limitation,
all rights and claims arising thereunder;
(5) the rights and claims of the Owner Trust under
the Participation Agreement;
(6) any and all other assets, properties and rights
of whatsoever nature now owned or hereafter acquired by the Owner Trust
pursuant to the Operative Agreements and all tolls, rents, revenues, issues,
income, products and profits of any assets, properties and rights subjected to
the lien hereof;
(7) all monies and securities now or hereafter paid
or deposited or required to be paid or deposited with the Indenture Trustee
pursuant to any term of this Indenture, the Lease or the Participation
Agreement or required to be held by the Indenture Trustee hereunder or
thereunder; and
(8) all proceeds of the foregoing.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the foregoing sale,
assignment, transfer, conveyance, mortgage, pledge or security
interest granted by this Indenture and from the Indenture Estate all
Excepted Property;
<PAGE> 9
4
(b) (i) the Owner Trustee and the Owner Participant
shall at all times retain the right, to the exclusion of the Indenture
Trustee A) to Excepted Property and to commence and continue an action
at law to obtain such Excepted Property and otherwise to exercise any
election or option or make any determination or to give or receive any
notice, consent, waiver or approval in respect of any Excepted
Property and (B) prior to any foreclosure or other exercise of
remedies hereunder that operates to divest the Owner Trustee of its
rights as "Lessor" under the Lease, to adjust Basic Rent and the
percentages relating to Stipulated Loss Value and Termination Value as
provided in Section 3.4 of the Lease and Section 2.6 of the
Participation Agreement;
(ii) the Owner Trustee and the Indenture Trustee
shall independently retain the right to receive from the Lessee all
notices, certificates, reports, filings, opinions of counsel, copies
of all documents and all information which the Lessee is permitted or
required to give or furnish to the "Lessor" pursuant to the Lease or
to the Owner Trustee pursuant to any other Operative Agreement, to
exercise the inspection rights provided for in Section 13 of the
Lease, to give any notice of default under Section 14 of the Lease and
to declare the Lease in default in respect thereof and to retain the
right 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;
(iii) so long as no Indenture Event of Default shall
have occurred and be continuing (but subject to the provisions of
Section 9.05 hereof), the Owner Trustee shall retain the right, to the
exclusion of the Indenture Trustee, to exercise all rights of the
"Lessor" (but not the rights of the "Indenture Trustee") under the
Lease (other than the right to receive any funds to be delivered to
the "Lessor" under the Lease (except funds which constitute or are
delivered with respect to Excepted Property));
(c) the leasehold interest granted to the Lessee
under the Lease shall not be subject to the security interest granted
by this Indenture, and nothing in this Indenture shall affect the
rights of the Lessee under the Lease so long as no Lease Event of
Default has occurred and is continuing; and
<PAGE> 10
5
(d) as between the Owner Trustee and the Indenture
Trustee, prior to any foreclosure or other exercise of remedies
hereunder that operates to divest the Owner Trustee of its rights as
"Lessor" under the Lease, nothing contained in this Granting Clause
shall prevent the Owner Trustee, as the Lessor under the Lease, or the
Owner Participant from seeking specific performance of the covenants
of the Lessee under the Lease relating to the protection, insurance,
maintenance, storage, possession, use and return of the Equipment (as
long as any such action does not materially interfere with the ability
of the Indenture Trustee to exercise its remedies pursuant to Section
4.03 hereof) and from maintaining separate insurance with respect to
the Equipment to the extent permitted by Section 12 of the Lease.
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 holders from time to time of the Equipment
Notes, without any priority of any one Equipment Note over any other, and for
the uses and purposes, and subject to the terms and provisions, set forth in
this Indenture.
It is expressly agreed that anything herein contained
to the contrary notwithstanding, the Owner Trustee and the Owner Trust shall
remain liable under each of the Operative Agreements to which it is a party to
perform all of the obligations, if any, assumed by it thereunder, all in
accordance with and pursuant to the terms and provisions thereof, and the
Indenture Trustee and the holders of the Equipment Notes shall have no
obligation or liability under any of the Operative Agreements to which the
Owner Trustee or the Owner Trust is a party by reason of or arising out of this
assignment, nor shall the Indenture Trustee or the holders be required or
obligated in any manner to perform or fulfill any obligations of the Owner
Trustee or the Owner Trust under or pursuant to any of the Operative Agreements
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.
For so long as this Indenture is in effect and
subject to all the provisions hereof, the Owner Trustee does
<PAGE> 11
6
hereby constitute the Indenture Trustee the true and lawful attorney of the
Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee
or otherwise) to (i) ask, require, demand, receive, compound and give
acquittance for any and all moneys and claims for moneys due and to become due
to the Owner Trustee or the Owner Trust (other than Excepted Property), under
or arising out of the Indenture Estate (subject to the provisions of Section
9.05), or to endorse any checks or other instruments or orders in connection
therewith and to file any claims, exercise any rights or remedies, or take any
action or institute any proceedings which the Indenture Trustee may deem to be
necessary or advisable in the premises and (ii) without limiting the provisions
of the foregoing clause (i) hereof, during the continuance of any Indenture
Default to sue for, or settle, adjust or compromise any claim for any and all
Rents, income and other sums that are assigned under the Granting Clause hereof
as fully as the Owner Trustee could itself do, and upon any purchase of the
Equipment to execute and deliver in the name of and on behalf of the Owner
Trustee an appropriate bill of sale transferring the Owner Trustee's interest
in the Equipment and other instruments of transfer relating to the Equipment or
any interest therein, when purchased by the Lessee in accordance with the
Lease, and to perform all other necessary or appropriate acts with respect to
any such purchase, and in its discretion 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 performance of its duties hereunder, all to the
extent provided in this Indenture.
For as long as this Indenture is in effect the Owner
Trustee has directed the Lessee to make all payments of Rent (other than
Excepted Property) 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 the Indenture Trustee at such address as the
Indenture Trustee shall specify, for application as provided in this Indenture.
For so long as this Indenture is in effect the Owner Trustee agrees that
promptly on receipt thereof (other than Excepted Property), 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 Indenture, 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 Indenture and any
Excepted Property.
<PAGE> 12
7
For as long as this Indenture is in effect 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 executed and delivered any and all such further
instruments and documents as the Indenture Trustee may reasonably deem
necessary or appropriate in obtaining the full benefits of this assignment and
of the rights and powers herein granted.
The Owner Trustee has the right, power and authority
under the Trust Agreement to grant a lien on and security interest in the
Indenture Estate to the Indenture Trustee hereunder; and the Owner Trustee will
defend such lien and security interest against all Lessor's Liens as more fully
set forth in Sections 6.2 and 6.3 of the Participation Agreement. 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
assignment hereunder shall remain in effect, any of its estate, right, title or
interest hereby assigned, to anyone other than the Indenture Trustee, and that
it will not (other than in respect of the Excepted Property), except as
provided in or permitted by this Indenture, accept any payment from the Lessee,
enter into an agreement amending or supplementing any of the Operative
Agreements, execute any waiver or modification of, or consent under the terms
of any of the Operative Agreements (other than the Tax Indemnity Agreement),
settle or compromise any claim (other than claims in respect of Excepted
Property) against the Lessee arising under any of the Operative Agreements, or
submit or consent to the submission of any dispute, difference or other matter
arising under or in respect of any of the Operative Agreements, to arbitration
thereunder.
IT IS HEREBY FURTHER COVENANTED AND AGREED by and
between the parties hereto as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Definitions. Unless the
context otherwise requires, all capitalized terms used herein and not otherwise
defined shall have the meanings set forth in Appendix A hereto for all purposes
of this Indenture. All references to articles, sections, clauses, schedules
and appendices in this Indenture are to articles,
<PAGE> 13
8
sections, clauses, schedules and appendices in and to this Indenture unless
otherwise indicated.
ARTICLE II
THE EQUIPMENT NOTES
Section 2.01. Form of Equipment Notes. The
Equipment Notes shall be substantially in the form set forth below:
EQUIPMENT NOTE
Secured by certain [ ] and Lease
Obligations of Phillips Petroleum Company
Issued in connection with the financing of
[ ][designated as [ ]]
No._______________________ Maturity: ______________
$_________________________ Premium Termination
Date: __________________
WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as owner
trustee (herein in such capacity called the "Owner Trustee") under that certain
Trust Agreement (Phillips Trust No. [ ]), dated as of September 1, 1994 , as
from time to time supplemented and amended (herein called the "Trust
Agreement"), between the Owner Trustee in its individual capacity and the
institution referred to therein as the "Owner Participant", on behalf of the
trust created under the Trust Agreement, hereby promises to pay to
____________________________, or registered assigns, the principal sum of
$__________, in lawful currency of the United States of America, in
installments payable on the dates set forth in Annex A hereto, commencing [
] and thereafter to and including [ ], each such installment to be in
an amount equal to the corresponding percentage (if any) of the original
principal amount hereof set forth in Annex A hereto, together with interest
thereon on the amount of such principal amount remaining unpaid from time to
time from and including the date hereof until such principal amount shall be
due and payable, payable on [ ] and on each [ ] and [
] thereafter to the maturity date hereof at the rate of [ ]% per annum
(computed on the basis of a 360-day year
<PAGE> 14
9
of twelve 30-day months). Interest on any overdue principal and (to the extent
legally enforceable) on overdue interest shall be paid from the due date
thereof at the rate of [ ]% per annum (computed on the basis of a 360-day
year of twelve 30-day months), payable on demand.
All payments of principal and interest and premium,
if any, to be made hereunder and under the Trust Indenture and Security
Agreement (Phillips Trust No. [ ]), dated as of September 1, 1994, as from
time to time amended and supplemented (herein called the "Indenture", the
defined terms therein not otherwise defined herein being used herein with the
same meanings), between the Owner Trustee and Shawmut Bank Connecticut,
National Association, as Indenture Trustee thereunder for the holder of this
Equipment Note and the holders of other Equipment Notes outstanding thereunder
(herein in such capacity called the "Indenture Trustee") 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 in accordance with the terms of Article
III of the Indenture. 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 provided in the Indenture and that none of the Owner Trustee, the Owner
Participant, the Indenture Trustee or their permitted successors and assigns is
or shall be personally liable to the holder hereof for any amount payable under
this Equipment Note or the Indenture or, except as expressly provided in the
Participation Agreement or the Indenture, for any liability under the
Participation Agreement or (in the case of the Owner Trustee or the Indenture
Trustee) the Indenture.
Payments with respect to the principal amount hereof,
premium, if any, and interest thereon shall be payable in U.S. dollars in
immediately available funds at the principal corporate trust administration
office of the Indenture Trustee, or as otherwise provided in the Indenture.
Each such payment shall be made on the date such payment is due and, except for
the last payment of principal hereof, without any presentment or surrender of
this Equipment Note. Whenever the date scheduled for any payment to be made
hereunder or under the Indenture shall not be a Business Day, then such payment
need not be made on such scheduled date but may be made on the next succeeding
Business Day with the same force and effect as if made on such scheduled date
and (provided such payment is made on
<PAGE> 15
10
such next succeeding Business Day) no interest shall accrue on the amount of
such payment from and after such scheduled date to the time of such payment on
such next succeeding Business Day.
Each holder hereof, by its acceptance of this
Equipment Note, agrees that each payment received by it hereunder shall be
applied, first, to the payment of accrued but unpaid interest on this Equipment
Note then due, second, to the payment of the unpaid principal amount of this
Equipment Note then due, third, to the payment of any premium then due, and
fourth, to the payment of the remaining outstanding principal amount of this
Equipment Note; provided that the Owner Trustee may only prepay this Equipment
Note as provided in Sections 2.10, 3.02 and 3.03 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 on behalf of the Owner Trust pursuant to the terms of the Indenture in
the maximum principal amount of [ ]. The Indenture Estate is held by
the Indenture Trustee as security for the Equipment Notes. Reference is hereby
made to the Indenture for a statement of the rights of the holder of, and the
nature and extent of the security for, this Equipment Note, as well as for a
statement of the terms and conditions of the trusts created by the Indenture,
to all of which terms and conditions in the Indenture each holder hereof agrees
by its acceptance of this Equipment Note.
This Equipment Note is subject to redemption or
prepayment as provided in Sections 2.10, 3.02 and 3.03 of the Indenture. This
Equipment Note is subject to purchase by the Owner Participant without a
premium as provided in Section 4.04(b) of the Indenture. The holder hereof, by
its acceptance of this Equipment Note, agrees to be bound by said provisions.
This Equipment Note is a registered Equipment Note
and is transferable, as provided in the Indenture, only upon surrender of this
Equipment Note for registration of transfer duly endorsed by, or accompanied by
a written statement of transfer duly executed by, the registered holder hereof
or his attorney duly authorized in writing. Prior to the due presentation for
registration of transfer of this Equipment Note, the Owner Trustee and the
Indenture Trustee may deem and treat the registered holder of this Equipment
Note as the absolute owner and holder hereof for
<PAGE> 16
11
the purpose of receiving payment of all amounts payable with respect hereto and
for all other purposes and shall not be affected by any notice to the contrary.
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT.
THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Indenture Trustee by manual signature,
this Equipment Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Owner Trustee has caused this
Equipment Note to be executed by one of its authorized officers as of the date
hereof.
WILMINGTON TRUST COMPANY, not in its individual capacity,
but solely as Owner Trustee
By
-----------------------------------
This is one of the Equipment Notes referred to in the
within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Indenture Trustee
By
------------------------------
Authorized Officer
[Here insert Annex A, Amortization Schedule]
<PAGE> 17
12
Section 2.02. Terms of Equipment Notes. There shall
be issued and delivered to the Loan Participant or Participants an Equipment
Note or Notes having the maturities and bearing the interest rate or rates set
forth in the Participation Agreement, a supplement hereto or thereto or
otherwise in an agreement among the Owner Trustee, the Loan Participant or
Participants and the Lessee, in an aggregate principal amount equal to the
loans made by the Loan Participants to the Owner Trustee pursuant to the
Participation Agreement or any supplement thereto, which shall evidence the
loans made by the Loan Participants in connection with the purchase of the
Equipment by the Owner Trustee from the Lessee (or any loans resulting from a
refinancing thereof in accordance with the Participation Agreement or any
supplement thereto), such Equipment Notes to be substantially in the form set
forth in Section 2.01, with deletions and insertions as appropriate, duly
authenticated by the Indenture Trustee and dated the Closing Date of the
Equipment (or such other date to which the parties to any such refinancing
shall agree), and as having been issued in connection with the financing of the
Equipment or any Unit or Units of the Equipment.
The principal amount of each Equipment Note issued
pursuant to the provisions of this Indenture shall be payable on the dates and
in the amounts set forth in the form thereof contained in Section 2.01 and
Annex A. Interest accrued on the Equipment Notes shall be computed on the
basis of a 360-day year of twelve 30-day months on the principal amount thereof
remaining unpaid from time to time from and including the date thereof to but
excluding the date of payment. The Owner Trustee shall furnish to the
Indenture Trustee a copy of each Equipment Note issued pursuant to the
provisions of this Indenture.
The aggregate principal amount of Equipment Notes
which may be outstanding at any one time under this Indenture shall be limited
to the aggregate amount set forth in the form thereof contained in Section
2.01.
No Equipment Note shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose, unless it shall
have been authenticated by or on behalf of the Indenture Trustee by manual
signature.
Section 2.03. Payment from Indenture Estate Only.
All payments to be made under the Equipment Notes and this Indenture shall be
made only from the income and the proceeds from the Indenture Estate and only
to the extent
<PAGE> 18
13
that the Indenture Trustee shall have received sufficient income or proceeds
from the Indenture Estate to make such payments in accordance with the terms of
Article III hereof. Each holder of an Equipment Note, by its acceptance of
such 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
holder as herein provided and that none of the Owner Trustee, the Owner
Participant, the Indenture Trustee or their permitted successors and assigns is
or shall be personally liable to the holder of any Equipment Note for any
amount payable under such Equipment Note or this Indenture or, except as
expressly provided in the Participation Agreement or the Indenture, for any
liability under the Participation Agreement or (in the case of the Owner
Trustee or the Indenture Trustee) the Indenture.
Section 2.04. Method of Payment. (a) The principal
of and premium, if any, and interest on each Equipment Note will be payable in
U.S. dollars in immediately available funds at the principal corporate trust
administration office of the Indenture Trustee or as otherwise directed in the
manner provided herein. Notwithstanding the foregoing or any provision in any
Equipment Note to the contrary, the Indenture Trustee will pay, or cause to be
paid, if so requested by any holder of an Equipment Note by written notice to
the Owner Trustee and the Indenture Trustee, all amounts payable by the Owner
Trustee hereunder to such holder or a nominee therefor either (i) by
transferring by wire in immediately available funds to an account maintained by
such holder with a bank in the United States the amount to be distributed to
such holder or (ii) by mailing a check denominated in U.S. dollars to such
holder at such address as such holder shall have specified in such notice, in
any case without any presentment or surrender of any Equipment Note, except
that the holder of an Equipment Note shall surrender such Equipment Note to the
Indenture Trustee upon payment in full of the principal amount of and interest
on such Equipment Note and such other sums payable to such holder hereunder or
under the Equipment Note.
(b) Whenever the date scheduled for any payment to
be made hereunder (including without limitation, any payment made under Section
4.04) or under any Equipment Note shall not be a Business Day, then such
payment need not be made on such scheduled date but may be made on the next
succeeding Business Day with the same force and effect as if made on such
scheduled date and (provided such payment is
<PAGE> 19
14
made on such next succeeding Business Day) no interest shall accrue on the
amount of such payment from and after such scheduled date to the time of such
payment on such next succeeding Business Day.
Section 2.05. Application of Payments to Principal
Amount and Interest. In the case of each Equipment Note, each payment of
principal thereof and premium, if any, and interest thereon shall be applied,
first, to the payment of accrued but unpaid interest on such Equipment Note
then due thereunder, second, to the payment of the unpaid principal amount of
such Equipment Note then due thereunder, third, to the payment of any premium
then due thereon and fourth, to the payment of the remaining outstanding
principal amount of such Equipment Note; provided, that the Owner Trustee may
only prepay such Equipment Note in accordance with the provisions of Sections
2.10, 3.02 and 3.03 hereof.
Section 2.06. Termination of Interest in Indenture
Estate. A holder shall have no further interest in, or other right with
respect to, the Indenture Estate when and if the principal amount of and
interest on all Equipment Notes held by such holder and all other sums payable
to such holder hereunder and under such Equipment Notes and under the
Participation Agreement shall have been paid in full.
Section 2.07. Transfer of Equipment Notes. The
Indenture Trustee shall maintain at its corporate trust office in Hartford,
Connecticut or in the city in which the corporate trust office of a successor
Indenture Trustee is located, a register for the purpose of registering
transfers and exchanges of Equipment Notes. A holder of an Equipment Note
intending to transfer such Equipment Note to a new payee, or to exchange any
Equipment Note or Equipment Notes held by it for an Equipment Note or Equipment
Notes of a different denomination or denominations, may surrender such
Equipment Note or Equipment Notes to the Indenture Trustee at such principal
corporate trust administration office of the Indenture Trustee, together with a
written request from such holder for the issuance of a new Equipment Note or
Equipment Notes, specifying the denomination or denominations (each of which
shall be not less than $1,000,000 or a whole multiple thereof or such smaller
denomination as may be necessary due to the original issuance of Equipment
Notes of the applicable maturity in an aggregate principal amount not evenly
divisible by $1,000,000) of the same, and, in the case of a surrender for
<PAGE> 20
15
registration of transfer, the name and address of the transferee or
transferees. Promptly upon receipt of such documents, the Owner Trustee will
issue, and the Indenture Trustee will authenticate, a new Equipment Note or
Equipment Notes in the same aggregate principal amount and dated the same date
or dates as, with the same payment schedule, in the form set forth in Section
2.01 in the same maturity and bearing the same interest rate as the Equipment
Note or Equipment Notes surrendered (unless a different rate shall be specified
pursuant to the provisions of Section 2.12 hereof) and otherwise of the same
tenor, in such denomination or denominations and payable to such payee or
payees as shall be specified in the written request from such holder. 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 respective obligations, and entitled to the same security and benefits
under this Indenture, as the Equipment Notes surrendered upon such registration
of transfer or exchange. The Indenture Trustee shall make a notation on each
new Equipment Note or Equipment Notes of the amount of all payments or
prepayments of principal and interest previously made on the old Equipment Note
or Equipment Notes with respect to which such new Equipment Note or Equipment
Notes is or are issued. From time to time, the Indenture Trustee will provide
the Owner Trustee and the Lessee with such information as it may request as to
the registered holders of Equipment Notes. The Owner Trustee shall not be
required to exchange any surrendered Equipment Notes as above provided during
the 10-day period preceding the due date of any payment on such Equipment
Notes.
Prior to the due presentment for registration of
transfer of an Equipment Note, the Owner Trustee and the Indenture Trustee may
deem and treat the registered holder of such Equipment Note as the absolute
owner and holder of such Equipment Note for the purpose of receiving payment of
all amounts payable with respect to such Equipment Note and for all other
purposes and shall not be affected by any notice to the contrary.
The Indenture Trustee will promptly notify the Owner
Trustee and the Lessee of each request for a registration of transfer of an
Equipment Note. The Indenture Trustee will promptly cancel and destroy all
Equipment Notes surrendered for transfer or exchange pursuant to this Section.
<PAGE> 21
16
Section 2.08. 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 holder of
such Equipment Note, issue, and the Indenture Trustee shall authenticate and
deliver in replacement thereof, a new Equipment Note in the form set forth in
Section 2.01, payable to the same holder in the same principal amount, of the
same maturity, with the same payment schedule, bearing the same interest rate
and dated the same date as the Equipment Note so mutilated, destroyed, lost or
stolen. The Indenture Trustee shall make a notation on each new Equipment Note
of the amount of all payments or prepayments of principal and interest
theretofore made on the Equipment Note so mutilated, destroyed, lost or stolen
and the date to which interest on such old Equipment Note has been paid. If
the Equipment Note being replaced has become mutilated, such Equipment Note
shall be surrendered to the Indenture Trustee and forwarded to the Owner
Trustee by the Indenture Trustee. If the Equipment Note being replaced has
been destroyed, lost or stolen, the holder of such Equipment Note shall furnish
to the Owner Trustee and the Indenture Trustee such security or indemnity as
may be required by them 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; provided, however, that if the holder of such Equipment Note
is the Pass Through Trustee or another reputable financial institution, its
affidavit of destruction, loss or theft and its agreement to indemnify the
Owner Trustee and Indenture Trustee shall be sufficient.
Section 2.09. Payment of Transfer Taxes. Upon the
transfer of any Equipment Note or Equipment Notes pursuant to Section 2.07, the
Owner Trustee or the Indenture Trustee may require from the party requesting
such new Equipment Note or Equipment Notes payment of a sum to reimburse the
Owner Trustee or the Indenture Trustee for, or to provide funds for the payment
of, any tax or other governmental charge in connection therewith.
Section 2.10. Prepayments. (a) When and if the
Lease Term as applicable to any Unit or Units is terminated pursuant to Section
10 of the Lease or the early buy-out option is exercised with respect to any
Unit or Units pursuant to Section 22.6 thereof, each Equipment Note (or, if
Equipment Notes are issued in more than one series, each Equipment Note of the
series issued to finance the class of
<PAGE> 22
17
Equipment of which such Unit or Units is a part) shall be prepaid, in whole or
in part at a price equal to the sum of
(i) as to principal thereof, an amount equal to the
product obtained by multiplying the unpaid principal amount of such
Equipment Note as at the date of such prepayment (after deducting
therefrom the unpaid amount of any principal installment due on or
prior to the date of such prepayment) by a fraction, the numerator of
which shall be the Equipment Cost of such Unit or Units and the
denominator of which shall be the aggregate Equipment Cost of all
Units included in the Indenture Estate (or, if the Equipment Notes are
issued in more than one series, the aggregate Equipment Cost of all
Units included in the Indenture Estate of the class of Equipment
financed by the Equipment Notes of such series) immediately prior to
the date of such prepayment,
(ii) as to interest, the aggregate amount of interest
accrued and unpaid in respect of the principal amount to be prepaid
pursuant to clause (i) above on the date of such prepayment (after
giving effect to the application of any Basic Rent paid on or prior to
the date of such prepayment) and
(iii) if prepaid prior to the Premium Termination
Date applicable to such Equipment Note as specified therein, a premium
in an amount equal to the Make-Whole Amount, if any, applicable in
respect of the principal amount to be prepaid pursuant to clause (i)
above on the date of such prepayment.
Notwithstanding the foregoing, in the case of the exercise of the early buy-out
option pursuant to Section 22.6 of the Lease, if the Lessee assumes the related
indebtedness in respect of the Equipment Notes in accordance with the terms of
Section 10.3 of the Participation Agreement and Article VII hereof, then a
prepayment shall not be required under this Section 2.10(a).
(b) In connection with the occurrence or deemed
occurrence of an Event of Loss with respect to any Unit or Units if such Unit
or Units are not replaced in accordance
<PAGE> 23
18
with Section 11.2(i) of the Lease within the period of time set forth in
Section 11.2(i) of the Lease, the Equipment Note (or, if Equipment Notes are
issued in more than one series, each Equipment Note of the series issued to
finance the class of Equipment of which such Unit or Units is a part) shall be
prepaid in whole or in part at a price equal to the sum of
(i) as to principal thereof, an amount equal to the
product obtained by multiplying the aggregate unpaid principal amount
of such Equipment Note as at the Determination Date for such Unit or
Units as determined pursuant to Section 11.2(ii) to the Lease (after
deducting therefrom the unpaid amount of any principal installment due
on or prior to such Determination Date) by a fraction, the numerator
of which shall be the Equipment Cost of such Unit or Units and the
denominator of which shall be the aggregate Equipment Cost of all
Units included in the Indenture Estate (or, if the Equipment Notes are
issued in more than one series, the aggregate Equipment Cost of all
Units included in the Indenture Estate of the class of Equipment
financed by the Equipment Notes of such series) immediately prior to
such Determination Date, and
(ii) as to interest, the aggregate amount of interest
accrued and unpaid in respect of the principal amount to be prepaid
pursuant to clause (i) above to but not including the date of
prepayment (after giving effect to the application of any Basic Rent
paid on or prior to the date of such prepayment), but without the
payment of any premium.
(c) In connection with a refinancing
pursuant to Section 10.2 of the Participation Agreement, all Equipment Notes
shall be prepaid in whole but not in part on the date of such refinancing at a
price (in addition to any other amounts due to the holders of the Equipment
Notes under this Indenture) equal to the unpaid principal amount thereof
together with accrued but unpaid interest thereon, plus, if prepaid prior to
the Premium Termination Date applicable to such Equipment Note, a premium in an
amount equal to the Make-Whole Amount, if any, applicable in respect of the
principal amount to be prepaid pursuant to this Section 2.10(c).
(d) The Indenture Trustee shall give
prompt notice of any prepayment of any of the Equipment Notes to
<PAGE> 24
19
all holders of such Equipment Notes as soon as the Indenture Trustee shall
receive notice thereof specifying the principal amount of the Equipment Notes
to be prepaid and the date of prepayment.
(e) In case of any partial prepayment
of Equipment Notes in respect of any Unit or Units of Equipment,
(i) such prepayment shall be applied pro rata to each
Equipment Note issued to finance the same Units of Equipment and then
outstanding, in proportion to the outstanding principal balance
thereof, and
(ii) the amount of each installment of principal of
each such Equipment Note so prepaid becoming due after application of
such prepayment shall be adjusted so that the principal payable on
each date when such payment shall be due shall bear the same
proportion to the principal amount that would have been payable on
such date but for such prepayment as the total principal amount
outstanding bears to the principal amount that would have been
outstanding on such date but for such prepayment, and that, upon due
payment of all such installments, the entire principal balance of each
such Equipment Note shall have been paid in full.
Section 2.11. Equally and Ratably Secured. All
Equipment Notes at any time outstanding under this Indenture shall be equally
and ratably secured hereby without preference, priority or distinction on
account of the date or dates or the actual time or times of the issue or
maturity of such Equipment Notes so that all Equipment Notes at any time issued
and outstanding hereunder shall have the same rights, Liens and preferences
under and by virtue of this Indenture.
Section 2.12. Refinancing. In the case of any
refinancing of the Equipment Notes contemplated by the Participation Agreement
or any agreement among the Owner Trustee, the holders of all outstanding
Equipment Notes, and the purchasers of such Equipment Notes, which agreement
shall be deposited with the Indenture Trustee,
(a) upon request of the Owner Trustee, the Indenture
Trustee shall issue, in exchange for the then outstanding Equipment
Notes, new Equipment Notes having the maturities, bearing interest at
such rates, payable
<PAGE> 25
20
on such dates, and having such other terms and conditions as may be
specified in such request, and
(b) with the consent of the purchaser or purchasers
of all of the Equipment Notes, the Indenture Trustee and the Owner
Trustee shall enter into any agreement supplemental hereto or
amendment hereof amending Annex A and making such other amendments
hereto and to the Equipment Notes as shall be necessary or appropriate
to effect such refinancing.
Section 2.13. Agreement upon Purchase. By its
purchase of Equipment Notes, each Loan Participant agrees to be bound by the
terms and provisions hereof, including but not limited to Section 4.07.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE INDENTURE ESTATE
Section 3.01. Basic Rent Distribution. Except as
otherwise provided in Section 3.03, the payment of Interim Interest (whether
paid by the Owner Participant through the Owner Trustee pursuant to the
Participation Agreement or paid by the Lessee as Supplemental Rent) and each
payment of Basic Rent, as well as any payment of interest on overdue payments
of Interim Interest or Basic Rent and any other moneys paid over by the Lessee
or the Owner Trustee to the Indenture Trustee for such purpose, shall be
distributed by the Indenture Trustee as promptly as possible (it being
understood that any payments of Interim Interest and Basic Rent received by the
Indenture Trustee on a timely basis and in accordance with the provisions of
Section 3.6 of the Lease shall be distributed on the date received in the funds
so received) in the following order of priority:
first, so much of such payment as shall be required
for the purpose shall be distributed and paid to the holders of the
Equipment Notes to pay in full the aggregate amount of the payment or
payments of principal, premium, if any, and interest (as well as any
interest on overdue principal, premium or interest) then due, such
distribution to be made ratably, without priority of one over the
other, in the proportion that the amount of such payment or payments
then due with respect to each such Equipment Note bears to the
<PAGE> 26
21
aggregate amount of payments then due under all such Equipment Notes;
and
second, the balance, if any, of such payment
remaining thereafter shall be distributed to the Owner Trustee for
distribution in accordance with the terms of the Trust Agreement.
The portion of each such installment distributed to a holder of an Equipment
Note shall be applied by such holder in payment of such Equipment Note in
accordance with the terms of Section 2.05.
Section 3.02. Distribution in the Event of
Prepayment. (a) Except as otherwise provided in Section 3.02(b), 3.03 or
3.05, in the event that any prepayment of the Equipment Notes, in whole or in
part, is required in accordance with the provisions of Section 2.10, then any
amount received pursuant to Section 10, 11 or 22.6 of the Lease or as a result
of a refinancing pursuant to Section 10.2 of the Participation Agreement shall
in each case be distributed and paid in the following order of priority:
first, so much of such amount as shall be required
for the purpose shall be distributed and paid to the holders of the
Equipment Notes to pay the aggregate amount of the payment of
principal to be prepaid on the Equipment Notes pursuant to Section
2.10 and accrued but unpaid interest thereon and premium, if any, due
in respect of such prepayment, such payment to be made ratably,
without priority of one over any other, in the proportion that the
amount to be prepaid on each such Equipment Note bears to the
aggregate amount to be paid on all such Equipment Notes; and
second, the balance, if any, of such amount remaining
thereafter shall be distributed to the Owner Trustee for distribution
in accordance with the terms of the Trust Agreement;
provided, however, that (i) if the distribution pursuant to the foregoing
clause "first" is to be made in respect of a prepayment of the Equipment Notes
in full, then, prior to making the distributions referred to in clause "second"
above, so much of the amount distributable hereunder as shall be required to
pay in full the amounts referred to in clauses "first" and "second" of Section
3.03(a) shall be distributed in accordance with such clauses.
<PAGE> 27
22
(b) Except as otherwise provided in
Section 3.03 or 3.05 and subject to Section 4.05, any amounts received by the
Indenture Trustee directly or through the Lessee from any governmental
authority or other party pursuant to Section 11 of the Lease with respect to
any Unit as the result of 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 11
and any amounts of insurance proceeds for damage to the Indenture Estate
received directly or though the Lessee from any insurer pursuant to Section 12
of the Lease with respect thereto as the result of an Event of Loss (including
any such amounts received from the Lessee on account of self-insurance or
policy deductibles), to the extent such amounts are not at the time required to
be paid to the Lessee pursuant to said Section 12, shall (except to the extent
constituting Excepted Property), except as otherwise provided in the next
sentence, be applied as provided in subsection (a) of this Section 3.02 and
such application shall correspondingly reduce the Lessee's obligation to pay
Stipulated Loss Value and Termination Value as provided in the Lease. Any
amount (or portion thereof) referred to in the preceding sentence that is not
required to be paid to the Lessee according to the provisions of Section 11.6
of the Lease shall be held by the Indenture Trustee as security for the
obligations of the Lessee under the Lease and applied as set forth therein
(including without limitation Section 15 thereof).
Section 3.03. Payments After Indenture Event of
Default. (a) Except as provided in Section 3.05 and subject to Section 4.05,
after an Indenture Event of Default shall have occurred and be continuing and
after the Indenture Trustee either (i) has declared (as assignee from the Owner
Trustee of the Lease) the Lease to be in default pursuant to Section 15 thereof
or (ii) has declared the Equipment Notes to be accelerated pursuant to Section
4.02 or (iii) has elected to foreclose or otherwise exercise any remedies under
this Indenture, or (iv) has declared its intention to take any of the foregoing
actions (or has been directed to do so by a Majority in Interest) but is stayed
or otherwise prevented from doing so by operation of law, then all payments
(other than Excepted Property) received and amounts realized by the Indenture
Trustee (including any amounts realized by the Indenture Trustee from the
exercise of any remedies pursuant to Section 15 of the Lease, or Article IV),
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
<PAGE> 28
23
be continuing, shall be distributed forthwith by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall
be required to reimburse the Indenture Trustee for any fees which are
due and payable for its services under this Indenture and any tax,
expense (including reasonable attorney's fees) or other loss incurred
by the Indenture Trustee (to the extent reimbursable as provided in
the Operative Agreements and not previously reimbursed and to the
extent incurred in connection with its duties as Indenture Trustee)
shall be distributed to the Indenture Trustee;
second, so much of such payments or amounts as shall
be required to reimburse the holders of the Equipment Notes for
payments made by them to the Indenture Trustee pursuant to Section
5.03(b) (to the extent not previously reimbursed), and to pay such
holders of the Equipment Notes the amounts payable to them pursuant to
the provisions of the Participation Agreement, shall be distributed to
such holders of the Equipment Notes, without priority of one over the
other, in accordance with the amount of the payment or payments made
by, or payable to, each such holder;
third, so much of such payments or amounts remaining
as shall be required to pay in full the aggregate unpaid principal
amount of all the Equipment Notes, plus the premium, if any, thereon
and accrued but unpaid interest thereon to the date of distribution,
shall be distributed to the holders of the Equipment Notes, and in
case the aggregate amount so to be distributed shall be insufficient
to pay in full the aforesaid amounts, then, ratably, without priority
of one over the other, in the proportion that the aggregate unpaid
principal amount of all Equipment Notes held by each such holder, plus
the premium, if any, thereon and accrued but unpaid interest thereon
to the date of distribution, bears to the aggregate unpaid principal
amount of all Equipment Notes, plus the premium, if any, thereon and
accrued but unpaid interest thereon to the date of distribution; and
fourth, the balance, if any, of such payments or
amounts remaining thereafter shall be distributed to the Owner Trustee
for distribution in accordance with the terms of the Trust Agreement.
<PAGE> 29
24
(b) Except as provided in Sections
3.03(a) and 3.05 and subject to Section 4.05, if an Indenture Event of Default
shall have occurred and be continuing, the Indenture Trustee shall not make any
distribution to the Owner Trustee but shall hold amounts otherwise
distributable to the Owner Trustee as collateral security for the obligations
secured hereby until such time as no Indenture Event of Default shall be
continuing or such amounts are applied pursuant to Section 3.03(a); provided
that any amounts held pursuant to this Section 3.03(b) and not so applied shall
be distributed to the Owner Trustee for distribution in accordance with the
terms of the Trust Agreement after the expiration of a period of twelve months
from the date that such amounts would have been so distributed but for this
Section 3.03(b).
Section 3.04.Other Payments. (a) Except as
otherwise provided in Section 3.03 or 3.05 and subject to Section 4.05,
(i) any payments received by the Indenture Trustee
for which no provision as to the application thereof is made in the
Lease or the Participation Agreement or elsewhere in this Article III,
and
(ii) all payments received and amounts realized by
the Indenture Trustee under the Lease or otherwise with respect to the
Equipment to the extent received or realized at any time after payment
in full of the principal of and interest and premium, if any, on all
Equipment Notes, as well as any other amounts remaining as part of the
Indenture Estate after payment in full of the principal of and
interest and premium, if any, on all Equipment Notes issued hereunder,
shall be distributed forthwith by the Indenture Trustee in the order of
priority set forth in Section 3.03(a), except that in the case of any payment
described in clause (ii) above, such payment shall be distributed omitting
clause "third" of such Section 3.03(a).
(b) Any payments received by the Indenture Trustee
for which provision as to the application thereof is made in the Lease or the
Participation Agreement or other Operative Agreement but not elsewhere in this
Indenture shall be applied to the purposes for which such payments were made in
accordance with the provisions of the Lease, the Participation Agreement or
such other Operative Agreement, as the case may be.
<PAGE> 30
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Section 3.05. Distribution of Excepted Property.
All amounts constituting Excepted Property received by the Indenture Trustee
shall be paid by the Indenture Trustee to the Person or Persons entitled
thereto.
ARTICLE IV
REMEDIES OF THE INDENTURE TRUSTEE
UPON AN INDENTURE EVENT OF DEFAULT
Section 4.01. Indenture Events of Default. The
following events shall constitute "Indenture Events of Default" and each such
Indenture Event of Default shall be deemed to exist and continue so long as,
but only so long as, it shall not have been remedied:
(a) subject to Section 4.04(a), a Lease Event of
Default (other than a Lease Event of Default solely by reason of a
default by the Lessee to pay any amounts which are part of the
Excepted Property unless the Owner Participant shall in its sole
discretion direct in writing that such failure constitutes an
Indenture Event of Default); or
(b) default by the Owner Trustee in making any
payment when due of principal of, premium, if any, or interest on, any
Equipment Note or Equipment Notes, and the continuance of such default
unremedied for 10 Business Days after the same shall have become due
and payable; or
(c) any failure by the Owner Trustee or the Owner
Participant to observe or perform any covenant or obligation of them
or any of them, in this Indenture or the Equipment Notes (other than
as set forth in clause (b) above) or in the Participation Agreement,
if, but only if, such failure is not remedied within a period of 30
days after there has been given to the Owner Trustee, the Owner
Participant and the Lessee by the Indenture Trustee a written notice
specifying such failure and requiring it to be remedied; provided
that, if such failure is capable of being remedied, no such failure
shall constitute an Indenture Event of Default hereunder for a period
of 360 days after such notice so long as the Owner Trustee or the
Owner Participant is diligently proceeding to remedy such failure; or
<PAGE> 31
26
(d) any representation or warranty made by the Owner
Trustee or the Owner Participant under the Participation Agreement, or
by the Owner Trustee hereunder, or by any representative of the Owner
Trustee or the Owner Participant in any document or certificate
furnished to the Indenture Trustee or the Loan Participant in
connection herewith or therewith or pursuant hereto or thereto, shall
prove at any time to have been incorrect as of the date made in any
respect material to the interests of the holders of Equipment Notes
and such incorrectness shall remain material in such respect and
continue unremedied for a period of 30 days after there has been given
to the Owner Trustee and the Owner Participant by the Indenture
Trustee or by any holder of an Equipment Note a written notice
specifying such incorrectness, stating that such incorrectness is a
default hereunder and requiring it to be remedied;
(e) the Owner Trustee (as Owner Trustee and not in
its individual capacity), the Owner Trust or the Owner Participant
shall consent to the appointment of a custodian, receiver, trustee or
liquidator of itself or of a substantial part of its property or shall
make a general assignment for the benefit of creditors; or
(f) the Owner Trustee (as Owner Trustee and not in
its individual capacity), the Owner Trust or the Owner Participant
shall 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 other insolvency law of any jurisdiction now or
hereafter in effect; or
(g) an order, judgment or decree shall be entered by
any court of competent jurisdiction appointing, without the consent of
the Owner Trustee (as Owner Trustee and not in its individual
capacity) or the Owner Participant, a receiver, trustee or liquidator
of the Owner Trustee (as Owner Trustee and not in its individual
capacity), the Owner Trust or the Owner Participant, or of any
substantial part of its property, or granting any order for relief in
respect of the Owner Trustee (as Owner Trustee and not in its
individual capacity), the Owner Trust or the Owner Participant under
any bankruptcy or other insolvency law of any jurisdiction now or
hereafter in effect, and any such order, judgment or decree of
appointment shall
<PAGE> 32
27
remain in force undismissed, unstayed or unvacated for a period of 90
days after the date of entry thereof; or
(h) a petition against the Owner Trustee (as Owner
Trustee and not in its individual capacity), the Owner Trust or the
Owner Participant, in a proceeding under any bankruptcy or other
insolvency law now or hereafter in effect, shall be filed and shall
not be withdrawn or dismissed within 90 days thereafter, or if, under
the provisions of any law providing for reorganization or winding-up
of corporations which may apply to the Owner Trustee (as Owner Trustee
and not in its individual capacity), the Owner Trust or the Owner
Participant, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Owner Trustee (as Owner
Trustee and not in its individual capacity), the Owner Trust or the
Owner Participant or of any substantial part of its property and such
jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of 90 days.
Section 4.02. Acceleration; Rescission and
Annulment. If an Indenture Event of Default occurs and is continuing, the
Indenture Trustee may, and upon the directions of a Majority in Interest shall,
subject to Section 4.04, declare the unpaid principal amount of all Equipment
Notes then outstanding and accrued interest thereon to be due and payable,
whereupon the unpaid principal amount of all Equipment Notes then outstanding
and accrued interest thereon, and all other amounts payable to the Indenture
Trustee and the holders of the Equipment Notes, shall immediately and without
further act become due and payable; provided, however, that, unless an
Indenture Event of Default under clause (e), (f), (g) or (h) of Section 4.01,
or a Lease Event of Default under clause (d) or (e) of Section 14 of the Lease,
has occurred and is continuing, the Indenture Trustee shall give written notice
to the Owner Trustee not less than 10 Business Days prior to any such
declaration. At any time after the Indenture Trustee has declared the unpaid
principal amount of all Equipment Notes then outstanding to be due and payable
and prior to the sale of any of the Indenture Estate pursuant to this Article
IV, a Majority in Interest, by written notice to the Owner Trustee, the Lessee
and the Indenture Trustee, may rescind and annul such declaration and thereby
annul its consequences if: (i) there has been paid to or deposited with the
Indenture Trustee an amount sufficient to pay all overdue installments of
interest on the Equipment Notes, and
<PAGE> 33
28
the principal of and premium, if any, on any Equipment Notes that have become
due otherwise than by such declaration of acceleration, (ii) the rescission
would not conflict with any judgment or decree, and (iii) all other Indenture
Defaults and Indenture Events of Default, other than nonpayment of principal or
interest on the Equipment Notes that have become due solely because of such
acceleration, have been cured or waived.
Section 4.03. Remedies with Respect to Indenture
Estate. (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 assignee hereunder of the Lease or as
mortgagee hereunder of the Equipment or otherwise, may, and when required
pursuant to the provisions of Article V hereof shall, subject to Sections 4.04
and 4.05, exercise any or all of the rights and powers and pursue any and all
of the remedies pursuant to Section 15 of the Lease and this Article IV and 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; provided, however, that
nothing in this Indenture shall permit or require the Indenture Trustee to take
any action contrary to, or to disturb, the Lessee's rights under the Lease,
except in accordance with the provisions of the Lease.
(b) Subject to Section 4.04 and Section 4.05, 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 Trustee, the Owner
Participant and the Lessee once at least 30 days prior to the date of such sale
or the date on which the Indenture Trustee enters into a binding contract for a
private sale (which notice is agreed to constitute reasonable notification of
any such sale for purposes of the Uniform Commercial Code), 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 to the highest
bidder or at 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 or places (whether
<PAGE> 34
29
or not it be the location of the Indenture Estate or any part thereof) and time
or times. Any such public 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
or the holder or holders of any Equipment Notes, or any interest therein, may
bid and become the purchaser at any such public sale. 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 holders may
exercise such right without including the holders as parties to any suit or
proceeding relating to foreclosure of any property in the Indenture Estate.
Without limiting the power of attorney granted to the Indenture Trustee
following the Granting Clause of this Indenture, 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 of this Indenture (so long as the same
shall be consistent with the terms hereof and applicable law), 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 the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery (so long as the same
shall be consistent with the terms hereof and applicable law), 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 Section 4.04 and
Section 4.05, the Owner Trustee agrees, to the fullest extent that it lawfully
may, that, in case one or more of the Indenture Events of Default shall have
occurred and be continuing, then, in every such case, the Indenture Trustee 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. At the request of the Indenture Trustee, the
Owner Trustee shall promptly execute and deliver to the Indenture Trustee such
instruments of title and other documents as the
<PAGE> 35
30
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 fail for any reason to execute and deliver such instruments and
documents to the Indenture Trustee, the Indenture Trustee may pursue all or
part of the Indenture Estate wherever it may be found and may enter any of the
premises of the Lessee wherever the Indenture Estate may be or be supposed to
be and search for the Indenture Estate and, subject to Section 4.05, take
possession of and remove the Indenture Estate. Upon every such taking of
possession, the Indenture Trustee may, from time to time, at the expense of the
Indenture Estate and consistent with the requirements of the Lease, make all
such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to any of the Indenture Estate, as it
may deem proper. In each such case, the Indenture Trustee shall have the right
to use, operate, store, control or manage the Indenture Estate, and to carry on
the business and to exercise all rights and powers of the Owner Trustee
relating to the Indenture Estate, as the Indenture Trustee in its reasonable
discretion shall deem best, including the right to enter into any and all such
agreements with respect to the maintenance, operation, leasing or storage of
the Indenture Estate or any part thereof as the Indenture Trustee may
determine; and the Indenture Trustee shall be entitled to collect and receive
all tolls, rents, revenues, issues, income, products and profits of the
Indenture Estate and every part thereof, without prejudice, however, to the
right of the Indenture Trustee under any provision of this Indenture to collect
and receive all cash held by, or required to be deposited with, the Indenture
Trustee hereunder. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the reasonable expenses of holding and
operating the Indenture Estate and of conducting the business thereof, and of
all maintenance, 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 reasonable fees and expenses related to the employment of engineers and
accountants to examine, inspect and make reports upon the properties and books
and records of the Owner Trustee), and all other payments which the Indenture
Trustee may be required or authorized to make under any
<PAGE> 36
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provision of this Indenture, as well as just and reasonable compensation for
the services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee, including the reasonable expenses of the
Indenture Trustee.
(d) If an Indenture Event of Default occurs and is
continuing and the Indenture Trustee shall have obtained possession of a Unit,
the Indenture Trustee shall not be obligated to use or operate such Unit or
cause such Unit 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 such Unit by any other Person
unless (i) the Indenture Trustee shall have been able to obtain insurance in
kinds, at rates and in amounts reasonably satisfactory to it in its discretion
to protect the Indenture Estate and the Indenture Trustee, as trustee and
individually, against liability customarily insured against for loss or damage
to such Unit and for public liability and property damage resulting from use or
operation of such Unit 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 holders of the Equipment Notes 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.
(e) Subject to Sections 4.04 and 4.05, if an
Indenture Event of Default shall occur and be continuing, the Indenture Trustee
may proceed to protect and enforce this Indenture and the Equipment Notes by
suit or suits or proceedings in equity, at law or in bankruptcy, and whether
for specific performance of any covenant or agreement or in execution or aid of
any power herein granted, or for foreclosure hereunder, or the appointment of a
receiver or receivers for the Indenture Estate or any part thereof, or for the
recovery of a judgment for the indebtedness secured hereby, or the enforcement
of any other legal or equitable remedy available to a mortgagee or a secured
party under the Uniform Commercial Code or any other applicable law.
(f) Notwithstanding anything
contained herein, so long as the Pass Through Trustee under the Pass Through
Trust Agreement is the registered holder of any Equipment Note issued
hereunder, the Indenture Trustee is not authorized or empowered to acquire
title to any Indenture Estate or take any action with respect to any Indenture
<PAGE> 37
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Estate so acquired by it if such acquisition or action would cause the trust
created by the Pass Through Trust Agreement to fail to qualify as a "grantor
trust" for federal income tax purposes.
(g) Any Person succeeding to the
rights and interests of the Owner Trustee in and to the Lease, the Equipment,
or any other part of the Indenture Estate pursuant to this Article IV due to an
Indenture Event of Default when a Lease Event of Default shall not have
occurred and be continuing shall enter into an agreement with the Lessee,
assuming and undertaking all of the obligations of the Owner Trustee under the
Lease and the Participation Agreement. If such Person shall not meet the
requirements of clauses (b) and (c) of Section 6.1 of the Participation
Agreement, and a Lease Event of Default shall not have occurred and be
continuing, the Indenture Trustee shall provide 30 days notice of such pending
succession to the Lessee, and the Lessee shall have the right itself to succeed
the Owner Trustee, or provide a successor meeting such requirements, at the
same price and upon the same terms as shall have been offered by such Person.
Section 4.04. Right To Cure; Option To Purchase;
etc. (a) Right to Cure. If the Lessee shall fail to make any payment of
Basic Rent within 10 Business Days (the "Grace Period") after the same shall
become due, and if such failure of the Lessee to make such payment of Basic
Rent shall not constitute the fourth or subsequent consecutive or the seventh
or subsequent cumulative such failure, then as long as no other Indenture Event
of Default (other than arising solely from such failure to pay Basic Rent or
which is concurrently being cured pursuant to this Section 4.04(a)) 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 expiration of
a period of 10 Business Days (a "Ten-Day Period") after written notice of such
default is given to the Owner Trustee by the Indenture Trustee or any holder of
an Equipment Note (prior to the expiration of which Ten-Day Period the
Indenture Trustee 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 IV), 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, and such payment by the Owner Participant or the Owner
Trustee shall be deemed to cure any Indenture Event of Default which arose
<PAGE> 38
33
from such failure of the Lessee (but such cure shall not relieve the Lessee of
any of its obligations).
If the Lessee shall fail to make any other payment
(other than Basic Rent) or to perform or observe any other covenant, condition
or agreement to be performed or observed by it under the Lease or any other
Operative Agreement and if (but only if) the performance or observance thereof
can be effected by the payment of money alone (it being understood that items
such as the obtaining of insurance or the procurement of maintenance services
can be so effected), then as long as no other Indenture Event of Default shall
have occurred and be continuing which is not concurrently being cured pursuant
to this Section 4.04(a), 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 expiration of a Ten-Day
Period after the later of (x) 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 (y) the date that written notice of such default is given to
the Owner Trustee by the Indenture Trustee or any holder of an Equipment Note
(prior to the expiration of which Ten-Day Period the Indenture Trustee 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
IV), all sums necessary to effect the payment of such defaulted amount or the
performance or observance of such covenant, condition or agreement, together
with any interest due thereon on account of the delayed payment thereof, and
such payment by the Owner Participant or the Owner Trustee shall be deemed to
cure any Indenture Event of Default which arose from such failure of the Lessee
(but such cure shall not relieve the Lessee of any of its obligations);
provided, however, that the Owner Trustee and the Owner Participant shall not
be entitled to effect cures under this sentence in amounts that, cumulatively,
exceed $[] in the aggregate.
Upon any payment of Basic Rent by the Owner
Participant or the Owner Trustee in accordance with the first sentence of this
Section 4.04(a), 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
4.04(a), 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
<PAGE> 39
34
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 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, both before and after giving effect to such receipt, all
amounts of principal, premium, if any, and interest at the time due and payable
on the Equipment Notes, and all other amounts at the time due and payable to
the Indenture Trustee or any holder of an Equipment Note under this Indenture
or any other Operative Agreement, 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
4.04(a) except by demanding of the Lessee payment of such amount or by
commencing an action at law against the Lessee to require the payment of such
amount at a time when the Owner Participant or the Owner Trustee shall be
entitled to receive such amount as provided above.
(b) Option to Purchase Equipment Notes. In the
event that (i) at any time one or more Lease Events of Default shall have
occurred and any such Lease Event of Default shall have continued for a period
of six consecutive months or more during which time the Equipment Notes could,
but shall not, have been accelerated pursuant to Section 4.02 and the Indenture
Trustee could, but has not been, exercising remedies under the Lease or (ii)
the Equipment Notes shall have been accelerated pursuant to Section 4.02, then
and in such case, upon 30 days' notice from the Owner Trustee to the Indenture
Trustee designating a date of purchase (the "Purchase Date"), each holder of an
Equipment Note agrees that it will, upon and subject to receipt by the
Indenture Trustee from the Owner Trustee or its nominee of an amount equal to
the aggregate unpaid principal amount of all Equipment Notes, together with
accrued interest thereon to the Purchase Date, plus all other sums then due and
payable to the holders of the Equipment Notes hereunder and under the
Participation Agreement (including, subject to the next sentence of this
paragraph, the Make-Whole Amount, if any) forthwith sell, assign, transfer and
convey to the Owner Trustee or its nominee all of the right, title and interest
of such holder in and to the Equipment Notes then held by such holder, and
<PAGE> 40
35
the Owner Trustee or its nominee shall assume all of such holder's obligations
under the Participation Agreement, provided that the Owner Trustee or its
nominee on the date of such purchase shall purchase all of the Equipment Notes
then outstanding hereunder. Any purchase of the Equipment Notes pursuant to
this Section 4.04(b) shall be without payment of any Make-Whole Amount or other
premium if (i) the Equipment Notes shall have been accelerated pursuant to
Section 4.02 or (ii) notice of such purchase is given after the expiration of
120 days following the later of (A) the occurrence of one or more Lease Events
of Default continuing on the date of such notice or (B) the expiration of any
period during which the Indenture Trustee is required under Section 4.04(c) to
refrain from exercising remedies, and, in the case of this clause (ii), the
Indenture Trustee has not, prior to receipt of such notice of purchase,
commenced the exercise of one or more of the remedies provided for in Section
15 of the Lease intended to dispossess the Lessee of its interest in the
Equipment and is not then stayed or otherwise prevented by operation of law
from doing so; otherwise, such purchase of the Equipment Notes shall require
payment of the Make-Whole Amount. If the Owner Trustee or its nominee on or
before the date of such purchase shall so request by notice to the holders of
the Equipment Notes given at least 10 Business Days prior to the Payment Date,
each holder of the Equipment Notes will comply with all the provisions of
Section 2.07 to enable new Equipment Notes to be issued to the Owner Trustee or
its nominee in such denominations as the Owner Trustee shall request. All
charges and expenses required pursuant to Section 2.09 in connection with the
issuance of any such new Equipment Notes shall be borne by the Owner Trustee.
(c) Foreclosure Restrictions. Notwithstanding any
provision of this Indenture to the contrary, the Indenture Trustee shall not
foreclose the Lien of this Indenture as a result of an Indenture Event of
Default that constitutes or occurs solely by virtue of one or more Lease Events
of Default unless (i) the Indenture Trustee shall have exercised, or, to the
extent it is then entitled to do so hereunder and under the Lease, shall
contemporaneously commence the exercise of, one or more of the remedies
provided for in Section 15 of the Lease intended to dispossess the Lessee of
its interest in the Equipment (as it shall determine in its sole discretion) or
(ii) the Indenture Trustee is stayed or otherwise prevented by operation of law
from exercising such remedies under the Lease; provided, however, that in the
event that the Indenture Trustee is so stayed or otherwise prevented by
<PAGE> 41
36
operation of law from exercising such remedies under the Lease, then it shall
nevertheless refrain from foreclosing the Lien of this Indenture (A) if, and
for so long as, the only Lease Event of Default that has occurred and is
continuing is a Lease Event of Default under clause (d) or (e) of Section 14 of
the Lease resulting solely from a proceeding for reorganization of the Lessee
under Chapter 11 of the Bankruptcy Code and the Lessee has assumed or otherwise
agreed to continue to perform its obligations under the Lease or (B) until the
earlier of (1) the later of (x) the expiration of a period of 120 days during
which the Indenture Trustee was so stayed or otherwise prevented by operation
of law from exercising such remedies under the Lease and (y) if such stay or
operation of law is being contested by appropriate legal proceedings, the
expiration of the period during which such contest is being conducted (but in
no event longer than 60 days after the expiration of the 120-day period
described in clause (x) above) and (2) the date that the Indenture Trustee
ceases to be so stayed or otherwise prevented by operation of law from
exercising such remedies under the Lease and complies with clause (i) above;
provided further, however, that the Indenture Trustee shall not be required
under this Section 4.04(c) to refrain from foreclosing the Lien of this
Indenture if there shall have occurred and be continuing any Indenture Event of
Default other than a Lease Event of Default, and this Section 4.04(c) shall not
be construed to restrict, limit or impair the Indenture Trustee's right to
exercise at any time any remedies available to it other than foreclosure of the
Lien of this Indenture.
Section 4.05. Rights of Lessee. Notwithstanding the
provisions of this Indenture, including, without limitation, Article III and
Section 4.03, neither the Indenture Trustee nor the Owner Trustee nor any
Person claiming through or under either of them, shall, through its or any such
Person's action or inaction, interfere with or disturb the Lessee's rights
under the Lease, except in accordance with the provisions of the Lease,
including, without limitation, (i) the right to receive all monies due and
payable to it in accordance with the provisions of the Lease and (ii) the
Lessee's rights to possession and use of, and of quiet enjoyment of, the
Equipment. Each holder of an Equipment Note, by its acceptance thereof,
consents in all respects to the terms of the Lease and the Participation
Agreement and agrees to the provisions of this Section 4.05.
<PAGE> 42
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Section 4.06. Waiver of Existing Defaults. A
Majority in Interest by notice to the Indenture Trustee on behalf of all
holders of the Equipment Notes may waive any past default hereunder and its
consequences, except a default: (i) in the payment of the principal of,
premium, if any, or interest on any Equipment Note, or (ii) in respect of a
covenant or provision hereof which under Article IX hereof cannot be modified
or amended without the consent if the holder of each Equipment Note affected.
Upon any such waiver, such default shall cease to exist, and any Indenture
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 4.07. Certain Limitations in Reorganization.
The Loan Participants, each holder of an Equipment Note and the Indenture
Trustee agree that, if
(i) the Owner Trust becomes a debtor under the
reorganization provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statutes,
(ii) pursuant to such reorganization provision, the
Owner Participant is held to have recourse liability to the Indenture
Trustee or any holder of any Equipment Note, directly or indirectly,
on account of any amount payable as principal, interest or premium on
the Equipment Notes, and
(iii) the holder of any Equipment Note or the
Indenture Trustee actually receives any Recourse Amount (as defined
below) which reflects any payment by the Owner Participant on account
of clause (ii) above,
then such holder of any Equipment Note or the Indenture Trustee, as the case
may be, shall promptly refund to the Owner Participant such Recourse Amount.
For purposes of this Section 4.07, "Recourse Amount" means the amount by which
the portion of such payment by the Owner Participant on account of clause (ii)
above received by such holder of any Equipment Note or the Indenture Trustee
exceeds the amount which would have been received by such holder of an
Equipment Note or the Indenture Trustee if the Owner Participant had not become
subject to the recourse liability referred to in clause (ii) above.
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ARTICLE V
DUTIES OF THE INDENTURE TRUSTEE
Section 5.01. Action Upon Indenture Event of
Default. If any payments of Interim Interest or Basic Rent or payments of the
principal of interest or premium, if any, on the Equipment Notes due and
payable on any Rent Payment Date shall not have been paid in full on such Rent
Payment Date, the Indenture Trustee shall give telephonic notice within one
Business Day (followed by prompt written notice) to the Owner Trustee, the
Owner Participant and the Lessee specifying the amount and nature of such
deficiency in payment. In the event the Indenture Trustee shall have knowledge
of an Indenture Event of Default or an Indenture Default, the Indenture Trustee
shall give prompt notice of such Indenture Event of Default or Indenture
Default to the Lessee, the Owner Trustee, the Owner Participant and the Loan
Participant by telegram, telex, or telephone (to be promptly confirmed in
writing). In the event the Owner Trustee shall have knowledge of an Indenture
Event of Default or an Indenture Default, the Owner Trustee shall give notice
of such Indenture Event of Default or Indenture Default in the same manner to
the Lessee, the Indenture Trustee, the Owner Participant and the Loan
Participant. Subject to the terms of Article IV and Section 5.03, the
Indenture Trustee shall take such action, or refrain from taking such action,
with respect to such Indenture Event of Default or Indenture Default as the
Indenture Trustee shall be instructed in writing by a Majority in Interest. If
the Indenture Trustee shall not have received instructions as above provided
within 20 days after the mailing of notice of such Indenture Event of Default
or such Indenture Default to the Loan Participants by the Indenture Trustee,
the Indenture Trustee may (subject to Article IV), but shall not be obligated
to, take such action, or refrain from taking such action, with respect to such
Indenture Event of Default or Indenture Default as it shall determine to be
advisable in the best interests of the Loan Participants. Any provision of
this Section 5.01 to the contrary notwithstanding, the Indenture Trustee shall
not declare the Lease to be in default solely in respect of (i) the Lessee's
failure to make any payment of Basic Rent within 10 Business Days after the
same shall have become due, unless the Ten-Day Period within which, pursuant to
Section 4.04(a), the Owner Participant or the Owner Trustee is entitled to cure
such failure shall have expired, or (ii) the Lessee's failure to perform or
observe any of the covenants, conditions and agreements referred to in the
second sentence
<PAGE> 44
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of Section 4.04(a) within the grace period referred to in that sentence, unless
the Ten-Day period within which, pursuant to Section 4.04(a), the Owner
Participant or the Owner Trustee is entitled to cure such failure shall have
expired. For all purposes of this Indenture, in the absence of actual
knowledge, neither the Owner Trustee nor the Indenture Trustee shall be deemed
to have knowledge of an Indenture Event of Default (except, in the case of the
Indenture Trustee, the failure of the Lessee to pay any installment of Basic
Rent that is required to be paid directly to the Indenture Trustee within the
10 Business Days after the same shall become due or the failure of the Lessee
to maintain insurance as required under Section 12 of the Lease if the
Indenture Trustee shall receive notice thereof from an insurer or insurance
broker) unless notified in writing by the Lessee, the Owner Trustee, one or
more Loan Participants or the Owner Participant; and "actual knowledge" (as
used in the foregoing clause) of the Owner Trustee or the Indenture Trustee
shall mean actual knowledge of an officer in the Corporate Trust Administration
of the Owner Trustee or the Corporate Trust Department of the Indenture
Trustee, as the case may be.
Section 5.02. Action Upon Instructions. Subject to
the terms of Article IV and Sections 5.01 and 5.03, upon the written
instructions at any time and from time to time of a Majority in Interest, the
Indenture Trustee shall take such of the following actions as may be specified
in such instructions: (i) subject to and solely to the extent permitted by the
terms hereof and of the Lease, give such notice, direction or consent, or
exercise such right, remedy or power hereunder or under the Lease or in respect
of any part or all of the Indenture Estate or take such other action as shall
be specified in such instructions; and (ii) after an Indenture Event of Default
shall have occurred and so long as such Indenture Event of Default shall be
continuing, approve as satisfactory to it all matters required by the terms of
the Lease to be satisfactory to the Owner Trustee, it being understood that
without the written instructions of a Majority in Interest the Indenture
Trustee shall not take any action described in clauses (i) and (ii) above.
Upon (i) the expiration or earlier termination of the
Lease Term with respect to any Unit under the Lease and after payment of the
portion of the principal of, together with interest and premium, if any, on the
Equipment Notes in accordance with the terms of this Indenture, or (ii) so long
as no Indenture Event of Default shall have occurred and be
<PAGE> 45
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continuing, the transfer by the Owner Trustee to the Lessee or its designee of
any Unit pursuant to Section 10 or 11 of the Lease or the retention by the
Owner Trustee of any Unit pursuant to Section 10.3 of the Lease, the Indenture
Trustee shall in each case, upon the written request of the Owner Trustee, and
receipt by the Indenture Trustee of funds necessary to prepay the Equipment
Notes required to be prepaid in connection with such purchase, termination,
retention or Event of Loss execute and deliver to, or as directed in writing
by, the Owner Trustee an appropriate instrument (in due form for recording)
furnished by the Owner Trustee or the Lessee releasing such property from the
Lien of this Indenture.
Section 5.03. Indemnity. (a) The Indenture Trustee
shall not be required to take any action or refrain from taking any action
under Section 5.01 (other than the first two sentences thereof) or 5.02 or
Article IV 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. The Indenture Trustee shall not be required to take any action under
Section 5.01 or 5.02 or Article IV, nor shall any other provision of this
Indenture be deemed to impose a duty on the Indenture Trustee to take any
action, if the Indenture Trustee shall have been advised in writing by
independent counsel that such action is contrary to the terms hereof or of the
Lease or the Participation Agreement, or is otherwise contrary to law.
(b) Each Loan Participant may, but
shall not be required to, participate in any indemnity of the Indenture Trustee
given pursuant to paragraph (a) of this Section 5.03. Each Loan Participant so
participating shall be entitled to reimbursement for such participation in
accordance with Article III.
Section 5.04. No Duties Except as Specified in
Indenture or Instructions. The Indenture Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Equipment or any other part of the Indenture Estate, or to otherwise take or
refrain from taking any action under, or in connection with, this Indenture,
the Lease, or the Participation Agreement, except as expressly provided by the
terms of this Indenture or as expressly provided in written instructions
received pursuant to the terms of Section 5.01 or 5.02; and no implied duties
or obligations shall be read into this Indenture against the Indenture Trustee.
Each of the Owner Trustee and the Indenture Trustee nevertheless agrees that
<PAGE> 46
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it will, at its own cost and expense, promptly take such action as may be
necessary duly to discharge any liens or encumbrances on any part of the
Indenture Estate, or on any properties of the Owner Trustee assigned, pledged
or mortgaged as part of the Indenture Estate, which result from claims against
it in its individual capacity not related to the ownership of the Equipment (in
the case of the Owner Trustee), administration of the Indenture Estate (in the
case of the Indenture Trustee) or any other transaction under this Indenture or
the Trust Agreement or any document included in the Indenture Estate.
Section 5.05. No Action Except Under Lease,
Indenture or Instructions. The Indenture Trustee agrees that it will not
manage, control, use, sell, dispose of or otherwise deal with the Equipment or
other property constituting part of the Indenture Estate except (i) as required
by the terms of the Lease and the Participation Agreement, (ii) in accordance
with the powers granted to, or the authority conferred upon, the Indenture
Trustee pursuant to this Indenture, or (iii) in accordance with the express
terms hereof or with written instructions pursuant to Section 5.01 or 5.02.
Section 5.06. Disposition of Units. At any time and
from time to time prior to the expiration of the Lease Term, any Unit for which
the provisions of Section 11.4(a) of the Lease have been satisfied may be
disposed of in accordance with the provisions of Section 11.4(a) of the Lease,
and the Owner Trustee shall, from time to time, direct the Indenture Trustee
to, provided no Lease Event of Default shall have occurred and be continuing,
execute and deliver to it, or as directed in writing by the Owner Trustee, an
appropriate instrument furnished by the Owner Trustee or the Lessee releasing
such Unit from the Lien of the Indenture, but only in respect of such Unit.
Section 5.07. Indenture Supplements for
Replacements. In the event of a Replacement Unit being substituted as
contemplated by Section 11.2 of the Lease, the Owner Trustee and the Indenture
Trustee agree for the benefit of the holders of the Equipment Notes and the
Lessee, subject to compliance by the Lessee with its obligations set forth in
Section 11 of the Lease, to execute and deliver an Indenture Supplement
substantially in the form of Exhibit A hereto and, provided no Lease Event of
Default or Lease Default shall have occurred and be continuing, execute and
deliver to the Lessee an appropriate
<PAGE> 47
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instrument releasing the Unit being replaced from the Lien of the Indenture.
Section 5.08. Effect of Replacements. In the event
of the substitution of a Replacement Unit, all provisions of this Indenture
relating to the Unit or Units being replaced shall be applicable to such
Replacement Unit with the same force and effect as if such Replacement Unit was
the same Unit being replaced.
Section 5.09. Withholding Taxes. The Indenture
Trustee, as agent for the Owner Trustee, shall exclude and withhold from each
payment of principal, premium, if any, and interest and other amounts due
hereunder or under the Equipment Notes any and all 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
taxes or similar charges are required to be withheld with respect to any
amounts payable 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 holders of the Equipment Notes, that it will file any necessary
withholding tax returns or statements when due, and that, as promptly as
possible after the payment thereof, it will deliver to each holder of an
Equipment Note appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such holders may reasonably
request from time to time.
ARTICLE VI
THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
Section 6.01. Acceptance of Trusts and Duties. The
Indenture Trustee accepts the trusts hereby created and applicable to it and
agrees to perform the same but only upon the terms of this Indenture and agrees
to receive and disburse all moneys received by it constituting part of the
Indenture Estate in accordance with the terms hereof. The Indenture Trustee
shall not be answerable or accountable under any circumstances, except for its
own wilful misconduct or gross negligence or breach of any of its
representations or warranties or covenants set forth herein or in the
Participation Agreement, or the performance of its obligations under the last
sentence of Section 5.04; and the Owner Trustee shall not be liable for any
action or inaction of the Indenture Trustee and the Indenture Trustee shall not
be liable for any action or inaction of the Owner Trustee.
<PAGE> 48
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The Owner Trustee shall not be deemed a trustee for, or agent of, the holders
of the Equipment Notes for any purpose.
Section 6.02. Absence of Duties. Except in
accordance with written instructions or requests furnished pursuant to Section
5.01 or Section 5.02 and except as provided in, and without limiting the
generality of, Section 5.04, the Indenture Trustee shall have no duty (i) to
see to any registration of the Equipment or any recording or filing of the
Lease, or of this Indenture or any other document, or to see to the maintenance
of any such registration, recording or filing, (ii) to see to any insurance on
the Equipment or to effect or maintain any such insurance, whether or not the
Lessee shall be in default with respect thereto, (iii) to confirm, verify or
inquire into the failure to receive any financial statements of the Lessee or
(iv) to inspect the Equipment at any time or ascertain or inquire as to the
performance or observance of any of the Lessee's covenants under the Lease with
respect to the Equipment. Notwithstanding the foregoing, the Indenture Trustee
will furnish to any Loan Participant, so long as such Loan Participant or its
nominees shall hold any of the Equipment Notes, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and other instruments furnished to the Indenture Trustee
under this Indenture, to the extent that the same shall not have been furnished
to the Indenture Trustee and the Loan Participants pursuant to the Lease.
Section 6.03. No Representations or Warranties as to
the Equipment or Documents. NEITHER THE OWNER TRUSTEE NOR THE OWNER TRUSTEE IN
ITS INDIVIDUAL CAPACITY NOR THE INDENTURE TRUSTEE MAKES OR SHALL BE DEEMED TO
HAVE MADE (i) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE
EQUIPMENT OR AS TO THEIR TITLE THERETO, OR ANY OTHER REPRESENTATION OR WARRANTY
WITH RESPECT TO THE EQUIPMENT WHATSOEVER, except that the Owner Trustee in its
individual capacity hereby represents and warrants that on the Closing Date the
Owner Trustee received whatever title was conveyed to it by the Lessee and that
the Equipment shall be free of Lessor's Liens attributable to the Owner Trustee
in its individual capacity, or (ii) any representation or warranty as to the
validity, legality or enforceability of this Indenture, the Trust Agreement,
the Participation Agreement, the Equipment Notes, the Lease, any Lease
Supplement, or any Indenture Supplement or any other
<PAGE> 49
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document or instrument or as to the correctness of any statement contained in
any thereof (except as to the representations and warranties made by the Owner
Trustee in its individual capacity as set forth in Section 3.1 of the
Participation Agreement), except that the Owner Trustee and the Indenture
Trustee each in its individual capacity hereby confirms the representations and
warranties made by it in its individual capacity in Sections 3.1 and 3.3,
respectively, of the Participation Agreement.
Section 6.04. No Segregation of Moneys; No Interest;
Investments. (a) Subject to Section 6.04(b), no moneys received by the
Indenture Trustee hereunder need be segregated in any manner except to the
extent required by law, and any such moneys may be deposited under such general
conditions for the holding of trust funds as may be prescribed by law
applicable to the Indenture Trustee, and, except as otherwise agreed by the
Owner Trustee or the Indenture Trustee, as the case may be, neither the Owner
Trustee nor the Indenture Trustee shall be liable for any interest thereon.
(b) Any amounts held by the Indenture Trustee
pursuant to the express terms of this Indenture or the Lease and not required
to be distributed as herein provided shall be invested and reinvested by the
Indenture Trustee from time to time in Permitted Investments at the written
direction and at the risk and expense of the Lessee, except that in the absence
of any such direction and after a Lease Event of Default shall have occurred
and be continuing, such amounts shall be so invested and reinvested by the
Indenture Trustee in Indenture Investments. Any net income or gain realized as
a result of any such investments or reinvestment shall be held as part of the
Indenture Estate and shall be applied by the Indenture Trustee at the same
times, on the same conditions and in the same manner as the amounts in respect
of which such income or gain 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. Any such Permitted Investments or Indenture
Investments may be sold or otherwise reduced to cash (without regard to
maturity date) by the Indenture Trustee whenever necessary to make any
application as required by such provisions. The Indenture Trustee shall have
no liability for any loss resulting from any such investment or reinvestment
other than by reason of the willful misconduct or gross negligence of the
Indenture Trustee.
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Section 6.05. Reliance; Agents; Advice of Counsel.
The Indenture Trustee shall incur no liability to anyone acting upon any
signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Indenture Trustee may accept a copy of a resolution of the Board of Directors
of any party to the Participation Agreement, certified by the Secretary or an
Assistant Secretary of such party as duly adopted and in full force and effect,
as conclusive evidence that such resolution has been duly adopted by said Board
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
Indenture Trustee may for all purposes hereof rely on a certificate, signed by
an officer of the Lessee, as to such fact or matter, and such certificate shall
constitute full protection to the Indenture Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon. The Indenture
Trustee shall furnish to the Owner Trustee upon request such information and
copies of such documents as the Indenture Trustee may have and as are necessary
for the Owner Trustee to perform its duties under Article II hereof. The
Indenture Trustee shall assume, and shall be fully protected in assuming that
the Owner Trustee is authorized by the Trust Agreement to enter into this
Indenture and to take all action permitted to be taken by it pursuant to the
provisions hereof, and shall not inquire into the authorization of the Owner
Trustee with respect thereto. In the administration of the trusts hereunder,
the Indenture 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 Indenture Estate, consult with independent
counsel, accountants and other skilled persons to be selected and employed by
it, and the Indenture Trustee shall not be liable for anything done, suffered,
or omitted in good faith by it in accordance with the written advice or opinion
of any such independent counsel, accountants or other skilled persons acting
within such persons' area of competence (so long as the Indenture Trustee shall
have exercised reasonable care in selecting such persons).
Section 6.06. Not Acting in Individual Capacity.
The Owner Trustee and the Indenture Trustee each acts hereunder solely as
trustee hereunder and, in the case of the Owner Trustee, under the Trust
Agreement and not in its individual capacity unless otherwise expressly
provided; and all Persons, other than the holders of Equipment Notes to
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the extent expressly provided in this Indenture, having any claim against the
Owner Trustee or the Indenture Trustee by reason of the transactions
contemplated hereby shall, subject to the Lien and priorities of payment as
herein provided, look only to the Indenture Estate for payment or satisfaction
thereof.
Section 6.07. Certain Limitations on Owner Trustee's
and Indenture Trustee's Rights. The Owner Trustee and the Indenture Trustee
agree that they shall have no right against the holders of the Equipment Notes
or the Indenture Estate (except in the case of the Indenture Trustee as
expressly provided in Section 4.03 hereof) for any fee as compensation for its
services hereunder or any expenses or disbursements incurred in connection with
the exercise and performance of its powers and duties hereunder or any
indemnification against liability which it may incur in the exercise and
performance of such powers and duties but, on the contrary, shall look solely
to the Lessee for such payment and indemnification and that neither the Owner
Trustee nor the Indenture Trustee shall have any lien on nor security interest
in the Indenture Estate as security for such compensation, expenses, reasonable
counsel fees, if any, disbursements and indemnification.
ARTICLE VII
ASSUMPTION OF OBLIGATIONS
If the Lessee shall elect to exercise the early
buy-out purchase option contemplated by Section 22.6 of the Lease, the Lessee
may elect to assume (the "Assumption") the indebtedness under Equipment Notes
to the extent such indebtedness was incurred to finance the Units of Equipment
for which such option is being exercised (the "Option Units") (and, if
Equipment Notes are issued in more than one series, the Assumption shall be of
the series issued to finance the Option Units), as contemplated by Section 10.3
of the Participation Agreement, and in such case and to such extent, the Owner
Trustee shall be relieved of its liability in respect of such indebtedness upon
the effectiveness of the Assumption in accordance with the following
procedures.
The Assumption shall be effected by:
(a) execution and delivery by the Lessee and the
Indenture Trustee of a new Trust Indenture and Security Agreement (the
"Lessee Indenture") with respect to the
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Option Units and the indebtedness in respect thereof being assumed, in
substantially the form hereof, but
(i) substituting for this Article VII
agreements, undertakings, and covenants of the Lessee
of the same scope and tenor as the agreements,
undertakings, and covenants of the Lessee in Sections
4, 7, 8, 9, 11, 12, 13, and 16 of the Lease,
(ii) substituting for the Indenture
Events of Default set forth in Section 4.01 hereof
events of default correlative to the Lease Events of
Default, and
(iii) deleting the limitation of
liability set forth in Section 2.03 hereof;
(b) execution and delivery by the Owner Trustee and
the Indenture Trustee of an amendment or supplement to this Indenture
excluding from the Indenture Estate the Option Units and the
obligations of the Lessee under the Lease with respect thereto;
(c) execution by the Lessee of Equipment Notes issued
under the Lessee Indenture, substantially in the form specified in
Section 2.01 hereof (and, if Equipment Notes are issued in more than
one series, in the form and tenor of the Equipment Notes of the series
then being assumed) but without the limitation of liability set forth
in the second paragraph of such form, in an aggregate principal amount
equal to the product obtained by multiplying the aggregate unpaid
principal amount of the Equipment Notes hereunder (or, if Equipment
Notes are issued in more than one series, of the series issued to
finance the class of Equipment of which the Option Units are a part)
as of the effective date of the Assumption by a fraction, the
numerator of which shall be the Equipment Cost of the Option Units and
the denominator of which shall be the aggregate Equipment cost of all
Units included in the Indenture Estate (or, if Equipment Notes are
issued in more than one series, the aggregate Equipment Cost of all
Units included in the Indenture Estate of the class of Equipment
financed by the Equipment Notes of such series) immediately prior to
the Assumption;
(d) execution by the Owner Trustee of new Equipment
Notes in an aggregate unpaid principal amount
<PAGE> 53
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equal to the balance of the aggregate unpaid principal amount of the
Equipment Notes issued hereunder after deducting the principal amount
of Equipment Notes executed by the Lessee pursuant to clause (c) above
(and, if Equipment Notes are issued in more than one series, in the
form and tenor of the Equipment Notes not then being assumed);
(e) delivery of the Equipment Notes contemplated by
the foregoing clauses (c) and (d) to the holders of the Equipment
Notes at the time outstanding hereunder (pro rata to each such holder,
if there is more than one such holder) in exchange for such
outstanding Equipment Notes (which shall be cancelled);
(f) recordation, registration, and filing in all
public offices in which evidence of this Indenture and the interests
hereunder have been recorded, registered, or filed, suitable evidence
of the transactions contemplated by this Article VII, and delivery of
opinions of counsel with respect thereto of the same scope and tenor
as the opinions originally delivered under the Participation Agreement
with respect to such recordation, registration and filing;
(g) delivery by the Lessee to the Owner Trustee and
the Indenture Trustee of an opinion of counsel, satisfactory to such
parties, as to the due authorization, execution and delivery by the
Lessee of the Lessee Indenture and any supplements thereto
contemplated by the foregoing clause (a) and the new Equipment Notes
contemplated by the foregoing clause (c);
(h) delivery by the Owner Trustee to the Indenture
Trustee of an opinion of counsel, satisfactory to such party, as to
the due authorization, execution and delivery by the Owner Trustee of
the amendments or supplements to this Indenture contemplated by the
foregoing clause (b) and the Equipment Notes contemplated by the
foregoing clause (d);
(i) execution and delivery by the Lessee and the
Owner Trustee of the instruments contemplated by Section 22.6 of the
Lease and Section 10.3 of the Participation Agreement; and
(j) execution and delivery by the Lessee and the
Owner Trustee of such agreements, instruments, and
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documents of further assurance as the Indenture Trustee shall
reasonably request, on advice of counsel, to implement the foregoing
(if and so long as the same shall not involve any adverse effect on or
increased risk to the Owner Trustee or the Owner Participant);
all at the expense of the Lessee, as contemplated by Section 10.3 of the
Participation Agreement.
The Lessee Indenture, and the obligations of the
Lessee remaining assigned and subject to this Indenture after the exclusion of
the Option Units, shall constitute separate obligations of the Lessee, and
default under either thereof shall not, ipso facto, result in a default under
the other, nor shall the Indenture Trustee, solely by reason of any default
under either such obligation, have any right against the Units of Equipment
covered by or securing the other such obligation.
The Assumption shall be consummated by the execution
and delivery of the foregoing documents and instruments, and the taking of the
foregoing actions, on a single date, and shall not be effective until all such
documents and instruments have been executed and delivered and all such actions
have been taken. Upon the Assumption becoming effective, the Equipment Notes
executed by the Lessee under the Lessee Indenture shall evidence the same
indebtedness previously represented by the corresponding Equipment Notes
surrendered therefor. If more than one Assumption is consummated hereunder,
all such Assumptions shall be accomplished by the issuance of Equipment Notes
by the Lessee under the same Lessee Indenture, and it shall not be necessary
for the Lessee to execute and deliver more than one Lessee Indenture pursuant
to clause (a) above.
It shall be a condition to any Assumption hereunder
that such Assumption is consummated and becomes effective at or prior to the
date that the Equipment Notes would be prepaid pursuant to Section 2.10(a) if
such Assumption were not effected.
ARTICLE VIII
SUCCESSOR TRUSTEES
Section 8.01. Notice of Successor Owner Trustee. In
the case of any appointment of a successor to the Owner
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Trustee pursuant to the Trust Agreement or any merger, conversion,
consolidation or sale of substantially all the business involving the Owner
Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give
prompt written notice thereof to the Indenture Trustee, the Lessee and the
holders of all Equipment Notes at the time outstanding.
Section 8.02. Resignation of Indenture Trustee;
Appointment of Successor. 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 8.02. The Indenture Trustee or any successor thereto
may resign at any time without cause by giving at least 30 days' prior written
notice to the Owner Trustee, the Owner Participant, the Lessee and the holders
of the Equipment Notes. A Majority in Interest may at any time remove the
Indenture Trustee without cause by an instrument in writing delivered to the
Owner Trustee, the Owner Participant, the Lessee and the Indenture Trustee. In
addition, the Owner Trustee may remove the Indenture Trustee if: (i) the
Indenture Trustee fails to comply with Section 8.02(c), (ii) the Indenture
Trustee is adjudged a bankrupt or an insolvent, or (iii) a receiver or public
officer takes charge of the Indenture Trustee or its property or the Indenture
Trustee becomes incapable of acting.
(a) In the case of the resignation or removal of the
Indenture Trustee, a Majority in Interest may appoint a successor Indenture
Trustee. If a successor Indenture Trustee shall not have been appointed and
accepted its appointment hereunder within 60 days after the Indenture Trustee
gives notice of resignation or is removed as provided above, the retiring
Indenture Trustee, the Lessee, the Owner Trustee, the Owner Participant or any
holder of an Equipment Note may petition any court of competent jurisdiction
for the appointment of a successor Indenture Trustee. Any successor Indenture
Trustee so appointed by such court shall immediately and without further act be
superseded by any successor Indenture Trustee appointed by a Majority in
Interest.
(b) Any successor Indenture Trustee, however
appointed, shall execute and deliver to the Owner Trustee and the Lessee and to
the predecessor Indenture Trustee an instrument accepting such appointment, and
thereupon such successor Indenture Trustee, without further act, shall
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become vested with all the estates, properties, rights, powers, duties and
trusts of the predecessor Indenture Trustee hereunder in the trusts hereunder
applicable to it with like effect as if originally named the Indenture Trustee
herein; but nevertheless, upon the written request of such successor Indenture
Trustee, such predecessor Indenture Trustee shall execute and deliver an
instrument transferring to such Indenture Trustee, upon the trusts herein
expressed applicable to it, all the estates, properties, rights, powers and
trusts of such predecessor Indenture Trustee; and such predecessor Indenture
Trustee shall duly assign, transfer, deliver and pay over to such successor
Indenture Trustee all moneys or other property then held by such predecessor
Indenture Trustee hereunder.
(c) The Indenture Trustee shall 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 $100,000,000, if there be
such an institution willing, able and legally qualified to perform the duties
of the Indenture Trustee hereunder upon reasonable or customary terms.
(d) Any corporation into which the
Indenture Trustee may be merged or converted or with which it may by
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Indenture Trustee shall be a party, or any
corporation to which substantially all the corporate trust business of the
Indenture Trustee may be transferred, shall, subject to the terms of paragraph
(c) of this Section, be the Indenture Trustee under this Indenture without
further act.
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
TO THIS INDENTURE AND OTHER DOCUMENTS
Section 9.01. Supplemental Indentures Without
Consent of Holders. (a) The Owner Trustee and the Indenture Trustee, at any
time and from time to time, without notice to or the consent of any holders of
any Equipment Notes, but with the prior written consent of the
<PAGE> 57
52
Lessee, may enter into one or more indentures supplemental hereto for any of
the following purposes:
(i) to correct or amplify the description of any
property at any time subject or required to be subject to the Lien of
this Indenture or better to assure, convey and confirm unto the
Indenture Trustee any property subject or required to be subject to
the Lien of this Indenture or to subject to the Lien of this Indenture
any Unit or Units substituted for any Unit or Units in accordance with
the Lease; provided, however, that indenture supplements entered into
for the purpose of subjecting to the Lien of this Indenture any Unit
or Units substituted for any in accordance with the Lease need only be
executed by the Owner Trustee; or
(ii) to evidence the succession of another trustee to
the Owner Trustee and the assumption by any such successor of the
covenants of the Owner Trustee herein and in the Equipment Notes
contained, or to evidence (in accordance with Article VIII) the
succession of the new Indenture Trustee hereunder; or
(iii) to add to the covenants of the Owner Trustee,
for the benefit of the holders of the Equipment Notes, or to surrender
any right or power herein conferred upon the Owner Trustee; or
(iv) to effect the complete or partial assumption of
the obligations of the Owner Trustee hereunder and under the Equipment
Notes by the Lessee, as contemplated by Article VII hereof; or
(v) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect
to matters or questions arising hereunder so long as any such action
does not adversely affect the interests of the holders of the
Equipment Notes; or
(vi) to comply with the requirements of the Trust
Indenture Act.
(b) Supplemental Indentures With Consent of Majority
In Interest. With the written consent of a Majority in Interest (and the
Lessee, which consent shall not be unreasonably withheld), the Owner Trustee
(but only on the written request of the Owner Participant) may, and
<PAGE> 58
53
the Indenture Trustee, subject to Section 9.02 hereof, shall, at any time and
from time to time, enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights and obligations of holders of the Equipment Notes or of the
Owner Trustee under this Indenture; provided, however, without the consent of
each holder of an Equipment Note affected thereby, no such supplemental
indenture shall:
(1) change the final maturity of the principal of any
Equipment Note, or change the dates or amounts of payment of any
installment of the principal of, premium, if any, or interest on any
Equipment Note, or reduce the principal amount thereof or the premium,
if any, or interest thereon, or change to a location outside the
United States the place of payment where or the coin or currency in
which, any Equipment Note or the premium, if any, or interest thereon
is payable, or impair the right to institute suit for the enforcement
of any such payment of principal or premium, if any, or interest on or
after the date such principal or premium, if any, or interest becomes
due and payable; or
(2) create any Lien with respect to the Indenture
Estate ranking prior to, or on a parity with, the security interest
created by this Indenture except such as are permitted by this
Indenture, or deprive any holder of an Equipment Note of the benefit
of the Lien on the Indenture Estate created by this Indenture; or
(3) reduce the percentage in principal amount of the
Equipment Notes, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required
for any waiver (of compliance with certain provisions of this
indenture, or of certain defaults hereunder and their consequences)
provided for in this Indenture; or
(4) modify any provisions of this Section 9.01(b)
except to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the holder of each
Equipment Note affected thereby.
Section 9.02. Indenture Trustee Protected. If in
the opinion of the Indenture Trustee any document required
<PAGE> 59
54
to be executed pursuant to the terms of Section 9.01 adversely affects any
right, duty, immunity or indemnity in favor of the Indenture Trustee under this
Indenture, the Participation Agreement or the Lease, the Indenture Trustee may
in its discretion decline to execute such document.
Section 9.03. Request of Substance, Not Form. It
shall not be necessary for the consent of the holders of Equipment Notes under
Section 9.01(b) to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 9.04. Documents Mailed to Holders. Promptly
after the execution by the Indenture Trustee of any document entered into
pursuant to Section 9.01(b), the Indenture Trustee shall mail, by first-class
mail, postage prepaid, a conformed copy thereof to each holder of an Equipment
Note at its address last known to the Indenture Trustee, but the failure of the
Indenture Trustee to mail such conformed copies shall not impair or affect the
validity of such document.
Section 9.05. Amendments, Waivers, etc., of Other
Documents. (a) Without the consent of a Majority in Interest, the respective
parties to the Lease, the Participation Agreement and the Trust Agreement may
not modify, amend or supplement any of such agreements, or give any consent,
waiver, authorization or approval thereunder, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
thereof or of modifying in any manner the rights of the respective parties
thereunder; provided, however, that the actions specified in subsection (b) of
this Section 9.05 may, to the extent provided in such subsection, be taken
without the consent of the Indenture Trustee or of any holder of an Equipment
Note.
(b) Subject to the provisions of subsection (c) of
this Section 9.05, the respective parties to the Lease, the Trust Agreement and
the Participation Agreement, at any time and from time to time without the
consent of the
<PAGE> 60
55
Indenture Trustee or of any holder of an Equipment Note, may:
(1) effect any modification, amendment, addition or
deletion expressly provided for in the Lease, the Participation
Agreement or the Trust Agreement (including, without limitation,
Section 3.4 of the Lease and Section 2.6 of the Participation
Agreement pertaining to adjustments to Rent);
(2) 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 9.05, 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, in a manner
that would impose any additional obligations on the "Lessor"
thereunder or, in any event, with respect to the following provisions
of the Lease: Section 2, Section 3.1 (if the result thereof would be
to shorten the Basic Term to a period shorter than the period ending
with the final maturity of the Equipment Notes), Section 3.2, Section
3.3, Section 3.4, Section 3.5, Section 3.6 (except insofar as it
relates to the address or account information of the Owner Trustee or
Indenture Trustee) (other than as such Sections 3.1 through 3.6 may be
amended pursuant to Section 3.4 of the Lease as originally executed),
Section 4, Section 7, Section 8, Section 9 (except that additional
obligations may be imposed on the Lessee to make Required
Modifications and additional conditions may be imposed on the Lessee's
ability to make Optional Modifications), Section 10 (except that
additional requirements may be imposed on the Lessee's ability to
terminate the Lease with respect to a Unit and except with respect to
amounts that would be paid to the Owner Trustee or the Owner
Participant pursuant to Article III), Section 11 (except that
additional requirements may be imposed on the Lessee's ability to
replace a Unit subject to an Event of Loss), Section 12 (except with
respect to insurance on vehicles and except that additional insurance
requirements may be imposed on the Lessee), Section 13, Section 14,
Section 15, Section 16, Section 17, Section 18,
<PAGE> 61
56
Section 19, Section 20, Section 22 (if the result thereof would be to
provide any renewal or purchase option contained in such Section prior
to the final maturity of the Equipment Notes), and Section 24, and any
definition of terms used in the Lease to the extent that any
modification of such definition would result in a modification of any
of the foregoing provisions of the Lease;provided that, in the event
an Indenture Event of Default shall have occurred and be continuing,
the Indenture Trustee, acting pursuant to Article IV hereof, 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 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, subject to the Indenture
Trustee's rights to exercise remedies under Section 15 of the Lease
without the prior consent of the Owner Trustee (consistent with the
terms of Article IV hereof), and whether or not an Indenture Event of
Default shall have occurred and be continuing, no such modification,
amendment or supplement of the Lease or other action referred to in
the preceding proviso shall be taken without the prior written consent
of the Owner Trustee (x) with respect to any of the provisions of
Sections 3, 5.1, 6, 8, 9, 10, 11, 12 (with respect to public liability
insurance coverage of the Owner Trustee and the Owner Participant),
14, 17, 18, 19, 20, 22 and 23 of the Lease 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 proviso, or (y) to the extent such modification,
amendment or supplement of the Lease or other action referred to in
the preceding proviso shall affect the amount or timing of any amounts
payable by the Lessee under the Lease as originally executed (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 III
or any other section of the Lease or (z) with respect to 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 without the consent of the Owner Trustee pursuant
to this subsection (b);
<PAGE> 62
57
(3) modify, amend or supplement the Trust Agreement,
or give any consent, waiver, authorization or approval with respect
thereto, except that without compliance with subsection (a) of this
Section 9.05, the parties to the Trust 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 Trust
Agreement: Section 2.02, Article IV, Article VIII, and Section 10.01,
and any definition of terms used in the Trust Agreement, to the extent
that any modification of such definition would result in a
modification of the Trust Agreement not permitted pursuant to this
subsection (b);
(4) 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 9.05, 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: Sections 1, 2, 3, 4, 5 (insofar as reports
to the Loan Participant would be affected), 6, 7 (insofar as
indemnities to the Indenture Trustee or the Loan Participants would be
affected), 10.2 (except with respect to the rights and interests of
the Owner Participant and the Owner Trustee), 10.3, 10.4 and 10.14(a),
each provision of the Participation Agreement which specifically
refers to the Indenture Trustee or Loan Participants 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);
(5) modify, amend or supplement any of said
agreements to the extent necessary to effect the complete or partial
assumption of the obligations hereunder and under the Equipment Notes
by the Lessee,
<PAGE> 63
58
in accordance with Section 10.3 of the Participation Agreement and
Article VII hereof;
(6) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provision thereof which may be defective or inconsistent with any
other provision thereof or any provision of this Indenture, or to make
any other provision with respect to matters or questions arising
thereunder or under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided any such action shall
not adversely affect the interests of the holders of the Equipment
Notes; and
(7) with the consent of the Indenture Trustee
pursuant to Section 9.05(d), effect any modification or amendment of,
addition to or deletion from the Lease, the Participation Agreement or
the Trust Agreement if, as reflected in an Officers' Certificate (and,
to the extent required therein, an Opinion of Counsel) delivered
pursuant to Section 9.05(e) hereof of the party requesting such action
addressed to the other parties to the applicable agreement, such
modification, amendment, addition or deletion shall not materially
adversely affect the interests of the holders of the Equipment Notes.
(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) or (d) of this Section 9.05, and anything in such
subsections or elsewhere in this Indenture to the contrary notwithstanding,
shall, without the consent of the holder of each 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, or Stipulated Loss
Value or any other amounts payable under, or as provided in, the Lease
upon the occurrence of an Event of Loss, or Termination Value or any
other amounts payable under, or as provided in, the Lease upon
termination thereof, or reduce the amount of any installment of Basic
Rent so that the same is less than the payment of interest and
principal on the Equipment Notes, as the case may be, to be made from
such installment of Basic Rent, or reduce the aggregate amount of
Stipulated Loss Value and any other amounts
<PAGE> 64
59
payable under, or as provided in, the Lease upon the occurrence of an
Event of Loss so that the same is less than the accrued interest on
and principal of the Equipment Notes required to be paid at the time
of such payments, or reduce the amount of Termination Value and any of
the amounts payable under, or as provided in, the Lease upon
termination thereof so that the same is less than the accrued interest
and premium, if any, on and principal of the Equipment Notes required
to be paid at the time of such payments; 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 obligation in respect of payment of Basic Rent or
Stipulated Loss Value or any other amounts payable under, or as
provided in, the Lease upon the occurrence of an Event of Loss, or
Termination Value or any other amounts payable under, or as provided
in, the Lease upon termination thereof, except for any such assignment
pursuant to Section 6.7 of the Participation Agreement, and except as
provided in the Lease.
(d) Subject to the provisions of Section 9.01(b) and
subsection (c) of this Section 9.05, the Indenture Trustee may, without the
consent of any holder of Equipment Notes, give any consent, waiver,
authorization or approval under this Section 9.05 or elsewhere under this
Indenture, the Lease or the Trust Agreement, whether or not provided for
therein, if, as reflected in an Officers' Certificate (and to the extent
required therein, an Opinion of Counsel) referred to in Section 9.05(e), such
consent, waiver, authorization or approval does not materially adversely affect
the interests of the holders of the Equipment Notes.
(e) Upon receipt of an Officers' Certificate and, as
to any matters of law, an Opinion of Counsel (which Opinion, in the case of the
Lessee, may be by an employee of the Lessee) from the Lessee, the Indenture
Trustee shall consent and evidence its consent to any act permitted by this
Section 9.05 and the Indenture Trustee shall be fully protected in relying on
such Officers' Certificate and Opinion of Counsel.
<PAGE> 65
60
ARTICLE X
MISCELLANEOUS
Section 10.01. Termination of Indenture. With
respect to each Unit, this Indenture and the trusts created hereby shall
terminate and this Indenture shall be of no further force or effect upon the
earliest to occur of (i) the termination of the Lease Term with respect to such
Unit by Lessee pursuant to Section 10 of the Lease and upon payment in full to
the Indenture Trustee of the amounts required to be paid pursuant to Section
2.10(a) in respect of such Unit, (ii) the termination of the Lease Term with
respect to such Unit pursuant to Section 11 of the Lease, or the sale of such
Unit pursuant to Section 22.6 of the Lease, and upon payment in full to the
Indenture Trustee of the amounts required to be paid pursuant to Section
2.10(b) in respect of such Unit, and (iii) the payment in full of the principal
amount of and interest on all Equipment Notes outstanding hereunder and all
other sums payable to the Indenture Trustee and the holders of the Equipment
Notes hereunder and under such Equipment Notes and under the Participation
Agreement.
Section 10.02. No Legal Title to Indenture Estate in
Holders. No holder of an Equipment Note shall have legal title to any part of
the Indenture Estate. No transfer, by operation of law or otherwise, of any
Equipment Note or other right, title and interest of any holder of an Equipment
Note in and to the Indenture Estate or hereunder shall operate to terminate
this Indenture or the trusts hereunder or entitle any successor or transferee
of such holder to an accounting or to the transfer to it of legal title to any
part of the Indenture Estate.
Section 10.03. Sale of Equipment by Indenture
Trustee Is Binding. Any sale or other conveyance of the Equipment by the
Indenture Trustee made pursuant to the terms of this Indenture or the Lease
shall bind the holders of the Equipment Notes, the Owner Trustee and the Owner
Participant and shall be effective to transfer or convey all right, title and
interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and
such holders of the Equipment Notes in and to the Equipment. No purchaser or
other grantee shall be required to inquire as to the authorization, necessity,
expediency or regularity of such sale or conveyance or as to the application of
any sale or other proceeds with respect thereto by the Indenture Trustee.
<PAGE> 66
61
Section 10.04. Remedies Cumulative. Each and every
right, power and remedy herein specifically given to the Indenture Trustee or
otherwise in this Indenture shall be cumulative and shall be in addition to
every other right, power and remedy herein specifically given or now or
hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the 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 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 the pursuance of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of
the Owner Trustee or the Lessee or to be an acquiescence therein.
Section 10.05. Discontinuance of Proceedings. In
case the Indenture Trustee shall have proceeded to enforce any right, power or
remedy under this Indenture by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Indenture Trustee, then and in every such
case the Owner Trustee, the Owner Participant, the Indenture Trustee and the
Lessee shall be restored to their former positions and rights hereunder with
respect to the Indenture Estate, and all rights, remedies and powers of the
Indenture Trustee shall continue as if no such proceedings had been undertaken
(but otherwise without prejudice).
Section 10.06. Indenture and Equipment Notes for
Benefit of Owner Trustee, Indenture Trustee, Owner Participant and Holders.
Nothing in this Indenture, whether express or implied, shall be construed to
give to any Person other than the Owner Trustee (individually and as trustee),
the Indenture Trustee, the Owner Participant (as expressly set forth herein)
and the holders of the Equipment Notes any legal or equitable right, remedy or
claim under or in respect of this Indenture or any Equipment Note.
Section 10.07. Notices. Unless otherwise
expressly specified or permitted by the terms hereof, all notices required or
permitted under the terms and provisions hereof shall be in writing, and shall
become effective when deposited in the United States mail, with proper postage
for
<PAGE> 67
62
first class registered or certified mail prepaid, when delivered personally
(including without limitation express mail and courier service), or, if
promptly confirmed by mail as provided above, when dispatched by telegram,
telex or other written telecommunication addressed
(i) if to the Owner Trustee, at its office at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration
(ii) if to the Indenture Trustee, at its office at
777 Main Street, Hartford, Connecticut 06115-2001, Attention:
Corporate Trust Department
(iii) if to the Loan Participant, at such address as
is set forth on Schedule 2 of the Participation Agreement or, if not
so specified, at the address set forth in the register maintained
pursuant to Section 2.07 hereof, or at such address as such Loan
Participant shall have furnished by notice to the Owner Trustee and
the Indenture Trustee,
(iv) if to the Lessee, at 3 A3 Phillips Building,
Bartlesville, Oklahoma 74004, Attention: Assistant Treasurer,
(v) if to the Owner Participant, at the address
specified in the Participation Agreement, and
(vi) if to any of the foregoing Persons, at such
other address as such Person shall from time to time designate by
written notice to the other parties hereto in accordance with this
Section 10.07.
Notwithstanding the foregoing provisions, for
purposes of Sections 4.01, 4.02, 4.04, 5.01 and 5.02, written notice shall be
deemed given when it is in fact received (by mail or otherwise) by any
addressee at the respective addresses specified above.
Section 10.08. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
enforceability 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. In the event
of any inconsistency or
<PAGE> 68
63
conflict between any provision of this Indenture and any provision of the Trust
Agreement, such provision in this Indenture shall govern and control.
Section 10.09. Separate Counterparts. This
Indenture may be executed in any number of counterparts (and each of the
parties hereto shall not be required to execute the same counterpart). Each
counterpart of this Indenture including a signature page executed by each of
the parties hereto shall be an original counterpart of this Indenture, but all
of such counterparts together shall constitute one instrument.
Section 10.10. Successors and Assigns. All
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, the Owner Trustee and its successors and permitted assigns, the
Owner Participant and its successors and permitted assigns, and the Indenture
Trustee and its successors and permitted assigns, and each holder of an
Equipment Note, all as herein provided. Any request, notice, direction,
consent, waiver or other instrument or action by any holder of an Equipment
Note shall bind the successors and assigns of such holder.
Section 10.11. Indenture for Benefit of Owner
Trustee, Indenture Trustee, Owner Participant and Holders. Nothing in this
Indenture, whether express or implied, shall be construed to give to any Person
other than the Owner Trustee, the Indenture Trustee, the Owner Participant, the
holders of the Equipment Notes and, with respect to Articles II, III, Sections
4.05, 5.07, 5.08, 5.09 and 5.10, Article VII, Article IX and this Article X,
and any provisions hereof requiring payment to or by the Lessee, the Lessee,
any legal or equitable right, remedy or claim under or in respect of this
Indenture.
Section 10.12. Headings. 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.
Section 10.13. Governing Law. THIS INDENTURE SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
Section 10.14. Normal Commercial Relations.
Anything contained in this Indenture to the contrary
<PAGE> 69
64
notwithstanding, the Owner Participant, the Owner Trustee or the Indenture
Trustee or any affiliate of the Owner Participant, the Owner Trustee or the
Indenture Trustee may enter into commercial banking or other financial
transactions, and conduct banking or other commercial relationships, with the
Lessee, any holder of an Equipment Note or the Indenture Trustee (in its
individual capacity or otherwise) fully to the same extent as if this Indenture
were not in effect, including, without limitation, the making of loans or other
extensions of credit for any purpose whatsoever.
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed by their respective officers or
attorneys-in-fact, as the case may be, thereunto duly authorized, as of the day
and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as
Indenture Trustee
by
---------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity
except as set forth in
Section 6.03 hereof, but
solely as Owner Trustee
by
----------------------------
Name:
Title:
<PAGE> 71
STATE OF CONNECTICUT )
:ss.
COUNTY OF HARTFORD )
On this day of , 199 , before me
personally appeared , to me personally known, who being by me duly
sworn, say that she is a Vice President of Shawmut Bank Connecticut, National
Association, that said instrument was signed on such date on behalf of said
association by authority of its Board of Directors, and she acknowledged that
the execution of the foregoing instrument was the free act and deed of said
association.
----------------------------
Notary Public
(NOTARIAL SEAL]
My commission expires:
STATE OF DELAWARE )
: ss.
COUNTY OF )
On this day of , 199 , before me
personally appeared , to me personally known, who being by me
duly sworn, say that he is Trust Officer of WILMINGTON TRUST COMPANY, that said
instrument was signed on such date on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
----------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
<PAGE> 72
Annex A
Trust Indenture and Security Agreement
PRINCIPAL AMORTIZATION
Percentage of
Payment Date Original Principal Amount
------------ -------------------------
[If more than one maturity of Equipment Note is used, prepare a right-hand
column for each maturity]
[In the case of the Railcars, use separate amortization tables for each class
of Railcars.]
<PAGE> 73
Exhibit A
Trust Indenture and Security Agreement
TRUST INDENTURE SUPPLEMENT
(Phillips Trust No. [ ]) NO.
This INDENTURE SUPPLEMENT (Phillips Trust No. [ ])
No. , dated , (this "Indenture Supplement"), of WILMINGTON TRUST
COMPANY, a Delaware banking corporation, not in its individual capacity but
solely as trustee (the "Owner Trustee") under the Trust Agreement (Phillips
Trust No.[ ]), dated as of September 1, 1994 (the "Trust Agreement"), between
the Owner Trustee in its individual capacity and [ ], a
Delaware corporation, as Owner Participant;
W I T N E S S E T H :
WHEREAS the Trust Indenture and Security Agreement
(Phillips Trust No.[ ]) dated as of September 1, 1994 (the "Indenture"),
between the Owner Trustee and Shawmut Bank Connecticut, National Association as
Indenture Trustee (the "Indenture Trustee"), provides for the execution and
delivery of Indenture Supplements thereto substantially in the form hereof
which shall particularly describe the Equipment, by having attached thereto a
copy of the Lease Supplement, and shall specifically mortgage the Equipment to
the Indenture Trustee; and
WHEREAS the Indenture relates to the Equipment
described in the copy of the Lease Supplement of even date herewith attached
hereto and made a part hereof, and a counterpart of the Indenture is attached
to and made a part of this Indenture Supplement;
NOW, THEREFORE, in order to secure (a) the prompt
payment of the principal of and interest, and premium, if any, on and all other
amounts due with respect to, the Equipment Notes from time to time outstanding
under the Indenture and (b) the payment, performance and observance by the
Owner Trustee, on behalf of the Owner Trust, of all the obligations, agreements
and covenants of the Owner Trustee in the Indenture and in the Equipment Notes,
and (c) the payment, performance and observance of all the obligations,
agreements and covenants of the Owner Trustee in the Participation Agreement
for the benefit of the Indenture Trustee or the holders of the Equipment Notes,
all for the benefit of the holders of the Equipment Notes, and for the uses and
purposes and subject to the terms and conditions of
<PAGE> 74
2
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
holders thereof, and of the sum of $1.00 paid to the Owner Trustee by the
Indenture Trustee at or before the delivery hereof, the receipt whereof is
hereby acknowledged, the Owner Trustee, on behalf of the Owner Trust, does
hereby sell, assign, transfer, convey, grant, mortgage, pledge and confirm,
unto the Indenture Trustee, its successors and assigns, in the trust created by
the Indenture for the benefit of the holders from time to time of the Equipment
Notes, a security interest in and mortgage lien on all estate, right, title and
interest of the Owner Trustee and the Owner Trust in and to (i) the property
comprising the Equipment described in the copy of the Lease Supplement attached
hereto and (ii) the Lease Supplement of even date herewith (excluding, however,
any rights to Excepted Property thereunder);
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 holders from time to time of the Equipment
Notes and for the uses and purposes and subject to the terms and provisions set
forth in the Indenture.
This Supplement shall be construed as supplemental to
the Indenture and shall form a part of it, and the Indenture is hereby
incorporated by reference herein and each is hereby ratified, approved and
confirmed.
This Supplement may be executed by the Owner Trustee
in separate counterparts, each of which when so executed and delivered is an
original, but all such counterparts shall together constitute but one and the
same Supplement.
AND FURTHER, the Owner Trustee hereby acknowledges
that the Equipment referred to in the aforesaid Lease Supplement attached
hereto and made a part hereof has been delivered to the Owner Trustee and is
included in the property of the Owner Trust covered by all the terms and
conditions of the Trust Agreement, subject to the pledge or mortgage thereof
under the Indenture.
<PAGE> 75
3
IN WITNESS WHEREOF, the Owner Trustee has caused this
Indenture Supplement to be duly executed by one of its duly authorized
officers, as of the day and year first above written.
WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee,
by
--------------------------
Title:
STATE OF DELAWARE )
) ss.
COUNTY OF )
On this day of 199 , before me
personally appeared , to me personally known, who being by me
duly sworn, say that he is Trust Officer of WILMINGTON TRUST COMPANY, that said
instrument was signed on such date on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
------------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
<PAGE> 1
EXHIBIT 4(c)(1)
________________________________________________________________________________
PARTICIPATION AGREEMENT
(Phillips Trust No. 94-__)
Dated as of ________________, 1994
among
PHILLIPS PETROLEUM COMPANY,
as Lessee
WILMINGTON TRUST COMPANY,
as Owner Trustee
_________________________,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Indenture Trustee
and
________________________,
as Interim Loan Participant
Transportation Equipment
COVERED HOPPERS AND TANK CARS
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT COST;
CLOSING; TRANSACTION COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Participation in Equipment Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing Date; Procedure for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions . . . . . . . . . . 6
2.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and
Termination Value; Confirmation and Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Postponement of Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Representations and Warranties of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Representations and Warranties of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Representations and Warranties of the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Representations, Warranties and Covenants Regarding Beneficial Interest . . . . . . . . . . . . . . . 22
3.5 Representations and Warranties of the Interim Loan Participant . . . . . . . . . . . . . . . . . . . . 22
3.6 Representations and Warranties of the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . 23
3.7 Opinion Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Conditions Precedent to Investment by Each Participant . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 (Intentionally Omitted.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Additional Conditions Precedent to Investment by Owner Participant . . . . . . . . . . . . . . . . . . 29
4.4 Conditions Precedent to the Obligation of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE . . . . . . . . . . . . . . . . . . 33
6.1 Restrictions on Transfer of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Lessor's Liens Attributable to the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
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----
<S> <C>
6.3 Lessor's Liens Attributable to the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Liens Created by the Indenture Trustee, the Loan Participants and the Pass Through Trustee . . . . . . 38
6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee . . . . . . . . . . . . . . . . . 39
6.6 Amendments to Operative Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.7 Merger Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.8 Rent Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.9 Pass Through Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7. LESSEE'S INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.1 General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.2 General Indemnification and Waiver of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9. SUCCESSOR INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 Lessee's Assumption of the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.4 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.6 No Guarantee of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.8 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.12 Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.13 Limitations of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.15 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
EXHIBITS
Exhibit A - Form of Certificate of Acceptance
Exhibit B - Form of Bill of Sale
Exhibit C - Form of Transferee's Parent Guaranty
Exhibit D - Form of Assignment and Assumption Agreement
Exhibit E-1 - Form of Opinion of Counsel to Assignee
Exhibit E-2 - Form of Opinion of Counsel to Assignee Guarantor
Exhibit F - Form of Participation Agreement Supplement
Exhibit G - Form of Underwriting Agreement
Exhibit H - Form of Pass Through Trust Agreement
-ii-
<PAGE> 4
SCHEDULES
Schedule 1 - Description of Equipment
Schedule 2 - Participant's Commitments
Schedule 3 - Rental Factors
Schedule 4 - Stipulated Loss Values
Schedule 5 - Termination Values
Schedule 6 - Early Buyout Dates and Early Buyout Prices
Schedule 7 - Percentage of Total Equipment Cost Financed By Equipment
Notes
-iii-
<PAGE> 5
EXHIBIT 4(c)(1)
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (Phillips Trust No. 94-__) dated
as of ________________, 1994 (this "Agreement"), among (i) PHILLIPS PETROLEUM
COMPANY, a Delaware corporation (herein, together with its successors and
assigns, called the "Lessee"), (ii) WILMINGTON TRUST COMPANY, a Delaware
banking corporation, not in its individual capacity except as expressly stated
herein, but solely as trustee under the Trust Agreement (as hereinafter
defined) (herein in such capacity, together with its successors and assigns,
called the "Owner Trustee"), (iii) _______________ _________________, a North
Carolina corporation (herein, together with its successors and assigns, called
the "Owner Participant"), (iv) SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
a national banking association, as trustee under the Indenture (as defined
below) (herein in such capacity, together with its successors and assigns,
called the "Indenture Trustee"), and (v) ______________, a _________________
banking corporation (herein in such capacity, together with its successors and
assigns, called the "Interim Loan Participant").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant has entered into the Trust Agreement (Phillips
Trust No. 94-__) with the Owner Trustee in its individual capacity pursuant to
which the Owner Trustee agrees, among other things, (i) to hold the Trust
Estate for the benefit of the Owner Participant thereunder on the terms
specified in the Trust Agreement, subject, however, to the Lien created under
the Indenture and, (ii) subject to the terms and conditions hereof, to purchase
on behalf of the Trust the Equipment described in Schedule 1 hereto from the
Lessee and concurrently therewith lease such Equipment to the Lessee;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Trustee has entered into the Indenture with the Indenture
Trustee pursuant to which the Owner Trustee agrees, among other things, for the
benefit of the holder or holders of the Equipment Notes, to issue on behalf of
the Trust to the Interim Loan Participant, the Equipment Notes as evidence of
the loan made by the Interim Loan Participant participating in the financing of
the Equipment Cost for the Equipment;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Owner Trustee is authorized and directed by the Owner Participant (i) to accept
delivery of the Bill of Sale evidencing the purchase and transfer of title of
each Unit of the Equipment to the Owner Trustee and (ii) to execute and deliver
the Lease
<PAGE> 6
2
relating to the Equipment pursuant to which, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to lease to the Lessee,
and the Lessee agrees to lease from the Owner Trustee, each Unit of Equipment
to be delivered on the Closing Date, such lease of Equipment of a Class to be
evidenced by the execution and delivery of a Lease Supplement to the Lease
covering such Class and such Units;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Lessee and the Owner Participant have entered into the Tax
Indemnity Agreement relating to the Equipment;
WHEREAS, the proceeds from the loan evidenced by the Equipment
Notes and made by the Interim Loan Participant will be applied, together with
the equity contribution made by the Owner Participant pursuant to this
Agreement, to effect the purchase of the Equipment contemplated hereby;
WHEREAS, on the Refinancing Date, pursuant to one or more Pass
Through Trust Agreements, one or more grantor trusts will be created in order
to facilitate the refinancing of the Equipment Notes issued to the Interim Loan
Participant on the Closing Date;
WHEREAS, on the Refinancing Date, the Pass Through Trustee
shall execute and deliver the Participation Agreement Supplement pursuant to
which the Pass Through Trustee shall become a party to this Agreement; and
WHEREAS, on the Refinancing Date, pursuant to the Indenture,
the Owner Trustee shall issue Equipment Notes on behalf of the Trust to the
Pass Through Trustee (acting on behalf of one or more grantor trusts and as
Loan Participant), and the proceeds of such Equipment Notes, together with
other amounts payable pursuant to the Operative Agreements, shall be applied to
the payment in full of all principal, interest and other amounts owing in
respect of the Equipment Notes issued to the Interim Loan Participant.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, receipt of which is
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. The capitalized terms used in this
Agreement (including the foregoing recitals) and not otherwise defined herein
shall have the respective meanings specified in Appendix A hereto, unless the
context hereof shall otherwise require. All references to Sections, Schedules
and Exhibits
<PAGE> 7
3
herein are to Sections, Schedules and Exhibits of this Agreement unless
otherwise indicated.
1.2 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT
COST; CLOSING; TRANSACTION COSTS
2.1 Sale and Purchase. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, the Lessee agrees to sell to the Owner Trustee and the Owner
Trustee agrees to purchase from the Lessee, the Units described in Schedule 1
as hereinafter provided, and in connection therewith, the Owner Trustee agrees
to pay to the Lessee the cost for each Unit as specified in Schedule 1;
provided, however, that the Owner Trustee shall not be obligated to purchase on
the Closing Date any Unit that is destroyed, damaged, defective, in unsuitable
condition or otherwise unacceptable to the Lessee for lease pursuant to the
Lease. The Lessee shall deliver the Equipment to the Owner Trustee and the
Owner Trustee shall accept such delivery on a single delivery date as more
fully provided herein (the "Closing Date"); provided that the Closing Date
shall occur on or prior to ______________, 1994.
2.2 Participation in Equipment Cost.
(a) Equity Participation. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, on the Closing Date, the Owner Participant agrees to participate
in the payment of the Equipment Cost for the Units delivered on the Closing
Date by making an equity investment in the beneficial ownership of such Units
in the amount equal to the product of the aggregate Equipment Cost for the
Units delivered on the Closing Date and the percentage set forth opposite the
Owner Participant's name in Schedule 2 (the Owner Participant's "Commitment").
The aggregate amount of the Owner Participant's Commitment shall not exceed
$___________. The Owner Participant's Commitment shall be paid on the Closing
Date to the Indenture Trustee to be held and applied by the Indenture Trustee
toward the payment of the Equipment Cost for the Units as provided in Section
2.3.
(b) Debt Participation. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, on the Closing Date, the Loan Participant agrees to participate
in the payment of the Equipment Cost for the Units delivered on the Closing
Date by making a secured loan, to be evidenced by the Equipment Notes, to the
Owner Trustee in the amount equal to the product of the aggregate
<PAGE> 8
4
Equipment Cost for the Units delivered on the Closing Date and the percentage
set forth opposite the Loan Participant's name in Schedule 2 (the Loan
Participant's "Commitment"). The aggregate amount of the Loan Participant's
Commitment shall not exceed $________________.
(c) Initial Lease Period Interest Payment. The Owner
Participant covenants and agrees solely for the benefit of the Lessee that it
will advance funds to the Owner Trustee sufficient to pay the interest (the
"Initial Lease Period Interest") on the Equipment Notes which accrues during
the period from the Closing Date to ____________, 1995. If the Refinancing Date
occurs prior to ____________, 1995, then the Owner Participant shall advance
such funds to the Owner Trustee in two installments, with the first installment
due on the Refinancing Date in order to pay the interest which has accrued on
the Equipment Notes from and including the Closing Date to but excluding the
Refinancing Date and with the second installment due on ____________, 1995 in
order to pay the interest which has accrued on the Equipment Notes from and
including the Refinancing Date to but excluding ____________, 1995. If the
Refinancing Date does not occur prior to ____________, 1995, then the Owner
Participant shall advance funds to the Owner Trustee in a single installment on
____________, 1995 in order to pay the interest which has accrued on the
Equipment Notes from and including the Closing Date to but excluding
____________, 1995. The Lessee shall provide the Owner Participant with at
least three days advance notice of the date and amount of any Initial Lease
Period Interest which will be due and payable. The Owner Trustee shall upon
receipt of funds advanced by the Owner Participant pursuant to this Section
2.2(b) make such funds available to the Indenture Trustee in order to pay the
Initial Lease Period Interest. The Owner Participant hereby agrees to the
terms and conditions set forth in Section 3.5 of the Lease.
2.3 Closing Date; Procedure for Participation.
(a) Notice of Closing Date. Not later than 1:00 P.M.,
New York City time, on the third Business Day preceding the Closing Date, the
Lessee shall give the Owner Participant, the Indenture Trustee, the Owner
Trustee and the Interim Loan Participant notice (a "Notice of Delivery") by
facsimile or other form of telecommunication or telephone (to be promptly
confirmed in writing) of the Closing Date, which Notice of Delivery shall
specify in reasonable detail the number and type of Units to be delivered on
such date, the aggregate Equipment Cost of such Units, and the respective
amounts of the Owner Participant's Commitment and the Loan Participant's
Commitment required to be paid with respect to such Units, provided if such
Units do not constitute all of the units of similar equipment contemplated by
the Term Sheet, there shall be no subsequent or additional closing without the
consent of all the parties hereto. Prior to 10:00 A.M., New York City time, on
the Closing Date, the Owner Participant shall make the amount of the Owner
Participant's
<PAGE> 9
5
Commitment required to be paid on the Closing Date available to the Indenture
Trustee, and immediately prior to the delivery and acceptance of the Units
specified in Section 2.3(b), the Loan Participant shall make the amount of the
Loan Participant's Commitment for the Equipment Cost required to be paid on the
Closing Date available to the Indenture Trustee, in either case, by
transferring or delivering such amounts, in funds immediately available on the
Closing Date, to the Indenture Trustee, either directly to, or for deposit in,
the Indenture Trustee's account at Shawmut Bank Connecticut, National
Association (ABA No. _____________), for credit to account number ___________.
The making available by the Owner Participant of the amount of its Commitment
for the Equipment Cost shall be deemed a waiver of the Notice of Delivery by
the Owner Participant and the Owner Trustee and the making available by the
Loan Participant of the amount of its Commitment for the Equipment Cost shall
be deemed a waiver of the Notice of Delivery by the Loan Participant and the
Indenture Trustee.
(b) Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place beginning at 10:00 A.M.,
New York City time, on the Closing Date at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, 10017 or at such other
place or time as the parties hereto shall agree. Upon receipt by the Indenture
Trustee on the Closing Date of the full amount of the Owner Participant's
Commitment and Loan Participant's Commitment in respect of the Units delivered
on the Closing Date, the Indenture Trustee on behalf of the Owner Trustee
shall, subject to the conditions set forth in Sections 4.1 and 4.3 having been
fulfilled to the satisfaction of the Owner Participant and the Interim Loan
Participant or waived by the Owner Participant and the Interim Loan
Participant, pay to the Lessee from the funds then held by the Indenture
Trustee, in immediately available funds, an amount equal to the Equipment Cost
for the Units delivered on the Closing Date, and simultaneously therewith, (i)
the Lessee shall deliver the Units to the Owner Trustee, (ii) the Owner Trustee
shall have accepted the Units, such acceptance to be conclusively evidenced by
the execution and delivery by the Owner Trustee or its authorized
representative (as provided in Section 2 of the Lease) of a Certificate of
Acceptance with respect to the Units in the form attached hereto as Exhibit A
(a "Certificate of Acceptance"), (iii) the Owner Trustee shall, pursuant to the
Lease, lease and deliver the Equipment delivered on the Closing Date to the
Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of the
Units under the Lease (such lease, delivery and acceptance of the Units under
the Lease being conclusively evidenced by the execution and delivery by the
Lessee and Owner Trustee of a Lease Supplement to the Lease concerning such
Units of Equipment so delivered), and (iv) the Owner Trustee shall execute and
deliver the Equipment Notes to the Loan Participant. Each of the Lessee, the
Owner Participant, the Owner Trustee, the Loan Participant and the Indenture
Trustee
<PAGE> 10
6
hereby agree to take all actions required to be taken by it in connection
therewith and pursuant to this Section 2.3(b).
2.4 Owner Participant's Instructions to the Owner
Trustee; Satisfaction of Conditions.
(a) The Owner Participant agrees that the making
available to the Indenture Trustee of the amount of its Commitment for the
Units delivered on the Closing Date in accordance with the terms of this
Section 2 shall constitute, without further act, authorization and direction by
the Owner Participant to the Owner Trustee, subject, on the Closing Date, to
the conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the
satisfaction of the Owner Participant or waived by the Owner Participant, to
take the actions specified in Section 2.1 of the Trust Agreement with respect
to the Units on the Closing Date.
(b) The Owner Participant agrees, in the case of any
Replacement Unit substituted pursuant to Section 11 of the Lease, that the
Owner Trustee is authorized and directed to take the actions specified in such
Section 11 of the Lease with respect to such Replacement Unit upon due
compliance with the terms and conditions set forth in Section 11 of the Lease
with respect to such Replacement Unit.
(c) The Owner Participant agrees that the authorization by
the Owner Participant or its counsel to the Indenture Trustee to release to the
Lessee the Owner Participant's Commitment with respect to the Units delivered
on the Closing Date shall constitute, without further act, notice and
confirmation that all conditions to closing set forth in Sections 4.1 and 4.3
were either met to the satisfaction of the Owner Participant or, if not so met,
were waived by it with respect to such Units.
2.5 Expenses.
(a) If the Owner Participant shall have made its
investment provided for in Section 2.2 and the transactions contemplated by
this Agreement are consummated, either the Owner Participant will promptly pay,
or the Owner Trustee will promptly pay, with funds the Owner Participant hereby
agrees to pay to the Owner Trustee, the following (the "Transaction Costs") if
evidenced by an invoice in form reasonably satisfactory to the Owner
Participant delivered to the Owner Participant prior to the Basic Term
Commencement Date (it being understood and agreed that all Transaction Costs
will be incurred either in connection with the closing of the Overall
Transaction or with the refinancing of the Equipment Notes to occur on the
Refinancing Date):
(i) the cost of reproducing and printing the Operative
Agreements, the Equipment Notes, the Pass Through Certificates and the
offering materials relating to the Pass
<PAGE> 11
7
Through Certificates, including all costs and fees in connection with
the initial filing and recording of the Lease, the Indenture and any
other document required to be filed or recorded pursuant to the
provisions hereof or of any other Operative Agreement and the fees and
expenses of the rating agencies in connection with rating the Pass
Through Certificates;
(ii) the reasonable fees and expenses of Moore & Van
Allen, special counsel for the Owner Participant, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(iii) the fees, expenses and disbursements of the
Underwriters in connection with the offer and sale of the Pass Through
Certificates;
(iv) the fees, expenses and disbursements of Chemical
Securities, Inc., as equity placement agent for the Lessee, for their
services rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(v) the reasonable fees and expenses of Cravath, Swaine
& Moore, special counsel for the Interim Loan Participant and the
Underwriters, for their services rendered in connection with the
Overall Transaction and the refinancing of the Equipment Notes to
occur on the Refinancing Date;
(vi) the reasonable fees and expenses of Shipman &
Goodwin, special counsel for the Indenture Trustee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(vii) the reasonable fees and expenses of Potter Anderson
& Corroon, special counsel for the Owner Trustee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(viii) the reasonable fees and expenses of Shipman &
Goodwin, special counsel for the Pass Through Trustee, for their
services rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(ix) the reasonable fees and expenses of Simpson Thacher
& Bartlett, special counsel for the Lessee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
<PAGE> 12
8
(x) the fees and expenses of the Owner Trustee incurred
in connection with the closing of the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(xi) the initial fees and expenses of the Indenture
Trustee incurred in connection with the closing of the Overall
Transaction and the refinancing of the Equipment Notes to occur on the
Refinancing Date;
(xii) the initial fees and expenses of the Pass Through
Trustee;
(xiii) the reasonable fees and expenses of Deloitte &
Touche Valuation Group, for their services rendered in connection with
delivering the Appraisal required by Section 4.3(a); and
(xiv) the costs incurred in connection with any
adjustment pursuant to Section 2.6(a), other than clause (C) thereof;
and
(xv) the reasonable fees and expenses of Donelan,
Cleary, Wood, & Maser, P.C., special ICC counsel, for their services
rendered in connection with the Overall Transaction;
provided that the Lessee reserves the right (A) to pay directly all or a
portion of the Transaction Costs specified in clauses (iii), (iv) and (ix)
above and (B) to pay directly any other Transaction Costs in excess of ____% of
Total Equipment Cost, provided that the amount of Transaction Costs paid
directly by the Lessee pursuant to this clause (B) shall not exceed the excess,
if any, of (1) $__________ over (2) the amount of Transaction Costs paid
directly by the Lessee pursuant to clause (A), provided, further, that the
aggregate amount of Transaction Costs shall not exceed _____% of Total
Equipment Cost without the consent of the Owner Participant not to be
unreasonably withheld. Notwithstanding the foregoing, Transaction Costs shall
not include internal costs and expenses such as salaries and overhead of
whatsoever kind or nature nor costs incurred by parties to this Participation
Agreement pursuant to arrangements with third parties for services (other than
those expressly referred to above), such as computer time procurement,
financial analysis and consulting, advisory services, and costs of a similar
nature.
(b) Upon the consummation of the transactions
contemplated by this Agreement, the Lessee agrees to pay, to the extent such
fees and expenses do not constitute Transaction Costs as specified in Section
2.5(a), when due: (i) the reasonable expenses (including legal fees and
expenses) of the Owner Trustee, the Indenture Trustee, the Pass Through Trustee
and the Participants incurred subsequent to the delivery of the Equipment on
the Closing Date, in connection with any supplements,
<PAGE> 13
9
amendments, modifications or alterations of any of the Operative Agreements
which are (A) requested by, or necessitated by action on the part of, the
Lessee or entered into in connection with, or as a result of, a Lease Default
or a Lease Event of Default or (B) required or contemplated by any Operative
Agreement (including costs incurred in connection with any adjustment pursuant
to Section 2.6); (ii) the ongoing fees and expenses (including legal fees and
expenses) of the Owner Trustee under the Operative Agreements; (iii) the
ongoing fees and expenses of the Indenture Trustee under the Operative
Agreements; and (iv) the ongoing fees and expenses of the Pass Through Trustee
under the Operative Agreements; and (v) the reasonable fees and expenses of any
separate owner trustee or co-trustee appointed pursuant to the Trust Agreement
as a result of any requirement of law or if otherwise required by any Operative
Agreement or if requested or consented to by the Lessee. The Lessee also
agrees to pay all amounts constituting Transaction Costs which the Owner
Participant is not required to pay by reason of the second proviso of Section
2.5(a).
(c) Subject to the next sentence, if the transactions
contemplated hereby are not consummated for any reason, the Lessee shall pay
all Transaction Costs. Notwithstanding anything contained herein to the
contrary, if the transactions contemplated hereby are not consummated solely as
a result of (A) the Owner Participant's default in its obligations to
consummate the transactions hereunder or (B) the Owner Participant's failure to
make its equity investment as required by Section 2.2(a) after the conditions
specified in Section 4 have been satisfied or waived by it in writing (other
than conditions the satisfaction of which are solely in the control of the
Owner Participant), the Owner Participant shall pay its own fees and expenses
and the fees and expenses of its legal counsel.
(d) Notwithstanding the foregoing provisions of this
Section 2.5, except as specifically provided in Section 7.2 or in any other
Operative Agreement, the Lessee shall have no liability for any costs or
expenses relating to any voluntary transfer of the Owner Participant's interest
in the Equipment (other than in connection with the exercise of remedies as
provided in Section 15 of the Lease) and no such costs or expenses shall
constitute Transaction Costs and the Lessee will not have any obligation with
respect to the costs and expenses resulting from any such transfer of any
equity interest by any transferee of the Owner Participant, whenever occurring.
2.6 Calculation of Adjustments to Basic Rent, Stipulated
Loss Value and Termination Value; Confirmation and
Verification.
(a) Calculation of Adjustments. In the event that (A)
the Transaction Costs paid by the Owner Participant pursuant to Section 2.5 are
less or more than ____% of the Total Equipment Cost or (B) prior to the
acceptance of the Equipment on the
<PAGE> 14
10
Closing Date: (1) there shall have occurred a Change in Tax Law and (2) after
having been advised in writing by the Owner Participant of such Change in Tax
Law and the proposed adjustment to the payments of Basic Rent resulting
therefrom, the Lessee shall have waived its right under Section 4.4(f) of this
Agreement to decline to proceed with the transaction, or (C) a refinancing or
refunding as contemplated by Section 10.2 occurs, or (D) the Closing Date is
other than _______________, 1994, or (E) the Debt Rate applicable to the
Equipment Notes is other than ____%, or (F) the percentage of Total Equipment
Cost for each Class of Equipment financed by the issuance of Equipment Notes is
other than as set forth in Schedule 7, (clauses (A)-(F), collectively, the
"Pricing Assumptions"), then, in each such case of a Pricing Assumption not
being correct, the Owner Participant shall recalculate the payments or amounts,
as the case may be, of Basic Rent, the Early Buy-Out Price, Stipulated Loss
Values and Termination Values in respect of the Units of each Class of
Equipment, (i) to preserve the Net Economic Return that the Owner Participant
would have realized had such Pricing Assumption been correct (or, if such
adjustment results from the Closing Date occurring after _____________ __,
1994, to increase the Net Economic Return that the Owner Participant will
realize by ___ basis points over the Net Economic Return that the Owner
Participant would have realized had the Closing Date occurred on
______________, 1994) and (ii) to minimize to the greatest extent possible,
consistent with the foregoing clause (i), the present value (discounted
semiannually at an interest rate per annum equal to the Debt Rate) of the
payments of Basic Rent in respect of the Units of each Class of Equipment,
provided that any such adjustment will not cause the average life of the Owner
Participant's investment to increase by more than six months nor cause the
pay-back period for the Owner Participant's investment to increase by more than
three months provided, further, that any such adjustment shall not cause a
decrease in the Early Buy-Out Price except to the extent such decrease is
attributable to a reduction in the principal amount of the Equipment Notes
which will be outstanding on the Early Buy-Out Date. In performing any such
recalculation and in determining the Owner Participant's Net Economic Return,
the Owner Participant shall utilize the same methods and assumptions originally
used in making the computations of Basic Rent, the Early Buy-Out Price,
Stipulated Loss Values and Termination Values in respect of the Units of each
Class of Equipment with respect to the Basic Term for such Units initially set
forth in Schedules 3, 4, 5 and 6 to this Participation Agreement (other than
those assumptions changed as a result of any of the events described in clauses
(A) through (F) of the preceding sentence necessitating such recalculation; it
being agreed that such recalculation shall reflect solely any changes of
assumptions or facts resulting directly from the event or events necessitating
such recalculation). Such adjustments shall comply (to the extent the original
structure complied) with section 467 of the Code (or if section 467 is amended
subsequent to the Closing Date, to the extent the original structure would have
complied with section 467, as amended, the adjustment shall
<PAGE> 15
11
comply with section 467, as amended) and the requirements of Revenue Procedure
75-28, as amended.
(b) Confirmation and Verification. Upon completion of
any recalculation described above in this Section 2.6, a duly authorized
officer of the Owner Participant shall provide a certificate to the Lessee
either (x) stating that the payments of Basic Rent, Early Buy-Out Price,
Stipulated Loss Values and Termination Values in respect of the Units of each
Class of Equipment with respect to the Basic Term for such Units as are then
set forth in Schedules 3, 4, 5 and 6 of this Participation Agreement do not
require change, or (y) setting forth such adjustments to the payments of Basic
Rent, Early Buy-Out Price, Stipulated Loss Values or Termination Values for
such Units with respect to the Basic Term for such Units as have been
calculated by the Owner Participant in accordance with Section 2.6(a) above.
Such certificate shall describe in reasonable detail the basis for any such
adjustments. If the Lessee shall so request, the recalculation of any such
adjustments described in this Section 2.6 shall be verified by a nationally
recognized firm of independent accountants selected by the Owner Participant
and reasonably acceptable to the Lessee, and any such recalculation of such
adjustment as so verified shall be binding on the Lessee and the Owner
Participant; provided the Owner Participant shall be afforded the opportunity
to review such calculations and discuss any objections it may have with respect
thereto with such accountants, and errors, if any, shall be corrected by the
firm of accountants. Such accounting firm shall be requested to make its
determination within 30 days. The Owner Participant shall provide to a
representative of such accounting firm, on a confidential basis, such
information as it may reasonably require, including the original assumptions
used by the Owner Participant and the methods used by the Owner Participant in
the original calculation of, and any recalculation of, Basic Rent, Early
Buy-Out Price, Stipulated Loss Values and Termination Values and such other
information as is necessary to determine whether the computation is accurate
and in conformity with the provisions of this Agreement. The costs of such
verification shall be borne by the Lessee. If such accounting firm's
verification shall result in a decrease in the net present value of the Basic
Rent in respect of the Units of any Class of Equipment under this Lease by more
than __ basis points, as compared to the net present value of Basic Rent
proposed by the Owner Participant, or shall result in a reduction in any
Stipulated Loss Value, Termination Value or the Early Buy-Out Price in respect
of any such Units by more than __ basis points, as compared to the value
proposed by the Owner Participant, then the Owner Participant agrees to
reimburse the Lessee for any amounts paid for such verification.
(c) Notwithstanding the foregoing, any adjustment made to
the payments of Basic Rent, Early Buy-Out Price, Stipulated Loss Values or
Termination Values with respect to the Basic Term, pursuant to the foregoing,
shall comply with the following
<PAGE> 16
12
requirements: (i) adjustments of payments of Basic Rent shall be subject to
Section 6.8, and (ii) adjustments of the Early Buy-Out Price, Stipulated Loss
Values and Termination Values for any Unit shall be subject to Section 6.8.
(d) Invoices. All invoices in respect of Transaction
Costs shall be directed to the Owner Participant at the address set forth in
Schedule 7.
2.7 Postponement of Closing Date. (a) The scheduled
Closing Date specified in the Notice of Delivery (or subsequently specified in
a notice of postponement pursuant to this Section 2.7) may be postponed for any
reason (but to no later than ______________, 1994) if the Lessee gives the
Owner Participant, the Indenture Trustee, the Interim Loan Participant and the
Owner Trustee facsimile or telephonic (confirmed in writing) notice of the
postponement and notice of the date to which such Closing Date has been
postponed, the notice of postponement to be received by each party no later
than 5:30 P.M., New York City time, on the scheduled Closing Date specified in
the Notice of Delivery (or subsequently specified in a notice of postponement
pursuant to this Section 2.7), and the term "Closing Date" as used in this
Agreement shall mean the postponed "Closing Date".
(b) In the event of any postponement of a scheduled
Closing Date pursuant to this Section 2.7 (any such scheduled Closing Date
being referred to as a "Scheduled Closing Date" for the purposes of this
Section 2.7): (i) the Lessee will reimburse the Owner Participant and the
Interim Loan Participant for the loss of the use of their respective funds
deposited with the Indenture Trustee pursuant to Section 2.3(a) with respect to
each such Unit occasioned by such postponement or failure to deliver or accept
(unless, in the case of the Owner Participant's funds, such failure to accept
is caused by a default by the Owner Participant hereunder or by the Owner
Trustee (acting pursuant to instructions from the Owner Participant) under the
Trust Agreement, the Lease or the Indenture) by paying to the Owner Participant
and the Interim Loan Participant, respectively, on demand interest at the Prime
Rate, for the period from and including such Scheduled Closing Date to but
excluding the earlier of the date upon which such funds are returned (unless
such funds are returned after 10:00 A.M., New York City time, in which case
such date of return shall be included) or the actual date of delivery, and (ii)
the Indenture Trustee will return not later than 10:00 A.M. New York City time,
on the first Business Day following such Scheduled Closing Date, any funds
which it shall have received from the Owner Participant and the Interim Loan
Participant, respectively, as its Commitment for such Units, absent joint
instruction from Lessee, the Owner Participant and the Interim Loan Participant
to retain such funds until the specified date of postponement established under
Section 2.7(a).
(c) The Indenture Trustee agrees that, in the event it
has received telephonic notice (to be confirmed promptly in
<PAGE> 17
13
writing) from the Lessee on a Scheduled Closing Date that such Scheduled
Closing Date is to be postponed, it will if instructed in the aforementioned
notice from the Lessee (which notice shall specify the securities to be
purchased) use reasonable best efforts to invest, at the risk of the Lessee
(except as provided below with respect to the Indenture Trustee's gross
negligence or willful misconduct), the funds received by it from the Owner
Participant and the Interim Loan Participant with respect to their respective
Commitments in Permitted Investments in accordance with Lessee's instructions.
Any such Permitted Investments purchased by the Indenture Trustee upon
instructions from the Lessee shall be held in trust by the Indenture Trustee
(but not as part of the Indenture Estate under the Indenture) for the benefit
of the Owner Participant and the Interim Loan Participant, respectively, whose
funds are invested in Permitted Investments upon instructions from the Lessee
and any net profits on the investment of such funds (including interest), if
any, shall be for the account of and shall on the Closing Date, or on the date
such funds are returned to the Owner Participant and the Interim Loan
Participant, respectively, be paid over to, the Lessee. The Lessee shall pay
to the Indenture Trustee on the Closing Date (if such Unit or Units are
delivered and accepted pursuant hereto) the amount of any net loss on the
investment of such funds invested at the instruction of the Lessee. If the
funds furnished by the Owner Participant and the Interim Loan Participant,
respectively, with respect to such Unit or Units are required to be returned to
the Owner Participant and the Interim Loan Participant, respectively, the
Lessee shall, on the date on which such funds are so required to be returned,
reimburse the Indenture Trustee, for the benefit of the Owner Participant and
the Interim Loan Participant, respectively, for any net losses incurred on such
investments regardless of the cause of, or responsibility for, such loss. The
Indenture Trustee 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 gross negligence. In order to obtain funds for the payment of Equipment
Cost for such Unit or Units or to return funds furnished by the Owner
Participant and the Interim Loan Participant, respectively, to the Indenture
Trustee for the benefit of the Owner Participant and the Interim Loan
Participant, respectively, with respect to such Unit or Units, the Indenture
Trustee is authorized to sell any Permitted Investments purchased as aforesaid
with the funds received by it from the Owner Participant and the Interim Loan
Participant, respectively, in connection with such Unit or Units.
(d) Notwithstanding the provisions of Section 2.7(a), the
Owner Participant and the Interim Loan Participant, respectively shall not be
under any obligation to make its Commitment available beyond 1:00 P.M. New York
City time, on _____________, 1994.
<PAGE> 18
14
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Owner Trustee.
The Owner Trustee, both in its individual capacity and as Owner Trustee,
represents and warrants to the Owner Participant, the Interim Loan Participant,
each of the other Trustees and the Lessee, notwithstanding the provisions of
Section 10.13 or any similar provision in any other Operative Agreement, that,
as of the date hereof:
(a) the Owner Trustee, in its individual capacity, is a
banking corporation duly organized and validly existing in good
standing under the laws of Delaware, has full corporate power and
authority to carry on its business as now conducted and to enter into
and perform its obligations hereunder and under the Trust Agreement
and (assuming due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has full power and authority, as
Owner Trustee and/or, to the extent expressly provided herein or
therein, in its individual capacity, to enter into and perform its
obligations under each of the Owner Trustee Agreements;
(b) the Owner Trustee, in its individual capacity, has
duly authorized, executed and delivered the Trust Agreement and
(assuming the due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) the Owner Trustee in its trust
capacity and, to the extent expressly provided therein, in its
individual capacity, has duly authorized, executed and delivered each
of the other Owner Trustee Agreements and, as of the Closing Date, the
Equipment Notes, the Lease Supplement and the Indenture Supplement to
be delivered on the Closing Date; and the Trust Agreement constitutes
a legal, valid and binding obligation of the Owner Trustee, in its
individual capacity, enforceable against it in its individual capacity
in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity;
(c) assuming the due authorization, execution and
delivery of the Trust Agreement by the Owner Participant, each of the
Owner Trustee Agreements (other than the Trust Agreement) to which it
is a party constitutes, or when entered into will constitute, a legal,
valid and binding obligation of the Owner Trustee in its individual
capacity to the extent such agreements relate to the Owner Trustee in
its individual capacity, enforceable against it in its individual
capacity, in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by
general principles of equity;
<PAGE> 19
15
(d) neither the execution and delivery by the Owner
Trustee, in its individual capacity or as Owner Trustee, as the case
may be, of the Owner Trustee Agreements to be delivered on the Closing
Date, nor the consummation by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, of any of the
transactions contemplated hereby or thereby, nor the compliance by the
Owner Trustee, in its individual capacity, or as Owner Trustee, as the
case may be, with any of the terms and provisions hereof and thereof,
(i) requires or will require any approval of its stockholders, or
approval or consent of any trustees or holders of any indebtedness or
obligations of it in its individual capacity, or (ii) violates or will
violate its certificate of incorporation or by-laws, or contravenes or
will contravene any provision of, or constitutes or will constitute a
default under, or results or will result in any breach of, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sale
contract, bank loan or credit agreement, license or other agreement or
instrument to which the Owner Trustee in its individual capacity is a
party or by which it is bound, or contravenes or will contravene any
law, governmental rule or regulation of the State of Delaware or of
the United States of America governing the banking or trust powers of
the Owner Trustee, or any judgment or order applicable to or binding
on it;
(e) there are no Taxes payable by the Owner Trustee,
either in its individual capacity or as Owner Trustee, imposed by the
State of Delaware or any political subdivision thereof in connection
with the execution and delivery by the Owner Trustee in its individual
capacity of the Trust Agreement, and, in its individual capacity or as
Owner Trustee, as the case may be, of this Agreement, the other Owner
Trustee Agreements to be delivered on the Closing Date solely because
the Owner Trustee in its individual capacity is a corporation with its
principal place of business in Wilmington, Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware; and
there are no Taxes payable by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, imposed by the State
of Delaware or any political subdivision thereof in connection with
the acquisition of its interest in the Equipment (other than franchise
or other taxes based on or measured by any fees or compensation
received by the Owner Trustee for services rendered in connection with
the transactions contemplated hereby) solely because the Owner Trustee
in its individual capacity is a corporation with its principal place
of business in Wilmington, Delaware and performs certain of its duties
as Owner Trustee in the State of Delaware;
(f) there are no pending or, to its knowledge, threatened
actions or proceedings against the Owner Trustee, either in its
individual capacity or as Owner Trustee,
<PAGE> 20
16
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 Owner Trustee, in its individual capacity or
as Owner Trustee, as the case may be, to perform its obligations under
the Trust Agreement or the other Owner Trustee Agreements to be
delivered on the Closing Date;
(g) both its chief executive office, and the place where
its records concerning the Equipment and all its interest in, to and
under all documents relating to the Trust Estate, are located at
Wilmington, Delaware 19890, and the Owner Trustee, in its individual
capacity, agrees to give the Owner Participant, the Indenture Trustee
and the Lessee at least 30 days prior written notice of any relocation
of said chief executive office or said place from its present
location;
(h) no consent, approval, order or authorization of,
giving of notice to, or registration with, or taking of any other
action in respect of, any Delaware or local governmental authority or
agency or any United States federal governmental authority or agency
regulating the banking or trust powers of the Owner Trustee, in its
individual capacity, is required for the execution and delivery of, or
the carrying out by, the Owner Trustee in its individual capacity or
as Owner Trustee, as the case may be, of any of the transactions
contemplated hereby or by the Trust Agreement or of any of the
transactions contemplated by any of the other Owner Trustee
Agreements, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken;
(i) on the Closing Date, the Owner Trustee's right, title
and interest in and to the Equipment delivered on the Closing Date
shall be free of any Lessor's Liens attributable to the Owner Trustee
in its individual capacity;
(j) the proceeds received by the Owner Trustee from the
Owner Participant pursuant to the Trust Agreement will be administered
by it in accordance with Article IV of the Trust Agreement; and
(k) the Owner Trustee shall receive from the Lessee such
title as is conveyed to it by the Lessee, subject to the rights of the
Owner Trustee and the Lessee under the Lease and the security interest
created pursuant to the Indenture and the Indenture Supplement in
respect of the Units delivered on the Closing Date.
3.2 Representations and Warranties of the Lessee. The
Lessee represents and warrants to the Interim Loan Participant,
<PAGE> 21
17
the Trustees and the Owner Participant that, as of the date hereof:
(a) the Lessee is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, has the corporate power and authority to carry on its
business as now conducted, and has the requisite power and authority
to execute, deliver and perform its obligations under the Lessee
Agreements;
(b) the Lessee Agreements have been duly authorized by
all necessary corporate action (no shareholder approval being
required), executed and delivered (or in the case of the Lease
Supplement in respect of the Units delivered on the Closing Date will
on the Closing Date have been duly executed and delivered) by the
Lessee, and constitute (or in the case of the Lease Supplement in
respect of the Units delivered on the Closing Date will on the Closing
Date constitute) the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity;
(c) the execution, delivery and performance by the Lessee
of each Lessee Agreement and compliance by the Lessee with all of the
provisions thereof do not and will not contravene any law or
regulation, or any order of any court or governmental authority or
agency applicable to or binding on the Lessee or any of its
properties, or contravene the provisions of, or constitute a default
by the Lessee under, or result in the creation of any Lien (except for
Permitted Liens) upon the property of the Lessee under its certificate
of incorporation or by-laws or any indenture, mortgage, contract or
other agreement or instrument to which the Lessee is a party or by
which the Lessee or any of its property is bound or affected;
(d) there are no proceedings pending or, to the knowledge
of the Lessee, threatened against the Lessee in any court or before
any governmental authority or arbitration board or tribunal (i) in
which it is probable that an adverse decision will be rendered in a
matter for which no adequate provision has been made which could
reasonably be expected to materially adversely affect the business,
consolidated financial position or consolidated results of operations
and cash flows of the Lessee or (ii) which in any manner draws into
question the validity of, or seeks to restrain the transactions
contemplated by the Lessee Agreements or (iii) which affects its
ability to perform its obligations under the Lessee Agreements;
<PAGE> 22
18
(e) the consolidated balance sheet of the Lessee and its
consolidated subsidiaries as of December 31, 1993, and the related
consolidated statements of income, cash flow and changes in common
stockholders' equity for the fiscal year ended on such date reported
on by Ernst & Young and set forth in the Lessee's 1993 Form 10-K, as
filed with the Securities Exchange Commission, fairly present, in
conformity with generally accepted accounting principles, the
consolidated financial position of the Lessee and its consolidated
subsidiaries as of such date and the results of operations of and
cashflows for the Lessee and its consolidated subsidiaries for such
period. The unaudited consolidated balance sheet of the Lessee and
its consolidated subsidiaries as of ____ __, 1994, and the related
unaudited consolidated statements of income, cash flow and changes in
common stockholders' equity for the six-month period ended ____ __,
1994, fairly present, in conformity with generally accepted accounting
principles (except for the absence of footnotes) the financial
position of the Lessee and its consolidated subsidiaries as of such
date and the results of their operations for the period then ended,
subject to normal year-end adjustments. Since ____ __, 1994, there
has been no material adverse change in the financial position of the
Lessee and its consolidated subsidiaries taken as a whole;
(f) no consent, approval or authorization of, or filing,
registration or qualification with, or the giving of notice to, any
governmental authority or other Person (including, without limitation,
any holder of indebtedness or obligations of the Lessee) is required
on the part of the Lessee in connection with the execution and
delivery by the Lessee of the Lessee Agreements;
(g) all filings and other actions necessary or reasonably
required to establish and perfect the right, title and interest of the
Owner Trustee under the Lease in and to the Equipment and the
remainder of the Trust Estate and to perfect the security interest of
the Indenture Trustee under the Indenture in the Indenture Estate will
have been made on or prior to the Closing Date (except for Uniform
Commercial Code financing statements in the process of being filed)
and, except as aforesaid, the Indenture will on the Closing Date
create a valid and perfected Lien on the Indenture Estate, subject to
any Lessor's Liens and Permitted Liens;
(h) no Lease Default or Lease Event of Default has
occurred and is continuing and to the knowledge of Lessee, no Event of
Loss has occurred;
(i) the execution and delivery of this Agreement and the
other Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not
<PAGE> 23
19
involve any non-exempt prohibited transaction within the meaning of
Section 406(a) of ERISA or Section 4975(c)(1)(A) through (D) of the
Code (such representation being made in reliance on the accuracy of
the representation of the Owner Participant in Section 3.6(h) of this
Agreement and on the accuracy of the representation of the Interim
Loan Participant in Section 3.5(c) of this Agreement;
(j) on the Closing Date, Lessee shall have, and the Bills
of Sale to be delivered on the Closing Date shall convey, to the Owner
Trustee title to the Units being delivered on the Closing Date, free
and clear of all Liens except Liens described in clauses (i), (ii) and
(v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not
due and payable;
(k) on the Closing Date, the Registration Statement does
not contain any untrue statement of a material fact or omit a material
fact which would make the statements contained therein misleading;
(l) on the Closing Date all sales, use or transfer taxes
due and payable upon the purchase of the Equipment by the Lessor and
on the lease thereof to the Lessee will have been paid or the Lessee
shall be liable for the payment thereof. No fees or other charges in
connection with the execution and delivery of the Operative Agreements
or the issuance and sale of the Equipment Notes to be delivered on the
Closing Date are payable for which the Lessee is not liable;
(m) no broker's or finder's or placement fee or
commission will be payable with respect to the transactions
contemplated by the Operative Agreements as a result of any action by
Lessee, except for the fees of Chemical Securities, Inc., which Lessee
agrees will be included in Transaction Costs (unless Lessee elects to
pay such fees directly pursuant to Section 2.5) and Lessee agrees that
it will hold the Owner Participant, the Lessor and the Indenture
Trustee harmless from any claim, demand or liability for any other
broker's or finder's or placement fees or commission alleged to have
been incurred as a result of any action by Lessee in connection with
this transaction;
(n) none of the proceeds from the issuance of the
Equipment Notes or from the acquisition by the Owner Participant of
its beneficial interest in the Trust Estate will be used directly or
indirectly by Lessee so as to result in a violation of Regulation G or
U of the Board of Governors of the Federal Reserve System;
(o) no governmental approval of any kind is required by
the Owner Participant or the Owner Trustee in connection
<PAGE> 24
20
with its execution, delivery and performance of this Agreement or any
Operative Agreement, solely by reason of any fact or circumstance
peculiar to the Lessee or the Lessee's proposed operations or use of
the Units of Equipment, specifically excluding, however, any consents
or approvals required by any statute or regulation governing banks and
their operations;
(p) the Units of Equipment are fully equipped to operate
in commercial service and comply with all material governmental
requirements governing the service in which such Units are being, and
are anticipated to be, used by Lessee; the Units are in the same
condition as when delivered to Lessee by the manufacturer or vendor,
ordinary wear and tear excepted, and the Lessee is unaware of any
material structural defects in or damage to the Units;
(q) the conveyance of the Units of Equipment effected by
the Bills of Sale are not void or voidable under any applicable state
or federal law (such representation being made in reliance on the
accuracy of the representations of the Participants and Trustees
contained in this Section 3);
(r) it is in compliance with all applicable Environmental
Laws relating to the ownership, use, transport, storage, condition,
maintenance and operation of the Equipment unless the failure to
comply with such Environmental Laws would not materially adversely
affect the operations of the Lessee or rights or interests of Lessor
in or the Lien of the Indenture on the Equipment or otherwise expose
Lessor or the Owner Participant to criminal sanctions or material
civil liabilities; and
(s) there are no writs, injunctions, decrees, orders or
judgements outstanding against the Lessee relating to the ownership,
use, transport, storage, condition, maintenance or operation of the
Equipment resulting from a violation of any applicable Environmental
Law, and there are no lawsuits, proceedings or investigations under
any applicable Environmental Law pending or, to the Lessee's
knowledge, threatened against Lessee relating to the ownership, use,
maintenance or operation of the Equipment.
3.3 Representations and Warranties of the Indenture
Trustee. The Indenture Trustee represents and warrants to the Interim Loan
Participant, the Owner Participant, the Owner Trustee and the Lessee that, as
of the date hereof:
(a) the Indenture Trustee is a national banking
association, duly organized and 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
United States of America pertaining to its banking, trust and
fiduciary powers to execute, deliver
<PAGE> 25
21
and carry out the terms of each of the Indenture Trustee Agreements;
(b) the execution, delivery and performance by the
Indenture Trustee of each of the Indenture Trustee Agreements have
been duly authorized by the Indenture Trustee and will not violate its
articles of association or by-laws or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it is bound;
(c) the Indenture Trustee Agreements, when executed and
delivered, will constitute its legal, valid and binding obligation
enforceable against it in accordance with its terms;
(d) there are no proceedings pending or, to the knowledge
of the Indenture Trustee, threatened, and to the knowledge of the
Indenture Trustee there is no existing basis for any such proceedings,
against or affecting the Indenture Trustee in or before any court or
before any governmental authority or arbitration board or tribunal
which, individually or in the aggregate, if adversely determined,
might impair the ability of the Indenture Trustee to perform its
obligations under the Indenture Trustee Agreements;
(e) no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body of the United States of America, governing the Indenture Trustee
in its trust capacity, is required for the due execution, delivery and
performance by the Indenture Trustee of the Indenture Trustee
Agreements, except as have been previously obtained, given or taken;
(f) the Indenture Trustee is not in default under any of
the Indenture Trustee Agreements;
(g) neither the Indenture Trustee, nor any Person
authorized to act on behalf of the Indenture Trustee, has directly or
indirectly offered any interest in the Trust Estate or the Equipment
Notes or any security similar to either thereof for sale to, or
solicited offers to buy any of the same from, or otherwise approached
or negotiated with respect to any of the same with, any Person; and
(h) there are no Taxes which may be imposed on or
asserted against the Indenture Estate or any part thereof or any
interest therein, the Owner Trustee, both in its individual capacity
and as Owner Trustee, or the Owner Participant by any state or local
government or taxing authority (except Taxes imposed on the fees
payable to the Indenture Trustee) required to be paid under the laws
of the State of Connecticut in connection with the execution,
<PAGE> 26
22
delivery or performance by the Indenture Trustee of the Indenture
Trustee Agreements or the authentication of the Equipment Notes, which
Taxes result solely from the participation therein by a national
banking association located in the State of Connecticut as Indenture
Trustee.
3.4 Representations, Warranties and Covenants Regarding
Beneficial Interest.
(a) The Owner Trustee represents and warrants to the
Lessee, each of the other Trustees and the Owner Participant that, as
of the date hereof and as of the Closing Date, neither the Owner
Trustee nor any Person authorized or employed by the Owner Trustee as
agent or otherwise in connection with the placement of the Beneficial
Interest or any similar interest has offered any of the Beneficial
Interest or any similar interest for sale to, or solicited offers to
buy any thereof from, or otherwise approached or negotiated with
respect thereto with, any prospective purchaser.
(b) The Lessee represents and warrants to the Trustees
and the Owner Participant that, as of the date hereof and as of the
Closing Date, neither the Lessee nor any Person authorized or employed
by the Lessee as agent or otherwise in connection with the placement
of the Beneficial Interest or any similar interest has offered any of
the Beneficial Interest or similar interest for sale to, or solicited
offers to buy any thereof from, or otherwise approached or negotiated
with respect thereto with, any Person other than the Owner Participant
and not more than (50) other institutional investors.
(c) Each of the Owner Trustee, the Owner Participant and
the Lessee agree severally but not jointly and with respect to itself
only that neither the Owner Trustee, the Owner Participant nor the
Lessee nor anyone acting on behalf of the Owner Trustee, the Owner
Participant or the Lessee will offer the Beneficial Interest, or any
part thereof or any similar interest for issue or sale to any
prospective purchaser, or solicit any offer to acquire any of the
Beneficial Interest, or any part thereof so as to bring the issuance
and sale of the Beneficial Interest within the provisions of Section 5
of the Securities Act of 1933, as amended.
3.5 Representations and Warranties of the Interim Loan
Participant. The Interim Loan Participant represents and warrants to the Owner
Participant, the Trustees, and the Lessee that, as of the date hereof:
(a) this Agreement has been duly authorized, executed and
delivered by the Interim Loan Participant; this Agreement constitutes
the legal, valid and binding
<PAGE> 27
23
obligation of the Interim Loan Participant enforceable against it in
accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity; and
(b) the Interim Loan Participant is advancing the loan
contemplated to be made by it hereunder in the ordinary course of its
business, and no part of such amount constitutes or could be deemed to
constitute the assets of any employee benefit plan under 29 CFR
Section 2510.3-101.
3.6 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to the Trustees, the
Interim Loan Participant and the Lessee that, as of the date hereof:
(a) the Owner Participant is a corporation duly
organized, validly existing and in good standing under the laws of the
State of _____________ and has the corporate power and authority to
carry on its business as now conducted;
(b) the Owner Participant has the corporate power and
authority to enter into the Owner Participant Agreements and to
perform its obligations thereunder, and such execution, delivery and
performance do not and will not contravene any law or any order of any
court or governmental authority or agency applicable to or binding on
the Owner Participant, or contravene the provisions of, or constitute
a default under, or result in the creation of any Lessor's Lien
attributable to the Owner Participant (other than the leasehold
interest of the Lessee under the Lease and the security interest of
the Indenture Trustee under the Indenture) upon the Equipment under,
its organization document or by-laws or any indenture, mortgage,
contract or other agreement or instrument to which the Owner
Participant is a party or by which it or any of its property is bound;
(c) the Owner Participant Agreements 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 indebtedness or
obligations of the Owner Participant, have been duly executed and
delivered by the Owner Participant and (assuming the due
authorization, execution and delivery by each other party thereto)
constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance
with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity;
<PAGE> 28
24
(d) no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery or performance by the
Owner Participant of the Trust Agreement, the Tax Indemnity Agreement
and this Agreement;
(e) the Trust Estate is free of any Lessor's Liens
attributable to the Owner Participant;
(f) there are no pending or, to the Owner Participant's
knowledge, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which would
materially adversely affect the Owner Participant's financial
condition or its ability to perform its obligations under the Trust
Agreement, the Tax Indemnity Agreement or this Agreement;
(g) as of the Closing Date the Owner Participant is
purchasing the Beneficial Interest to be acquired by it for its
account with no present intention of distributing such Beneficial
Interest or any part thereof in any manner which would violate the
Securities Act of 1933, as amended, but without prejudice, however, to
the right of the Owner Participant at all times to sell or otherwise
dispose of all or any part of such Beneficial Interest in compliance
with the Securities Act of 1933, as amended; provided, however, that
subject to the provisions of Section 6.1, the disposition of the
Beneficial Interest shall at all times be within the Owner
Participant's control. The Owner Participant acknowledges that its
Beneficial Interest has not been registered under the Securities Act
of 1933, as amended, and that neither the Owner Trustee nor the Lessee
contemplates filing, or is legally required to file, any such
registration statement;
(h) with respect to the source of an amount to be
advanced by the Owner Participant pursuant to Section 2.1, no part of
such amount constitutes or could be deemed to constitute the assets of
any employee benefit plan under 29 CFR Section 2510.3-101 (other than
a government plan exempt from the coverage of ERISA);
(i) no broker's or finder's or placement fee or
commission will be payable with respect to the transactions
contemplated by the Operative Agreements as a result of any action by
the Owner Participant except for the fees of ________________which
have been paid by the Owner Participant, and the Owner Participant
agrees that it will hold Lessee, the Indenture Trustee and Lessor
harmless from any claim, demand or liability for broker's or finder's
or placement fees or commission alleged to have been incurred as a
result of any action by the Owner Participant in connection with
this transaction; and
<PAGE> 29
25
(j) the Owner Participant has a tangible net worth of at
least $___________.
3.7 Opinion Acknowledgment. Each of the parties hereto,
with respect to such party, expressly consents to the rendering by its counsel
of the opinion referred to in Section 4.1(e) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the instructions of such
party, each of whom has consulted with and has been advised by its counsel as
to the consequences of such request, instructions and consent.
SECTION 4. CLOSING CONDITIONS
4.1 Conditions Precedent to Investment by Each
Participant. The obligation of each Participant to make its investment or loan,
as applicable, specified with respect to such Participant in Section 2 on the
Closing Date shall be subject to the following conditions (except that
paragraph (k) and clause (i) of paragraph (p) shall not be conditions precedent
to the Owner Participant's obligations hereunder and paragraph (t) and clause
(ii) of paragraph (p) shall not be conditions precedent to the Loan
Participant's obligations hereunder):
(a) Execution of Operative Agreements. On or before the
Closing Date, this Agreement, the Trust Agreement, the Lease, the
Lease Supplement in respect of the Units delivered on the Closing
Date, the Interim Lease Supplement, the Indenture, the Indenture
Supplement in respect of the Units delivered on the Closing Date, the
Interim Indenture Supplement and the Equipment Notes shall each be
satisfactory in form and substance to such Participant, shall have
been duly authorized, executed and delivered by the parties thereto
(except that the authorization, execution and delivery of this
Agreement and the other documents referred to above by a party hereto
or thereto shall not be a condition precedent to such party's
obligations hereunder), shall each be in full force and effect and
executed counterparts of each shall have been delivered to such
Participant or its counsel on or before the Closing Date (except that
executed Equipment Notes shall be delivered only to the Interim Loan
Participant); and no event shall have occurred and be continuing that
constitutes a Lease Default, a Lease Event of Default, an Indenture
Default or an Indenture Event of Default.
(b) Recordation Filing, Registration and Certification.
On or before the Closing Date (i) the Lessee shall have caused the
Lease, the Lease Supplement covering the Units of Equipment delivered
on the Closing Date, the Indenture and the Indenture Supplement in
respect of the Units delivered on the Closing Date or appropriate
other evidence, to be duly filed, recorded and deposited in conformity
with 49 U.S.C. Section 11303 and in such other places
<PAGE> 30
26
within the United States as the Owner Trustee, the Indenture Trustee
and any Participant may reasonably request for the protection of the
Owner Trustee's title to the Equipment and interest in the Lease, or
the security interest of the Indenture Trustee in the Units of
Equipment and the Lease, (ii) Uniform Commercial Code financing
statements shall have been filed in such places within the United
States as the Owner Trustee, the Indenture Trustee and any Participant
may reasonably request for the protection of the Owner Trustee's title
to the Equipment and interest in the Lease, or the security interest
of the Indenture Trustee in the Equipment and the Lease and (iii) the
Lease and the Indenture or appropriate other evidence shall have been
deposited in the office of the Registrar General of Canada pursuant to
Section 90 of the Railway Act of Canada.
(c) Closing Certificate of Lessee. On the Closing Date,
the Owner Trustee, the Indenture Trustee and each Participant shall
have received an Officer's Certificate dated such date of the Lessee,
to the effect that the representations and warranties of the Lessee
contained in Section 3.2 and Section 3.4(b) are true and correct in
all respects on the Closing Date with the same effect as though made
on and as of said date, except to the extent that such representations
and warranties relate solely to an earlier date (in which case such
representations and warranties were true and correct on and as of such
earlier date), and that the Lessee has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Lessee on or before said date.
(d) Closing Certificate of Owner Trustee. On the Closing
Date, the Lessee, the Indenture Trustee, the Pass Through Trustee and
each Participant shall have received an Officer's Certificate dated
such date from the Owner Trustee, to the effect that the
representations and warranties of the Owner Trustee contained in
Section 3.1 and Section 3.4(a) are true and correct in all respects on
the Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations
and warranties were true and correct on and as of such earlier date),
and that the Owner Trustee has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Owner Trustee on or before said
date.
(e) Opinions of Counsel. On the Closing Date, the Owner
Trustee, the Indenture Trustee and each Participant shall have
received the favorable written opinion of each of (i) the Lessee's
special counsel and counsel for the Lessee, (ii) counsel to the Owner
Trustee, (iii) counsel and special
<PAGE> 31
27
counsel to the Owner Participant, (iv) special counsel to the
Indenture Trustee and (v) special ICC Counsel in form and substance
satisfactory to each Participant.
(f) Title. On the Closing Date, after giving effect to
the transactions contemplated hereby, the Owner Trustee shall have
legal and beneficial title to each Unit of Equipment to be delivered
on the Closing Date, free and clear of all Liens, except Liens
described in clauses (i), (ii) and (v) of the definition of "Permitted
Liens" and Liens described in clauses (iii) and (iv) of such
definition for amounts which are not due and payable.
(g) Bills of Sale. On the Closing Date the Lessee shall
have delivered to the Owner Trustee (with copies to the Indenture
Trustee and each Participant) the Bill of Sale dated such date
covering the Units to be settled for on such date, transferring to the
Owner Trustee legal and beneficial title to such Units free of all
Liens except Liens described in clauses (i), (ii) and (v) of the
definition of "Permitted Liens" and Liens described in clauses (iii)
and (iv) of such definition for amounts which are not due and payable,
and warranting to the Owner Trustee that at the time of delivery of
each such Unit, the Lessee had legal and beneficial title thereto and
good and lawful right to sell the same, and title thereto was free of
all Liens, except Liens described in clauses (i), (ii) and (v) of the
definition of "Permitted Liens" and Liens described in clauses (iii)
and (iv) of such definition for amounts which are not due and payable.
(h) Insurance Certificate and Opinion. On or before the
Closing Date, the Indenture Trustee and each Participant shall have
received a certificate in form acceptable to the Owner Participant in
its reasonable discretion signed by the insurer or by an independent
insurance broker evidencing insurance coverages required pursuant to
Section 12 of the Lease.
(i) Corporate Documents. Each of the Participants shall
have received such documents and evidence with respect to the Lessee,
the Owner Participant, the Owner Trustee, the Pass Through Trustee and
the Indenture Trustee as the Participants may reasonably request in
order to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate and other proceedings
in connection therewith and compliance with the conditions herein or
therein set forth.
(j) No Threatened Proceedings. No action or proceeding
shall have been instituted nor shall 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 Closing Date, to set aside,
<PAGE> 32
28
restrain, enjoin or prevent the completion and consummation of this
Agreement or the Overall Transactions.
(k) Closing Certificate of Owner Participant. On the
Closing Date, the Lessee, the Interim Loan Participant, the Indenture
Trustee and the Pass Through Trustee shall have received an Officer's
Certificate dated such date from the Owner Participant, to the effect
that the representations and warranties of the Owner Participant
contained in Section 3.6 are true and correct in all respects on the
Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations
and warranties were true and correct on and as of such earlier date),
and that the Owner Participant has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Owner Participant on or before said
date.
(l) Closing Notice. The Indenture Trustee and the
Participants shall have received the Notice of Delivery required
pursuant to Section 2.3.
(m) Closing Certificate of Indenture Trustee. On the
Closing Date, the Lessee, the Owner Trustee and each Participant shall
have received an Officer's Certificate dated such date from the
Indenture Trustee, to the effect that the representations and
warranties of the Indenture Trustee contained in Section 3.3 are true
and correct in all respects on the Closing Date with the same effect
as though made on and as of said date, except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties were true and correct
on and as of such earlier date), and that the Indenture Trustee has
performed and complied with all agreements and conditions herein
contained which are required to be performed or complied with by the
Indenture Trustee on or before said date.
(n) (Intentionally Omitted.)
(o) No Illegality. 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 regulatory
authorities that, in the opinion of such Participant or its counsel,
would make it illegal for such Participant to enter into any
transaction contemplated by the Operative Agreements.
(p) Participants' Investments. (i) The Owner
Participant shall have made available its Commitment in the amount
specified in, and otherwise in accordance with, Sections 2.2(a) and
2.3 and (ii) the Loan Participant shall
<PAGE> 33
29
have made available its Commitment in the amount specified in, and
otherwise in accordance with, Sections 2.2(b) and 2.3.
(q) Consents. All approvals and consents of any trustees
or holders of any indebtedness or obligations of Lessee which are
required in connection with the transactions contemplated by this
Agreement, shall have been duly obtained and be in full force and
effect.
(r) Governmental Actions. All actions, if any, required
to have been taken on or prior to the Closing Date in connection with
the transactions contemplated by this Agreement on the Closing Date
shall have been taken by any governmental or political agency,
subdivision or instrumentality of the United States and all orders,
permits, waivers, exemptions, authorizations and approvals of such
entities required to be in effect on the Closing Date in connection
with the transactions contemplated by this Agreement on the Closing
Date shall have been issued, and all such orders, permits, waivers,
exemptions, authorizations and approvals shall be in full force and
effect, on the Closing Date.
(s) Certificate of Acceptance. On or before the Closing
Date a Certificate of Acceptance with respect to the Units delivered
by the Lessee to the Lessor on the Closing Date shall have been duly
executed and delivered by the Lessee, as the authorized representative
of the Lessor.
(t) Tax Indemnity Agreement. On or before the Closing
Date, the Tax Indemnity Agreement shall be satisfactory in form and
substance to the Owner Participant, shall have been duly executed and
delivered by the Lessee and, assuming due authorization, execution and
delivery by the Owner Participant, shall be in full force and effect.
4.2 (Intentionally Omitted.)
4.3 Additional Conditions Precedent to Investment by Owner
Participant. The obligation of the Owner Participant to provide the funds
specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date
with respect to any Unit to be delivered on the Closing Date shall be subject
to the following additional conditions:
(a) Appraisal. On or before the Closing Date, the Owner
Participant shall have received an opinion (the "Appraisal") of
Deloitte & Touche Valuation Group, satisfactory in form and substance
to the Owner Participant, concluding that: (i) the fair market value
of the Units of each Class of Equipment being delivered on the Closing
Date is equal to the Total Equipment Cost with respect to such Units;
(ii) (A) the expected economic useful life of the
<PAGE> 34
30
Units of each Class of Equipment will be at least equal to 134% of the
aggregate length of the Interim Term and the Basic Term for such Units
and (B) at the expiration of the Basic Term for the Units of each
Class of Equipment,without taking into account inflation or deflation
from and after the Closing Date or the existence of any purchase
option, it is reasonable to expect that such Units will have a fair
market value of at least 20% of the Equipment Cost for such Units;
(iii) taking into account a reasonable estimate for inflation or
deflation, the estimated fair market value on the Early Buyout Date
for the Units of each Class of Equipment is less than or equal to the
Early Buyout Price for such Units; (iv) Basic Rent payable under the
Lease with respect to the Units of each Class of Equipment shall be
equal to the fair market rental value for such Units and (v) the
Equipment being delivered on the Closing Date is not "limited use
property" within the meaning of Rev. Proc. 76-30, 1976-2 C.B.
647;provided, however, that the Lessee makes no representation as to
the fair market value, useful life or estimated residual value of any
of the Equipment, and the Lessee shall not be responsible for, or
incur any liabilities as a result of, the contents of such Appraisal
or report to which it relates or, except to the extent provided in the
Tax Indemnity Agreement, any information supplied by Lessee in
connection therewith. The Appraisal shall further set forth the
estimated fair market value of the Units of each Class of the
Equipment at the end of the Basic Term taking into account inflation
or deflation.
(b) Opinion with Respect to Certain Aspects. On the
Closing Date, the Owner Participant shall have received the opinion of
Moore & Van Allen addressed to the Owner Participant, in form and
substance reasonably satisfactory to the Owner Participant, containing
such counsel's favorable opinion with respect to such tax matters as
the Owner Participant may reasonably request.
(c) No Tax Law Change. No Change in Tax Law shall have
occurred nor shall a judicial opinion on a tax issue have been
rendered prior to the acceptance and delivery of the Equipment on the
Closing Date which, if enacted, adopted or made effective, in the same
or substantially similar form, would, in the reasonable opinion of the
Owner Participant, render it disadvantageous or inadvisable for the
Owner Participant to enter into the transactions contemplated by the
Operative Agreements.
4.4 Conditions Precedent to the Obligation of the Lessee.
The obligation of the Lessee with respect to the sale of the Units to the Owner
Trustee and acceptance of the Units under the Lease is subject to the following
conditions as of the Closing Date:
<PAGE> 35
31
(a) Corporate Documents. On or before the Closing Date,
the Lessee shall have received such documents and evidence with
respect to the Owner Participant, the Owner Trustee and the Indenture
Trustee as the Lessee may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the
taking of all corporate and other proceedings in connection therewith
and compliance with the conditions herein or therein set forth.
(b) Operative Agreements. On or before the Closing Date,
the Operative Agreements shall have been duly authorized, executed and
delivered by the respective party or parties thereto (other than the
Lessee), and an executed counterpart of each thereof shall have been
delivered to the Lessee or its special counsel.
(c) Representations and Warranties True. On the Closing
Date, the representations and warranties of the Owner Trustee and the
Indenture Trustee and the Owner Participant contained in Section 3
hereof shall be true and correct in all material respects as of the
Closing Date as though made on and as of such date, and the Lessee
shall have received an Officer's Certificate dated such date from each
of the Owner Trustee as described in Section 4.1(d), the Owner
Participant as described in Section 4.1(k) and the Indenture Trustee
as described in Section 4.1(m), addressed to the Lessee and certifying
as to the foregoing matters insofar as they relate to the Owner
Trustee, the Owner Participant and the Indenture Trustee, as the case
may be.
(d) Opinions of Counsel. On the Closing Date, the Lessee
shall have received the opinions of counsel referred to in Section
4.1(e) (other than that set forth in clause (i) therein), addressed to
the Lessee.
(e) No Threatened Proceedings. No action or proceeding
shall have been instituted nor shall 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 Closing Date, to set aside,
restrain, enjoin or prevent the completion and consummation of this
Agreement or the transactions contemplated hereby.
(f) No Tax Law Change. No Change in Tax Law shall have
occurred nor shall a judicial opinion on a tax issue have been
rendered prior to the acceptance and delivery of the Equipment on the
Closing Date, which, if enacted, adopted or made effective, in the
same or substantially similar form, would, in the reasonable opinion
of the Lessee, render it disadvantageous or inadvisable for the Lessee
to enter into the transactions contemplated by the Operative
Agreements.
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32
(g) Participants' Investments. (i) There shall have
been duly issued and delivered by the Owner Trustee to the Interim
Loan Participant, against payment therefor, Equipment Notes dated the
Closing Date.
(ii) The Owner Participant shall have made available its
Commitment in the amount specified in, and otherwise in accordance
with, Sections 2.2(a) and 2.3.
(iii) The Loan Participant shall have made its Commitment in
the amount specified in, and otherwise in accordance with, Sections
2.2(b) and 2.3.
(h) Rent Adjustment. If an adjustment to the payments of
Basic Rent in respect of a Unit of Equipment occurs pursuant to
Section 2.6, such adjustment shall not result in an increase in the
present value (discounted semiannually at an interest rate per annum
equal to the Debt Rate) of such amounts of Basic Rent in excess of __
basis points as compared to the present value of the amounts of Basic
Rent for such Unit of Equipment set forth in the applicable exhibit to
the Term Sheet. It being understood and agreed that if the Closing
Date occurs after _________ __, 1994, such Closing Date shall require
an adjustment to the payments of Basic Rent in respect of all Units of
Equipment, which adjustment shall cause the present value of such
amounts of Basic Rent to be increased in excess of said __ basis
points, and in which case the Lessee shall be under no obligation to
consummate the transactions contemplated to occur on the Closing Date.
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE
The Lessee agrees that it will furnish directly to each
Participant the following:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Lessee, an audited
consolidated balance sheet of the Lessee and its consolidated
subsidiaries as of the end of such fiscal year and the related audited
consolidated statements of income, cash flows and changes in common
stockholders' equity for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Ernst & Young or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal year
of the Lessee, a consolidated balance sheet of the Lessee and its
consolidated subsidiaries, as of the end of such quarter and the
related (i) consolidated statement of income for such quarter and for
the portion of
<PAGE> 37
33
the Lessee's fiscal year ended at the end of such quarter, and (ii)
consolidated statement of cash flows for the portion of the Lessee's
fiscal year ended at the end of such quarter, setting forth in each
case in comparative form (A) for the consolidated balance sheet, the
figures as of the end of the Lessee's previous fiscal year, (B) for
the consolidated statement of income, the figures for the
corresponding quarter and the corresponding portion of the Lessee's
previous fiscal year and (C) for the consolidated statement of cash
flows, the figures for the corresponding portion of the Lessee's
previous fiscal year, all prepared in accordance with generally
accepted accounting principles (subject to normal year-end
adjustments);
(c) promptly upon the mailing thereof, all registration
statements and reports filed with the Securities and Exchange
Commission;
(d) promptly upon any officer of the Lessee obtaining
knowledge of any condition or event which constitutes a Lease Event of
Default, an officer's certificate specifying the nature and period of
existence thereof and what action the Lessee has taken or is taking or
proposes to take with respect thereto;
(e) within the time period prescribed in subparagraph (a)
above, an officer's certificate, to the effect that the signer has
reviewed the activities of the Lessee during the immediately preceding
fiscal year and that such officer is not aware of any Lease Default
or, if a Lease Default shall exist, specifying such Lease Default and
what action the Lessee has taken or is taking or proposes to take with
respect thereto; and
(f) such additional information with respect to the
financial condition or the business of the Lessee or the Equipment as
the Owner Participant may reasonably request.
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE
6.1 Restrictions on Transfer of Beneficial Interest. The
Owner Participant agrees that it shall not, directly or indirectly, sell,
convey, assign, pledge, mortgage or otherwise transfer any of its Beneficial
Interest (whether by merger, consolidation, sale of assets or otherwise) prior
to the expiration or earlier termination of the Lease Term, without the prior
written consent of the Lessee and (so long as any Equipment Notes are
outstanding) the Indenture Trustee not to be unreasonably withheld, provided
that the Owner Participant may transfer the entire Beneficial Interest to an
Affiliate without the consent of the Lessee and the Indenture Trustee so long
as the Owner Participant remains primarily liable under all Owner Participant
Documents, provided, further, that the Owner
<PAGE> 38
34
Participant may transfer (whether by merger, consolidation, sale of assets or
otherwise) the entire Beneficial Interest without the consent of the Lessee and
the Indenture Trustee subject to the following conditions:
(a) the Owner Participant shall have delivered to the
Lessee a certificate of a Responsible Officer of the Owner Participant
setting forth in reasonable detail that (i) such transfer is
necessitated because of a change in law or regulation after the
Closing Date which makes it prohibitive or uneconomic for the Owner
Participant to continue to own the Beneficial Interest, (ii) such
transfer is due to a change in the Owner Participant's tax
circumstances its continued ownership of the Beneficial Interest has
become uneconomic or (iii) such transfer is pursuant to a
consolidation, merger, sale of all or substantially all of its assets
or a sale of all or substantially all of its lease portfolio (and in
which case clause (c) below shall not be applicable);
(b) the Person to whom such transfer is to be made (a
"Transferee") is (i) an institutional or corporate investor with
tangible net worth or, in the case of a bank or lending institution,
combined capital and surplus, at the time of such transfer of at least
$___________, all of the foregoing determined in accordance with
generally accepted accounting principles or (ii) any subsidiary or
Affiliate of any such institutional or corporate investor if such
investor guarantees the obligations so assumed by such subsidiary or
Affiliate pursuant to a guarantee substantially in the form of Exhibit
C;
(c) the Transferee is not involved and has not been
involved in any litigation adverse to the Lessee; no Affiliates of the
Transferee are involved or have been involved in any litigation
adverse to the Lessee where the amount in controversy is or was at
least $____________; and neither the Transferee nor any of its
Affiliates is a direct or indirect competitor of the Lessee or
otherwise is in the same industry as the Lessee (including, without
limitation, the industries of (i) petroleum exploration, production,
refining and marketing, (ii) natural gas gathering and processing and
(iii) chemical production or distribution);
(d) the Indenture Trustee and the Lessee shall have
received 30 days' prior written notice of such transfer specifying the
name and address of any proposed transferee and such additional
information as shall be necessary to determine whether the proposed
transfer satisfies the requirements of this Section 6.1;
(e) such Transferee enters into an assumption agreement
substantially in the form of Exhibit D;
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35
(f) such transfer complies with and does not violate any
applicable Federal securities law and the securities law of any
applicable state;
(g) the Lessee and the Indenture Trustee shall have
received an opinion of counsel of the Transferee (which counsel may be
Transferee's in-house counsel) substantially in the form of Exhibit
E-1, and, if a guarantee is delivered pursuant to Section 6.1(b), an
opinion of counsel of the guarantor of the Transferee (which may be
the guarantor's in-house counsel) substantially in the form of Exhibit
E-2;
(h) except as specifically consented to in writing by the
Lessee and the Indenture Trustee, the terms of the Operative
Agreements shall not be altered;
(i) such transfer shall transfer all of the Beneficial
Interest;
(j) all fees, expenses and charges of the parties hereto
(including, without limitation, reasonable legal fees and expenses of
special counsel) incurred in connection with each transfer of such
Beneficial Interest shall be paid by the Owner Participant or
Transferee;
(k) the Transferee delivers to the Lessee, the Owner
Trustee and the Indenture Trustee an Officer's Certificate of the
Transferee to the effect that such transfer (i) does not involve the
use of any assets that are or could be deemed to be plan assets under
29 C.F.R. Section 2510.3-101 of an employee benefit plan (other than a
government plan exempt from the coverage of ERISA) or (ii) if the
assets of an employee benefit plan are so used, will not constitute a
prohibited transaction which is not subject to an exemption contained
in ERISA or the Code or adopted thereunder.
(l) as a result of such transfer, no Indenture Default
attributable to the Owner Participant or the Owner Trustee shall have
occurred and be continuing;
(m) either (x) the transfer does not involve the sale of
the stock of any Owner Participant the sole asset of which is the
Beneficial Interest, or (y) if such a sale of stock is involved, the
transferee meets the requirements of clauses (a), (b), (c), (d), (f),
(g), (h), (i), (j) (but with reference to the stock), (k), (l) and
(n); and
(n) the Owner Participant and/or the Transferee shall
deliver an Officer's Certificate certifying as to compliance with the
transfer requirements contained herein.
Upon any such transfer, (i) except as the context otherwise requires, such
Transferee shall be deemed the "Owner Participant" for all purposes, and shall
enjoy the rights and privileges and
<PAGE> 40
36
perform the obligations of the Owner Participant to the extent of the interest
transferred hereunder and under each other Operative Agreement to which the
Owner Participant is a party, and, except as the context otherwise requires,
each reference in this Agreement and each other Operative Agreement to the
"Owner Participant" shall thereafter be deemed to include such Transferee for
all purposes to the extent of the interest transferred, (ii) the transferor
shall continue to be entitled to all the benefits and rights, including the
right to indemnification, hereunder and under each other Operative Agreement to
which such transferor was a party or by which it was bound except to the extent
otherwise agreed in writing and (iii) the transferor shall be released from all
obligations hereunder and under each other Operative Agreement to which such
transferor is a party or by which such transferor is bound to the extent such
obligations are expressly assumed by a Transferee; and provided, further, that
in no event shall any such transfer or assignment waive or release the
transferor from any liability on account of any breach existing immediately
prior to such transfer of any of its representations, warranties, covenants or
obligations set forth in the Operative Agreements or for any fraudulent or
willful misconduct. Any transfer or assignment of the Beneficial Interest in
violation of this Section 6.1 shall be voidable at the direction of the Lessee
or Indenture Trustee, provided that the Lessee and the Indenture Trustee agree
to respond promptly and in any event within 60 days to a written request of the
Owner Participant to proceed with a transfer which fails to meet all of the
requirements of this Section 6.1. Any party's failure to respond within such
60 day period shall be deemed to be consent by such party to the transaction
pursuant to which such transfer occurred. The restrictions set forth in this
Section 6.1 shall not apply to a contract between the Owner Participant and
third parties with respect to the sale or other transfer of the Equipment which
is to be consummated on or after the expiration or termination of the Lease
when the Equipment is owned by the Owner Trustee free and clear of any rights
of the Lessee therein and the lien of the Indenture (or of any indenture or
security agreement entered into pursuant to Section 10.2 or 10.3), provided
that the rights and interests granted thereunder shall be expressly stated to
be in all respects subject and subordinate to the rights of the parties under
the Operative Agreements. Notwithstanding anything herein to the contrary
other than as specifically set forth in Section 6.1(m), this Section 6.1 shall
not be construed to prohibit, limit or require that any consent be obtained in
connection with the sale of all or any portion of the capital stock of the
Owner Participant or the merger, consolidation, corporate restructuring or sale
of stock or assets by the parent company of the Owner Participant or any other
Affiliate of the Owner Participant.
6.2 Lessor's Liens Attributable to the Owner Participant.
(a) The Owner Participant hereby covenants and agrees with and for the benefit
of the other parties to this Agreement that the Owner Participant will not
directly or
<PAGE> 41
37
indirectly create, incur, assume or suffer to exist any Lessor's Liens on or
against any part of the Trust Estate or the Equipment attributable to it
(whether or not through its act or failure to act) or Lessor's Liens arising as
a result of taxes described in clause (iii) of the definition of Lessor's Liens
which are imposed against the Owner Trustee (not in its individual capacity but
solely as Owner Trustee), and the Owner Participant agrees that it will, at its
own cost and expense, take such action as may be necessary to duly discharge
and satisfy in full any such Lessor's Lien described above (by bonding or
otherwise, so long as Lessee's operation and use of the Equipment and the Lien
of the Indenture are not impaired); provided that the Owner Participant may
contest any such Lessor's Lien in good faith by appropriate proceedings so long
as such proceedings do not involve any material danger of the sale, forfeiture
or loss of the Equipment or any interest therein and do not interfere with the
use, operation, or possession of the Equipment by the Lessee under the Lease or
the rights of the Indenture Trustee under the Indenture.
(b) The Owner Participant agrees to indemnify and hold
harmless the Lessee, the Interim Loan Participant, the Indenture Trustee, the
Pass Through Trustee and the Holders from time to time from and against any
loss, cost, expense or damage which may be suffered by such party as a result
of the failure of the Owner Participant to discharge and satisfy in full any
Lessor's Lien of the type identified in and when required to be discharged and
satisfied by it under Section 6.2(a).
6.3 Lessor's Liens Attributable to the Owner Trustee. (a)
The Owner Trustee, in its individual capacity and trust capacity, hereby
unconditionally agrees with and for the benefit of the other parties to this
Agreement that the Owner Trustee in its individual capacity will not directly
or indirectly create, incur, assume or suffer to exist any Lessor's Liens on or
against any part of the Trust Estate or the Equipment arising out of any act or
omission of or claim against the Owner Trustee in its individual capacity, and
the Owner Trustee in its individual capacity agrees that it will, at its own
cost and expense, take such action as may be necessary to duly discharge and
satisfy in full any such Lessor's Lien attributable to the Owner Trustee in its
individual capacity (by bonding or otherwise, so long as Lessee's operation and
use of the Equipment and the Lien of the Indenture are not impaired); provided
that the Owner Trustee may contest any such Lessor's Lien in good faith by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture or loss of the Equipment or any interest therein
and do not interfere with the use, operation, or possession of the Equipment by
the Lessee under the Lease or the rights of the Indenture Trustee under the
Indenture.
(b) Indemnity for Lessor's Liens. The Owner Trustee, in
its individual capacity, agrees to indemnify and hold harmless the Lessee, the
Indenture Trustee, the Owner Participant, the
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38
Pass Through Trustee, the Owner Trustee and the Holders from and against any
loss, cost, expense or damage which may be suffered by such party as a result
of the failure of the Owner Trustee to discharge and satisfy any Lessor's Liens
attributable to it in its individual capacity, as described in Section 6.3(a).
6.4 Liens Created by the Indenture Trustee, the Loan
Participants and the Pass Through Trustee. (a) The Indenture Trustee, in its
individual capacity, covenants and agrees with the Lessee, the Owner Trustee,
the Owner Participant and the Loan Participant that it shall not cause or
permit to exist any Lien on the Equipment or all or any portion of any Trust
Estate or the Indenture Estate arising as a result of (i) claims against the
Indenture Trustee in its individual capacity not related to its interest in the
Equipment and any Trust Estate, or to the administration of the Indenture
Estate pursuant to the Indenture, (ii) acts of the Indenture Trustee in its
individual capacity not contemplated by, or failure of the Indenture Trustee to
take any action it is expressly required to perform by, the Operative
Agreements, (iii) claims against the Indenture Trustee in its individual
capacity relating to Taxes or expenses that are not indemnified against by the
Lessee pursuant to Section 7 attributable to the actions of the Indenture
Trustee, solely in its individual capacity, 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 Equipment, the Indenture Estate or the
Operative Agreements, other than a transfer permitted by the Operative
Agreements and that the Indenture Trustee will, at its own cost and expense
(and without any right of reimbursement from any other party hereto), promptly
take such action as may be necessary duly to discharge any such Lien.
(b) The Indenture Trustee agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Pass Through Trustee and the
Loan Participant from time to time from and against any loss, cost, expense or
damage which may be suffered by such party as a result of the failure of the
Indenture Trustee to discharge and satisfy in full any Lien of the type
identified in and when required to be discharged and satisfied by it under
Section 6.4(a).
(c) The Pass Through Trustee covenants and agrees with
the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee
that it shall not cause or permit to exist any Lien on the Equipment or all or
any portion of any Trust Estate or the Indenture Estate arising as a result of
(i) claims against the Pass Through Trustee not related to its interest in the
Equipment and any Trust Estate, (ii) acts of the Pass Through Trustee not
contemplated by, or failure of such Loan Participant to take any action it is
expressly required to perform by, the Operative Agreements, (iii) claims
against the Pass Through Trustee relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7 or (iv) claims
<PAGE> 43
39
against the Pass Through Trustee arising out of the transfer by such Loan
Participant of all or any portion of its interest in the Equipment, the
Indenture Estate or the Operative Agreements, other than a transfer permitted
by the Operative Agreements and that such Loan Participant will, at its own
cost and expense (and without any right of reimbursement from the Lessee),
promptly take such action as may be necessary duly to discharge any such Lien.
(d) The Pass Through Trustee agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Owner Trustee and the Indenture
Trustee from time to time from and against any loss, cost, expense or damage
which may be suffered by such party as a result of the failure of the Pass
Through Trustee to discharge and satisfy in full any Lien of the type
identified in and when required to be discharged and satisfied by it under
Section 6.4(c).
6.5 Covenants of Owner Trustee, Owner Participant and
Indenture Trustee. (a) The Owner Participant and the Owner Trustee in its
individual and trust capacity, hereby agree, severally and not jointly, with
the Lessee, the Loan Participant and the Indenture Trustee (i) not to amend,
supplement, or otherwise modify any provision of the Trust Agreement in such a
manner as to adversely affect the rights of the Lessee, the Pass Through
Trustee or the Indenture Trustee without the prior written consent of such
party and (ii) not to terminate or revoke the Trust Agreement, or the trusts
created by the Trust Agreement and such trusts shall not be subject to
revocation or termination by the Owner Participant prior to the payment in full
and discharge of the Equipment Notes and all other indebtedness secured by the
Indenture and the final discharge thereof pursuant to Section 10.01 thereof or
prior to the expiration or early termination of the Lease. Each of the Owner
Trustee and the Indenture Trustee agrees, for the benefit of the Lessee and the
Owner Participant, to comply with the provisions of the Indenture and not to
amend, supplement, or otherwise modify any provision of the Indenture in such a
manner as to adversely affect the rights of any such party without the prior
written consent of such party. Notwithstanding any provision herein or in any
of the Operative Agreements to the contrary, the Indenture Trustee's obligation
to take or refrain from taking any actions, or to use its discretion
(including, but not limited to, the giving or withholding of consent or
approval and the exercise of any rights or remedies under such Operative
Agreements), and any liability therefor, shall, in addition to any other
limitations provided herein or in the other Operative Agreements, be limited by
the provisions of the Indenture.
(b) Owner Trustee Activities Limited. So long as the
Indenture is in effect, the Owner Trustee, not in its individual capacity, but
solely as trustee under the Trust Agreement, shall not incur any indebtedness
for borrowed money except as expressly contemplated herein or in any other
Operative Agreement and shall
<PAGE> 44
40
not engage in any business or other activity other than the transactions
contemplated herein or in any other Operative Agreement and all necessary or
appropriate activity related thereto.
6.6 Amendments to Operative Agreements. The Trustees and
Participants will not terminate the Operative Agreements to which the Lessee is
not or will not be a party, except in accordance with the Operative Agreements
in effect on the Closing Date (as amended, modified or supplemented from time
to time in accordance with the terms hereof and of the Operative Agreements),
or amend, supplement, waive or modify such Operative Agreements in any manner
that increases the obligations or liabilities, or decreases the rights, of, or
is adverse to, the Lessee under the Operative Agreements, without, in each such
case, the prior written consent of the Lessee. The Owner Participant and the
Trustees (as applicable) agree that, in any event, they will not amend Section
2.10 or Section 9.05 of the Indenture or Section 9.01 or Section 11.01 of the
Trust Agreement without the prior written consent of the Lessee.
6.7 Merger Covenant. Notwithstanding anything in any
Operative Agreement to the contrary, the Lessee shall not consolidate with or
merge into any other Person, or permit any other Person to merge into it, or,
directly or indirectly, sell, convey, transfer or lease all or a substantial
part of its assets as an entirety to any Person unless (i) the Person formed by
such consolidation or surviving such merger (if other than the Lessee) or the
Person which acquires by sale, conveyance, transfer or lease all or a
substantial part of the assets of the Lessee shall execute and deliver to the
Owner Trustee, the Owner Participant and the Indenture Trustee an agreement in
form reasonably acceptable to such parties containing the assumption by such
successor corporation of the due and punctual performance and observance of
each covenant and condition of this Agreement and each of the other Lessee
Agreements to be performed or observed by the Lessee (and in the case of any
such sale, conveyance or lease, the Lessee shall not be released from its
obligations under the Lessee Agreements), and (ii) immediately after giving
effect to such transaction, no Lease Default or Lease Event of Default shall
have occurred and be continuing, whether as a result of such consolidation or
merger or such sale, conveyance, transfer or lease or otherwise. Upon such
consolidation or merger, or any sale, conveyance, transfer or lease of all or a
substantial part of the assets of the Lessee as an entirety in accordance with
this Section 6.7, the successor corporation formed by such consolidation or
into which the Lessee is merged or to which such sale, conveyance, transfer or
lease is made shall succeed to, and be substituted for (except as limited
above), and may exercise every right and power of, the Lessee under this
Agreement and the other Operative Agreements with the same effect as if such
successor corporation had been named as the Lessee herein. If the Lessee shall
have consolidated with or merged into any other Person or sold, conveyed,
transferred or
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41
leased all or a substantial part of its assets, such assets to include the
Lessee's leasehold interest in the Lease, the Person owning such leasehold
interest after such event shall deliver to the Owner Participant and the
Indenture Trustee (a) an Officer's Certificate certifying as to the compliance
with the requirements of this Section 6.7 and (b) an opinion of counsel (which
counsel may be such Person's in-house counsel) confirming that the assumption
agreement pursuant to which such Person assumed the obligations of the Lessee
shall have been duly authorized, executed and delivered by such Person and that
such agreement is the legal, valid and binding obligation of such Person,
enforceable against such Person in accordance with its terms and that such
assumption does not violate securities laws and does not cause the Owner
Participant to suffer any unindemnified tax risk arising from assumption. In
connection with such assumption, the Lessee shall, at the direction of Lessor,
take such action as is reasonably necessary to protect the Lessor's interest in
the Equipment. All reasonable fees, expenses and charges of the parties hereto
(including the costs of such parties in ensuring the compliance by the Lessee
with this Section 6.7) incurred in connection with such sale, conveyance,
transfer or lease shall be paid by the Lessee. Except as specifically
consented to in writing by the Owner Trustee and the Indenture Trustee, the
terms of the Operative Agreements shall not be amended in connection with a
sale, conveyance, transfer or lease permitted by this Section 6.7. The Lessee
shall provide the Lessor, the Indenture Trustee and the Owner Participant with
30 days' prior written notice of a transaction subject to the provisions of
this Section 6.7, provided that if the Lessee is unable to provide 30 days'
advance notice by reason of its legal or contractual restrictions, the Lessee
shall provide such notice as soon as possible, consistent with its legal and
contractual restrictions.
6.8 Rent Sufficiency. Anything contained herein, the
Lease or any other Operative Agreement or other agreement to the contrary
notwithstanding, the aggregate amount of Basic Rent payable on any Payment Date
under the Lease (as any such amount may be adjusted pursuant to Section 2.6
hereof or Section 3.4 of the Lease), together with any amounts paid by Owner
Trustee pursuant to Section 2.2(c) and amounts paid by the Lessee pursuant to
Section 3.5 of the Lease, shall be, under any circumstances and in any event,
at least equal to the aggregate amount of the scheduled installments of
principal of and interest on the Equipment Notes due on such Payment Date.
Anything contained herein, the Lease or any other Operative Agreement or other
agreement to the contrary notwithstanding, the amount of the Termination Value,
Stipulated Loss Value and Early Buy-Out Price payable on any date on account of
any Unit of Equipment, together with any other amounts payable pursuant to
Section 10.2, 11.2 or 22.6 of the Lease, as the case may be, shall be, under
any circumstance and in any event, at least equal to the amount of any payments
then required to be made on account of the
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outstanding principal of and premium, if any, and interest on the Equipment
Notes pursuant to Section 2.10 of the Indenture.
6.9 Pass Through Certificates. If at any time the Lessee
shall own any Pass Through Certificates, the Lessee shall not vote such Pass
Through Certificates or otherwise participate in the giving of any direction,
consent or waiver to be taken pursuant to the Pass Through Trust Agreement.
The Lessee agrees not to amend Section 1.04(c) of the Pass Through Trust
Agreement.
6.10 Environmental Matters. Lessee covenants, at its own
cost and expense, to remove or take remedial action with respect to any
Hazardous Material released into the environment from the Rail Cars before or
after the Closing Date to the extent that such removal or remedial action is
required by any applicable Environmental Law; provided that (i) Lessee shall
notify Lessor of such removal or remedial action as soon as practicable and
(ii) such removal or remedial action shall be undertaken in a manner consistent
with Environmental Laws and with Lessee's customary policies and practices;
provided, further, that Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any
such Environmental Law in any reasonable manner which does not materially
adversely affect the rights or interests of Lessor in the Equipment or impair
the Lien of the Indenture or otherwise expose Lessor or the Owner Participant
to criminal sanctions or release Lessee from its obligation with respect to
returning the Equipment as described herein.
SECTION 7. LESSEE'S INDEMNITIES
7.1 General Tax Indemnity.
(a) Tax Indemnitee Defined. For purposes of this Section
7.1, "Tax Indemnitee" means the Owner Participant, its Affiliates, the Owner
Trustee both in its individual capacity and as trustee, the Trust Estate, the
Interim Loan Participant, the Indenture Trustee both in its individual capacity
and as trustee, and each of their respective successors or assigns permitted
under the terms of the Operative Agreements.
(b) Taxes Indemnified. Subject to the exclusions stated
in subsection (c) below, the Lessee agrees to indemnify and hold harmless each
Tax Indemnitee, taking into account the income tax consequences to the Tax
Indemnitee of the accrual or receipt of an indemnity payment, against all fees,
taxes (including, without limitation, sales, use, excise and property), levies,
assessments, duties, charges or withholdings, together with any and all
penalties, additions to tax, fines or interest thereon ("Taxes") imposed upon
any Tax Indemnitee, the Lessee or all or any part of the Equipment by any
federal, state or local government, political subdivision, or taxing authority
in the United States, upon, with respect to or in connection with:
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(i) the Equipment or any part of any of the Equipment
or interest therein;
(ii) the purchase, acquisition, ownership, delivery,
transport, location, leasing, subleasing, possession, registration,
use, operation, condition, maintenance, repair, return, abandonment,
storage, sale or other application or disposition of or with respect
to the Equipment or any part thereof or interest therein; and
(iii) the rental payments, receipts of earnings arising
from any Unit of Equipment or payable pursuant to the Lease.
(c) Taxes Excluded. The indemnity provided for in
paragraph (b) above shall not apply to any of the following:
(i) As to any Tax Indemnitee, taxes on, based on or
measured by the gross or net income or receipts of such Tax Indemnitee
(including any capital gains, excess profits or alternative minimum
Taxes, and any Taxes on or measured by any items of tax preference),
and any accumulated earnings, personal holding company, succession,
estate, capital, net worth, value added (except to the extent any such
tax is in place or clearly in lieu of a sales, use, license, excise or
property tax), franchise, or conduct of or doing business Taxes
imposed upon such Tax Indemnitee;provided, however, sales, use,
license, excise or property taxes shall not be excluded under this
subparagraph; provided, further, that, notwithstanding the foregoing
proviso, sales or use taxes imposed by any state or local taxing
jurisdiction in the United States in connection with the transactions
contemplated by the Operative Agreements shall be excluded under this
subparagraph if (x) not later than the Closing Date the Lessee shall
have given written notice to the Owner Participant identifying such
jurisdiction and requesting that the Owner Participant provide (at
Lessee's cost and expense) a sales tax certificate that will enable
the Owner Participant or Lessor to receive an exemption from or
reduction in sales tax, (y) such sales tax certificate is reasonably
available to or obtainable by the Owner Participant, and (z) such
sales tax certificate is not provided to the Lessee on the Closing
Date or as soon as practicable thereafter (or, in the case of Alaska,
Maine, Montana, Vermont and Wyoming, within such reasonable period
following the Closing Date as will enable the Owner Participant to
apply for and obtain a certificate);
(ii) Taxes imposed or accrued on any equipment with
respect to any period after the earliest of (x) the return of
possession of the Equipment to the Owner Participant or the placement
of the Equipment in storage at the request of the Owner Participant,
in either case pursuant to and in accordance with Section 6 of the
Lease, (y) the termination
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of the Lease Term with respect to such Equipment pursuant to Section
10.1 of the Lease, or (z) the discharge in full of the Lessee's
obligation to pay the Termination Value or the Stipulated Loss Value
and all other amounts due, if any, under Section 10 or 11.2 of the
Lease, as the case may be, with respect to the Equipment;
(iii) As to any Tax Indemnitee, (y) Taxes which arise out
of or are caused by any breach by such Tax Indemnitee of any of its
representations, warranties or covenants in any of the Operative
Agreements, or the gross negligence or willful misconduct of such Tax
Indemnitee, or (z) Taxes arising from a Lessor Lien with respect to
such Tax Indemnitee;
(iv) As to any Tax Indemnitee, Taxes which become
payable as a result of a sale, assignment, transfer or other
disposition (whether voluntary or involuntary) by such Tax Indemnitee
of all or any portion of its interest in the Equipment or any part
thereof, the Trust Estate, any Indebtedness or any of the Operative
Agreements or rights created thereunder or any transfer of any
interest in such Tax Indemnitee other than a disposition which occurs
as the result of the exercise of remedies for a Lease Event of
Default;
(v) As to any Tax Indemnitee, Taxes imposed by a taxing
authority in a jurisdiction if any to the extent that such Taxes would
in any event have been imposed on such Tax Indemnitee if no Units of
Equipment had been located, operated, used leased or rented to or in
such jurisdiction;
(vi) Taxes which result from the Owner Trustee's
engaging on behalf of the Trust Estate in transactions other than
those permitted or contemplated by the Operative Agreements unless
attributable to the exercise of default remedies pursuant to Article V
of the Trust Indenture;
(vii) As to any Tax Indemnitee, Taxes to the extent they
exceed the Taxes that would have been imposed had the initial Tax
Indemnitee not transferred, sold or otherwise disposed of any interest
held by such Tax Indemnitee;
(viii) As to any Tax Indemnitee, Taxes imposed on any Tax
Indemnitee or any other person who, together with such Tax Indemnitee,
is treated as one employer for employee benefit plan purposes, as a
result of, or in connection with, any "prohibited transaction," within
the meaning or the provisions of the Code or regulations thereunder or
as set forth in Section 406 of ERISA or the regulations implementing
ERISA, engaged in by any Tax Indemnitee other than, with respect to
Owner Participant, Taxes for such prohibited transaction that results
from any misrepresentation made, or other breach committed, by Lessee
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or any holder of indebtedness under any documents delivered in
connection with the transactions contemplated hereunder;
(ix) As to the Owner Participant, Taxes described in
clause (i) above imposed by any taxing authority that is not the
United States federal government, any agency or subdivision thereof,
any state, any agency of any state or any political subdivision
thereof ("Foreign Taxing Jurisdiction") as a direct result of the
operation or location of one or more Units of Equipment in such
Foreign Taxing Jurisdiction; provided, however, that this exclusion
will not apply if such Taxes would not have been imposed if the Owner
Participant had not (1) been engaged in business in such Foreign
Taxing Jurisdiction (other than as a result of its ownership and lease
of such Units of Equipment therein) or (2) maintained a permanent
establishment (as that term is defined in the Income Tax Treaties of
the United States) therein (other than a permanent establishment that
the Owner Participant is treated as having as a result of its
ownership and lease of such Units of Equipment therein); and
(x) As to any Tax Indemnitee, Taxes for so long as such
Taxes are being contested in accordance with the provisions of Section
7(g) hereof provided the Lessee is in compliance with its obligations
under Section 7(g) hereof.
(d) (Intentionally Omitted.)
(e) Payments to Lessee.
(i) If any Tax Indemnitee shall realize a Tax benefit
as a result of any Taxes paid or indemnified against by the Lessee
under this Section 7.1 (whether by way of deduction, credit,
allocation or apportionment or otherwise), such Tax Indemnitee shall
pay to the Lessee, an amount equal to the amount of such Tax benefit,
increased by the Tax Indemnitee's additional saved Taxes attributable
to the payment being made to the Lessee hereunder; provided, however,
that if a Payment Event of Default exists and is continuing, such
payment shall be held by Owner Participant until such Payment Event of
Default is cured, provided, further, that when such Payment Event of
Default is cured payment shall be made to the Lessee.
(ii) Upon receipt by a Tax Indemnitee of a refund or
credit of all or part of any Taxes paid or indemnified against by the
Lessee, such Tax Indemnitee shall pay to the Lessee, an amount equal
to the amount of such refund plus any interest received by or credited
to such Tax Indemnitee with respect to such refund increased or
decreased, as the case may be, by the Tax Indemnitee's net additional
or saved taxes attributable to the receipt of such amounts from the
taxing authority and the payment being made to the Lessee
<PAGE> 50
46
hereunder; provided, however, that if a Payment Event of Default
exists and is continuing, such payment shall be held by Owner
Participant until such Payment Event of Default is cured, provided,
further, that when such Payment Event of Default is cured payment
shall be made to the Lessee.
(iii) Payments made to the Lessee under subparagraphs (i)
or (ii) of this subsection 7.1(e) shall be subject to the limitation
that the amount paid to the Lessee by any Tax Indemnitee, after
subtracting the actual reduction in income taxes realized by such Tax
Indemnitee with respect to the payment thereof, shall not exceed the
amount of the indemnity payment previously made by the Lessee after
subtracting the actual increase in income taxes previously incurred by
such Tax Indemnitee with respect to the receipt thereof. Any such
excess shall not be paid but shall instead be carried forward and
shall reduce the Lessee's obligations to make subsequent payments
under subparagraph (b) to the Tax Indemnitee. The Tax Indemnitee
shall in good faith use diligence in filing its Tax returns and in
dealing with taxing authorities to seek and claim any such tax
benefits or refunds and to minimize the Taxes indemnifiable by the
Lessee under paragraph (b).
(f) Procedures and Verification. Any amount payable to a
Tax Indemnitee pursuant to paragraph (b) shall be paid within 30 days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the basis for such indemnity
and the computation of the amount so payable, provided that such amount need
not be paid prior to the later of (i) the date on which such Taxes are paid or
(ii) in the case of amounts which are being contested pursuant to paragraph (g)
hereof, the time such contest (including all appeals) is finally resolved.
Each Tax Indemnitee shall promptly forward to the Lessee any notice, bill or
advice received by it from the relevant taxing authority concerning any Tax
against which the Lessee may be required to indemnify hereunder. Any amount
payable to the Lessee pursuant to paragraph (e) shall be paid within 15 days
after the Tax Indemnitee realizes a tax benefit or receives a refund giving
rise to a payment under paragraph (e), and shall be accompanied by a written
statement by the Tax Indemnitee setting forth in reasonable detail the basis
for computing the amount of such payment. Within 30 days following the
Lessee's receipt of any computation from the Tax Indemnitee, the Lessee may
request that an independent, nationally recognized, accounting firm selected by
Lessee and reasonably acceptable to Owner Participant determine whether such
computations of the Tax Indemnitee are correct. Such accounting firm shall be
requested to make the determination contemplated by this paragraph (f) within
30 days of its selection. In the event such accounting firm shall determine
that such computations are incorrect, such firm then shall notify the parties
of the incorrect computations and discuss with them the manner in which the
computations should be
<PAGE> 51
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recomputed. The Tax Indemnitee shall cooperate with such accounting firm and
supply it with all information necessary to permit it to accomplish such
determination. Information supplied by the Tax Indemnitee shall be kept
confidential by such accounting firm. In the absence of manifest error the
computations of such accounting firm shall be final, binding and conclusive
upon the parties. All fees and expenses of the accounting firm payable under
this Section 7.1(f) shall be borne by the Lessee unless such verification shall
disclose an error in such Tax Indemnitee's favor of the greater of __% of the
amount of such payment determined by such Tax Indemnitee, or $______, in which
case such cost shall be borne by such Tax Indemnitee.
(g) Contest. If a written claim is made against any Tax
Indemnitee for any such Tax referred to in this Section 7.1, the Tax Indemnitee
shall promptly (and in no event later than 30 days after the Tax Indemnitee's
receipt of such claim) notify Lessee of such claim; provided, however, that the
failure of the Indemnitee to so notify Lessee shall not preclude any indemnity
hereunder unless such failure adversely affects the Lessee's ability to
require such Indemnitee to contest the Tax or to contest the Tax itself.
If (i) a written claim shall be made for any Tax for which Lessee is
obligated pursuant to this Section 7.1, and (ii) either (y) under applicable
law of the Tax Authority Lessee is allowed to directly contest such Tax in its
own name and such contest does not involve an unindemnified Tax of the Tax
Indemnitee, or (z) the contest involves solely a claim for indemnified Taxes
or, in a contest involving indemnified and unindemnified Taxes the claim for
indemnified Taxes can be severed, then Lessee shall be permitted to contest the
imposition of such Tax (including in its own name in the case of Taxes
described in clause (y) of this paragraph) ("Lessee Controlled Contest");
provided, however, that Lessee shall be permitted to contest the imposition of
such Tax only if Lessee agrees to pay, and shall timely pay, all reasonable
costs and expenses (including without limitation, all reasonable costs,
expenses, losses, legal and accountant's fees and disbursements, penalties and
interest) incurred in contesting such claim. Lessee shall control the contest
of Taxes governed by this paragraph and shall consult in good faith with the
Tax Indemnitee regarding such contest.
In the case of Taxes not governed by the previous paragraph
(Indemnitee Controlled Contest"), such Tax Indemnitee will contest such claim
in good faith provided that (i) Lessee requests in writing that the Tax
Indemnitee contest such claim within 30 days after the Tax Indemnitee has
notified Lessee of the existence of the claim, (ii) prior to the first to occur
of (x) any administrative proceedings beyond the audit stage of the contest, or
(y) any court proceedings, Lessee has furnished the Tax Indemnitee, at Lessee's
expense, with a written opinion of Simpson Thacher & Bartlett, or other
independent counsel selected by Lessee and reasonably acceptable to such Tax
Indemnitee, that
<PAGE> 52
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there is a reasonable basis to contest such claim, (iii) Lessee agrees to pay,
and shall timely pay, all reasonable costs and expenses (including, without
limitation, all reasonable costs, expenses, losses, legal and accountant's fees
and disbursements, penalties and interest) which such Tax Indemnitee may incur
in contesting such claim, (iv) no Lease Event of Default shall have occurred
and be continuing, unless Lessee shall have posted a satisfactory bond or other
security with respect to the costs of such contest and the loss, and (v) the
amount of the required indemnity payments with respect to such Taxes (together
with any recurring or related actual or potential claims in other taxable
periods relating to the same Taxes) would be $_______ or more.
At its sole discretion, the Tax Indemnitee may elect to conduct the
contest or authorize Lessee to conduct the contest of any Tax under an
Indemnitee Controlled Contest. The Tax Indemnitee shall consult in good faith
with Lessee concerning the method of any contest controlled by the Tax
Indemnitee hereunder. If a Tax Indemnitee (or Lessee, in the case of a Lessee
Controlled Contest) contests a Tax by making a payment thereof, then Lessee
shall advance to (or on behalf of, in the case of a Lessee Controlled Contest)
such Tax Indemnitee, an amount equal to the Taxes and any penalties, additions
to tax, fines and interest thereon that are paid by such Tax Indemnitee in
connection with such contest. If the contest of any Tax or the return on which
the Tax is reported also involves other Taxes which are not required to be
indemnified by Lessee pursuant to this Section 7.1 ("Non-Indemnified Items"),
then the Tax Indemnitee shall not discriminate against such Tax in favor of any
Non-Indemnified Items. Unless Lessee has failed to satisfy the requirements
for contesting, or continuing to contest, any indemnified Taxes, no Tax
Indemnitee shall settle the contest of such Tax without the consent of Lessee
(except with respect to Non-Indemnified Items), which consent shall not be
unreasonably withheld or delayed given all the facts and circumstances. All
reasonable costs and expenses of any contest by Lessee or by any Tax Indemnitee
shall be borne by Lessee (except with respect to Non-Indemnified Items) which
costs and expenses shall be paid promptly after receipt of notice.
Notwithstanding anything contained in this Section 7.1, a Tax
Indemnitee will not be required to contest, or to continue to contest and
Lessee shall not be permitted to contest or continue to contest, the validity,
applicability or amount of any tax (or portion thereof) (i) if such Tax
Indemnitee waives its right to indemnity hereunder with respect to such Tax (or
such portion thereof); (ii) if such contest would result in risk of an
imposition of criminal penalties, any material danger of sale, forfeiture or
loss (or loss of use) of the Equipment or any interest therein; and (iii) in
the case of a Indemnitee Controlled Contest, if an Event of Default has
occurred and is continuing, unless Lessee provides such Tax Indemnitee with
security in a manner reasonably satisfactory to such Tax Indemnitee.
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(h) In the event any reports with respect to Taxes are
required to be made, the Lessee will either prepare and file such reports (and
in the case of reports which are required to be filed on the basis of
individual items of Equipment, such reports shall be prepared and filed in such
manner as to show as required the interests of each Tax Indemnitee in such item
of Equipment) or, if it shall not be permitted to file the same, it will notify
each Tax Indemnitee of such reporting requirements, prepare such reports in
such manner as shall be satisfactory to each Tax Indemnitee and deliver the
same to each Tax Indemnitee within a reasonable period prior to the date the
same is to be filed. The Lessee shall provide such information as the Owner
Participant or the Lessor may reasonably require from the Lessee to enable the
Owner Participant and the Lessor to fulfill their respective tax filing, tax
audit, and tax litigation obligations.
(i) The provisions of this Section 7.1 shall continue in
full force and effect, notwithstanding the expiration or termination of any
Operative Agreement, until all obligations hereunder have been met and all
liabilities hereunder paid in full.
7.2 General Indemnification and Waiver of Certain Claims.
(a) Claims Defined. For the purposes of this Section
7.2, "Claims" shall mean any and all costs, expenses, liabilities, obligations,
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort or otherwise) which may be imposed on, incurred by,
suffered by, or asserted against an Indemnified Person, as defined herein, or
any Unit and, except as otherwise expressly provided in this Section 7.2, shall
include, but not be limited to, all reasonable out-of-pocket costs,
disbursements and expenses (including legal fees and expenses) paid or incurred
by an Indemnified Person in connection therewith or related thereto.
(b) Indemnified Person Defined. For the purposes of this
Section 7.2, "Indemnified Person" means the Owner Participant and its
Affiliates, the Owner Trustee (both in its individual capacity and as Owner
Trustee), the Interim Loan Participant, the Indenture Trustee, and each of
their respective directors, officers, employees, successors and permitted
assigns, agents and servants, the Trust Estate, the Indenture Estate and the
Pass Through Trustee (the respective directors, officers, employees, successors
and permitted assigns, agents and servants of the Owner Participant and its
Affiliates, the Owner Trustee and the Indenture Trustee, as applicable,
together with the Owner Participant, the Owner Trustee and the Indenture
Trustee, as the case may be, being referred to herein collectively as the
"Related Indemnitee Group" of the Owner Participant, the Indenture Trustee and
the Owner Trustee, respectively).
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(c) Claims Indemnified. Whether or not any Unit is
accepted under the Lease, or a closing occurs with respect thereto, and subject
to the exclusions stated in subsection (d) below, Lessee agrees to indemnify,
protect, defend and hold harmless each Indemnified Person on an after-tax basis
against Claims resulting from or arising out of (whether or not such
Indemnified Person shall be indemnified as to such Claim by any other Person):
(i) this Agreement or any other Operative Agreement or
any of the transactions contemplated hereby and thereby or the
ownership, lease, operation, possession, modification, improvement,
abandonment, use, non-use, maintenance, sublease, substitution,
control, repair, storage, transport, condition, titling, alteration,
transfer or other application or disposition, return, overhaul,
testing or registration of any Unit (including, without limitation,
injury, death or property damage of passengers, shippers or others,
the Environmental Laws and all Claims arising out of the release of
Hazardous Materials to the environment (including, without limitation,
clean-up costs, response costs, costs of corrective actions and
natural resource damages)) whether or not in compliance with the terms
of the Lease;
(ii) the construction, manufacture, financing,
refinancing, design, purchase, acceptance, rejection, delivery,
non-delivery or condition of any Unit (including, without limitation,
latent and other defects, whether or not discoverable, and any claim
for patent, trademark or copyright infringement); and
(iii) the initial offer, sale or delivery of (x) the
Equipment Notes and the Pass Through Certificates and (y) the
Beneficial Interest and (z) any refinancing with respect thereto
(including, without limitation, with regard to the matters identified
in Section 10.2(a)(iv)).
(d) Claims Excluded. The following are excluded from the
agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the extent
attributable to acts or omissions or events occurring entirely after
(A) in the case of the exercise and full and complete performance by
the Lessee of a purchase option with respect to such Unit under
Section 22.2 of the Lease, the exercise by the Lessee of an early
termination option with respect to such Unit under Section 10 of the
Lease (whether or not the Lessor exercises its rights under Section
10.3) or the occurrence of an Event of Loss with respect to such Unit
under Section 11 of the Lease, the last to occur of (x) the payment of
all amounts due from the Lessee in connection with any such event and
(y) the release of the Lien of the Indenture on such Unit or (B) in
all other cases, the last
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to occur of (x) the earlier to occur of the termination of the Lease
with respect to such Unit or the expiration of the Lease Term, (y) the
return of such Unit to the Lessor (it being understood that, so long
as any Unit is in storage as provided in Section 6.3 or 15.4 of the
Lease, the date of return thereof for the purpose of this clause (i)
shall be the last day of the Storage Period or the storage period
provided in said Section 15.4, as the case may be), and (z) the
release of the Lien of the Indenture on such Unit; and it being
further understood that during any such storage period the Lessee
takes responsibility only for its own acts, omissions, gross
negligence or willful misconduct);
(ii) Claims which are Taxes, whether or not the Lessee
is required to indemnify therefor under Section 7.1 hereof or the Tax
Indemnity Agreement, the Lessee's entire obligation with respect to
Taxes and losses of tax benefits being fully set out in such Section
7.1 or the Tax Indemnity Agreement;
(iii) with respect to any particular Indemnified Person,
Claims to the extent attributable to the gross negligence or willful
misconduct of (other than gross negligence or willful misconduct
imputed as a matter of law to such Indemnified Person solely by reason
of its interest in the Equipment) such Indemnified Person;
(iv) with respect to any particular Indemnified Person,
Claims to the extent attributable to the incorrectness in any material
respect of any representation or warranty by such Indemnified Person
in the Operative Agreements or any document or certificate executed in
connection therewith; or
(v) with respect to any particular Indemnified Person,
the failure by such Indemnified Person to perform or observe any
agreement, covenant or condition required to be performed or observed
by such Indemnified Person in any of the Operative Agreements
including, without limitation, the creation or existence of a Lessor
Lien or a Lien required to be discharged by the Indenture Trustee or
the Loan Participant under Section 6.4; or
(vi) Claims to the extent attributable to any offer,
sale or other disposition (voluntary or involuntary) by or on behalf
of or for the account of (x) the Lessor of all or any part of its
interest in the Equipment or (y) any other Indemnified Person of all
or any part of such Indemnified Person's interest in the Equipment,
the Trust Estate, the Indenture Estate, or in the Operative Agreements
except, in the case of both clauses (x) or (y), (i) in connection with
the exercise of remedies as a result, and during the continuance, of a
Lease Event of Default under a Lease or (ii) pursuant to the exercise
by the Lessee of its purchase
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options or other rights under the Lease or (iii) in connection with a
refinancing pursuant to Section 10.2 hereof or (iv) in connection with
an assumption of the Equipment Notes pursuant to Section 10.14 hereof;
or
(vii) Claims to the extent attributable to a failure on
the part of the Indenture Trustee or the Owner Trustee, as the case
may be, to distribute in accordance with the Trust Indenture or the
Trust Agreement, as the case may be, any amounts received and
distributable by it thereunder; or
(viii) Claims to the extent attributable to the
authorization or giving or withholding of any future amendments,
supplements, waivers or consents with respect to any of the Operative
Agreements other than as provided in Section 2.5(b) or as may be
required by any Operative Agreement; or
(ix) any Claim that is included in Transaction Expenses
and for which the Owner Participant is responsible pursuant to Section
2.5(a) hereof or that is incurred by any Indemnified Person to the
extent that such Indemnified Person shall have expressly agreed in any
Operative Agreements to bear such expense without right of
reimbursement under any Operative Agreement; or
(x) any Claim for any amount constituting an amount
payable by the Lessor under the Indenture or the Equipment Notes
resulting from an Indenture Event of Default that does not also
constitute a Lease Event of Default under the Lease; or
(xi) any Claim that would not have been incurred but for
the appointment of a successor Owner Trustee without the consent of
the Lessee except in connection with the exercise of remedies as a
result of and during the continuance of a Lease Event of Default under
the Lease.
(e) Insured Claims. In the case of any Claim indemnified
by the Lessee hereunder which is covered by a policy of insurance maintained by
the Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified
Person agrees, at the Lessee's expense, to provide reasonable cooperation to
the insurers in the exercise of their rights to investigate, defend or
compromise such Claim as may be required to retain the benefits of such
insurance with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall, after
obtaining knowledge thereof, promptly notify the Lessee of any Claim as to
which indemnification is sought; provided, however, that the failure to give
such notice shall not release the Lessee from any of its obligations under this
Section 7, except to the extent that failure to give notice of any action, suit
or proceeding against such Indemnified Person shall have a
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53
material adverse affect on Lessee's ability to defend such Claim or recover
proceeds under any insurance policies maintained by Lessee hereunder. Subject
to the provisions of the following paragraph, the Lessee shall at its sole cost
and expense be entitled to control, and shall assume full responsibility for,
the defense of such claim or liability; provided that the Lessee shall keep the
Indemnified Person which is the subject of such proceeding fully apprised of
the status of such proceeding and shall provide such Indemnified Person with
all information with respect to such proceeding as such Indemnified Person
shall reasonably request.
Notwithstanding any of the foregoing to the contrary, the
Lessee shall not be entitled to control and assume responsibility for the
defense of such claim or liability if (1) a Lease Event of Default shall have
occurred and be continuing, (2) such proceeding will involve any material
danger of the sale, forfeiture or loss of, or the creation of any Lien (other
than any lien permitted under the Operative Agreements or a Lien which is
adequately bonded to the satisfaction of such Indemnified Person) on, any Unit
of Equipment, or any part of the Trust Estate or impairment of the Lien of the
Indenture thereon, (3) in the good faith opinion of such Indemnified Person,
there exists an actual or potential conflict of interest such that it is
advisable for such Indemnified Person to retain control of such proceeding or
(4) such claim or liability involves the possibility of criminal sanctions to
such Indemnified Person. In the circumstances described in clauses (1) through
(4) of the preceding sentence, the Indemnified Person shall be entitled to
control and assume responsibility for the defense of such claim or liability at
the expense of the Lessee. In addition, any Indemnified Person may participate
in any proceeding controlled by the Lessee pursuant to this Section 7.2, at its
own expense in respect of any such proceeding as to which the Lessee shall have
acknowledged in writing its obligation to indemnify the Indemnified Person
pursuant to this Section 7.2, and at the expense of Lessee in respect of any
such proceeding as to which the Lessee shall not have so acknowledged its
obligation to the Indemnified Person pursuant to this Section 7.2. Lessee may
in any event participate in all such proceedings at its own cost. Nothing
contained in this Section 7.2(f) shall be deemed to require an Indemnified
Person to contest any Claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
(g) Subrogation. If a Claim indemnified by the Lessee
under this Section 7.2 is paid in full by the Lessee and/or an insurer under a
policy of insurance maintained by the Lessee, the Lessee and/or such insurer,
as the case may be, shall be subrogated to the extent of such payment to the
rights and remedies of the Indemnified Person (other than under insurance
policies maintained by such Indemnified Person at its own expense) on whose
behalf such Claim was paid with respect to the transaction or event giving rise
to such Claim. So long as no
<PAGE> 58
54
Lease Event of Default shall have occurred and be continuing, should an
Indemnified Person receive any refund, in whole or in part, with respect to any
Claim paid by the Lessee hereunder, it shall promptly pay over the amount
refunded (but not in excess of the amount the Lessee or any of its insurers has
paid in respect of such Claim paid or payable by such Indemnified Person on
account of such refund) to the Lessee.
(h) Waiver of Certain Claims. The Lessee hereby waives
and releases any Claim now or hereafter existing against any Indemnified Person
arising out of death or personal injury to personnel of the Lessee, loss or
damage to property of the Lessee, or the loss of use of any property of the
Lessee, which may result from or arise out of the condition, use or operation
of the Equipment during the Lease Term, including without limitation any latent
or patent defect whether or not discoverable.
(i) No Guaranty. The general indemnification provisions
of this Section 7.2 do not constitute a guaranty by the Lessee that the
principal of, interest on or any amounts payable with respect to the Equipment
Notes will be paid.
(j) Survival of Obligations. The indemnities and
agreements of the Lessee provided for in this Article 7 shall survive the
closing of this transaction and the expiration or other termination of this
Participation Agreement and the other Operative Agreements.
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease, and expressly agrees that
with respect to the Lease, so long as no Lease Event of Default has occurred
and is continuing thereunder, it or any Person acting on its authority, shall
not, through its or any such Person's actions or inactions, interfere with
Lessee's rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by Lessee or any permitted sublessee of the
Equipment leased thereunder.
SECTION 9. SUCCESSOR INDENTURE TRUSTEE
(a) In the event that the Indenture Trustee gives notice
of its resignation pursuant to Section 8.02 of the Trust Indenture, a successor
Indenture Trustee shall be appointed pursuant to said Section 8.02.
(b) In the event that either the Owner Trustee or the
Lessee obtains actual knowledge of the existence of any of the grounds for
removal of the Indenture Trustee set forth in Section 8.02 of the Indenture,
the Owner Trustee or the Lessee, as the case may be, shall promptly notify the
other by telephone, confirmed in writing and the parties entitled to act
promptly
<PAGE> 59
55
thereafter may remove the Indenture Trustee and appoint a successor Indenture
Trustee.
SECTION 10. MISCELLANEOUS
10.1 Consents. The Owner Participant covenants and agrees
that it shall not unreasonably withhold its consent to any consent requested of
the Owner Trustee under the terms of the Operative Agreements that by its terms
is not to be unreasonably withheld by the Owner Trustee.
10.2 Refinancing.
(a) Generally. So long as no Lease Default or Lease
Event of Default shall be in existence and subject to the satisfaction of the
terms and conditions set forth in this Section 10.2, the Lessee shall have the
right, on not more than two occasions during the Lease Term (excluding any
refinancing pursuant to Section 10.2(e)), to require the Owner Participant and
the Owner Trustee to effect an optional prepayment of any or all of the
Equipment Notes pursuant to Section 2.10(c) of the Indenture as part of a
refunding or refinancing operation, upon the following terms and conditions:
(i) the Owner Participant, the Indenture Trustee, the
Owner Trustee, and any other appropriate parties agree to enter into a
financing or loan agreement (which may involve an underwriting
agreement in connection with a public offering) proposed by the Lessee
which is in form and substance reasonably satisfactory to the Owner
Participant, providing for (x) the issuance and sale by the Owner
Trustee or such other party as may be appropriate on the date
specified in such agreement (for the purposes of this Section 10.2,
the Refunding Date") of debt securities in an aggregate principal
amount (in the lawful currency of the United States) equal to the
principal amount of the Equipment Notes to be refunded or refinanced
on the Refunding Date;
(ii) the Lessee and the Owner Trustee will amend the
Lease such that (w) if the Refunding Date is not a Rent Payment Date,
the Lessee shall on the Refunding Date prepay that portion of the next
succeeding installment of Basic Rent as shall equal the aggregate
interest accrued on the Equipment Notes outstanding to the Refunding
Date, (x) Basic Rent payable under the Lease in respect of the period
from and after the Refunding Date shall be recalculated to preserve
the Net Economic Return which the Owner Participant would have
realized had such refunding not occurred, provided that the net
present value of Basic Rent shall be minimized to the extent
consistent therewith, and (y) amounts payable under the Lease in
respect of the Early Buyout Price, Stipulated Loss Value and
Termination Value from and after the Refunding Date shall be
appropriately
<PAGE> 60
56
recalculated to preserve the Net Economic Return which the Owner
Participant would have realized had such refunding or refinancing not
occurred (it being agreed that any recalculations pursuant to
subclauses (x) and (y) of this clause (ii) shall be performed in
accordance with the requirements of Section 2.6 hereof);
(iii) the Owner Trustee will enter into an agreement to
provide for the securing thereunder of the debt securities issued by
the Owner Trustee pursuant to clause (a) of this Section 10.2 in like
manner as the Equipment Notes and/or will enter into such amendments
and supplements to the Indenture proposed by the Lessee as being
necessary to effect such refunding or refinancing, which agreements,
amendments and/or supplements shall be reasonably satisfactory in form
and substance to the Owner Participant;provided that, notwithstanding
the foregoing (but subject to the provisions of clause (i) above), the
Lessee reserves the right to set the economic terms and other terms
not customarily negotiated between an owner participant and a lender
of the refunding or refinancing transaction to be so offered;
provided, further, that no such amendment or supplement will increase
the obligations or impair the rights of the Owner Participant under
the Operative Agreements without the consent of the Owner Participant;
and
(iv) in the case of a refunding or refinancing involving
a public offering of debt securities, neither the Owner Trustee nor
the Owner Participant shall be the "issuer", "obligor" or
"underwriter" for securities law purposes, and the offering materials
(including any registration statement) for the refunding or
refinancing transaction shall be reasonably satisfactory to the Owner
Participant (and shall not in any event identify the Owner Participant
unless required by law);
(v) unless otherwise agreed by the Owner Participant,
the Lessee shall pay to the Owner Trustee or to the Person entitled
thereto as Supplemental Rent an amount equal to the Make-Whole Amount,
if any, payable on the Refunding Date;
(vi) the Owner Participant, the Owner Trustee, the
Indenture Trustee and the Pass Through Trustee shall have received (1)
such opinions of counsel as they may reasonably request concerning
compliance with the Securities Act of 1933, as amended, and any other
applicable law relating to the sale of securities and (2) such other
opinions of counsel and such certificates and other documents, each in
form and substance satisfactory to them, as they may reasonably
request in connection with compliance with the terms and conditions of
thisSection 10.2;
<PAGE> 61
57
(vii) all necessary authorizations, approvals and
consents shall have been obtained;
(viii) the Owner Participant shall not be required to
undertake due diligence in order to avoid transactions that could be
deemed prohibited transactions within the meaning of Section
4975(c)(1)(A) through (D) of the Code;
provided, however, that (x) no refunding or refinancing of the Equipment Notes
will be permitted if within 30 days after receipt of a request from the Lessee
to effect a refunding or refinancing pursuant to this Section 10.2(a) and of
information regarding the terms of such refunding or refinancing necessary to
render the opinion referred to below, the Owner Participant determines in good
faith that the Owner Participant or the Owner Trustee will bear any loss or
expense or adverse tax or other consequence as a result of such refunding or
refinancing (including, without limitation, with respect to matters arising
under ERISA and any adverse tax consequences resulting from the application of
Revenue Procedure 75-21 or 75-28 or Section 467 of the Code) and gives notice
of such determination in reasonable detail to Lessee, unless Lessee shall have
agreed to indemnify the Owner Participant for such loss or expense or such
adverse tax or other consequences in a manner reasonably satisfactory to the
Owner Participant, as the case may be; (y) the Lessee shall pay to or reimburse
the Participants, the Owner Trustee and the Indenture Trustee for all
reasonable costs and expenses (including reasonable attorneys fees) paid or
incurred by them in connection with such refunding or refinancing and (z) no
refunding or refinancing shall result in the reasonable opinion of the Owner
Participant in a material risk of a change in accounting treatment of the
Lease. Subject to the terms and conditions set forth in this Section 10.2,
each party hereto agrees to cooperate in good faith with the Lessee in
effecting any such refunding or refinancing, including entering into such
further agreements, certificates, documents and doing such further things as
may be reasonably requested by Lessee to effect such refunding or refinancing.
(b) Other Prepayments, Redemptions, etc. No prepayment
or redemption and cancellation by the Owner Trustee or the Owner Participant of
any Equipment Note (other than pursuant to Section 2.10(a) and (b) of the
Indenture and this Section 10.2) shall be made without the prior written
consent of the Lessee.
(c) Notice. The Lessee will promptly provide to the
Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee notice of the final terms and conditions of any such refunding
or refinancing (other than pricing terms) within ten Business Days prior to the
execution and delivery of the documents contemplated hereunder in connection
therewith.
<PAGE> 62
58
(d) No Obligation of Owner Participant. Notwithstanding
anything to the contrary contained in this Section 10.2, in no event shall the
Owner Participant have any obligation to initiate or structure any refinancing
or refunding of Equipment Notes or to take, or to cause the Owner Trustee to
take, any action in connection therewith other than such as is required by this
Section 10.2.
(e) Interim Debt Refinancing. In addition to the
refunding and refinancing rights under Section 10.2(a), Lessee shall have the
right to require the Owner Participant and the Owner Trustee to effect an
optional prepayment on the Refinancing Date of all of the Equipment Notes
issued on the Closing Date pursuant to Section 2.10(c) of the Indenture with
the proceeds of the Equipment Notes to be sold to the Pass Through Trustee on
the Refinancing Date (such refinancing, the "Interim Debt Refinancing"), upon
the following terms and conditions:
(i) the Pass Through Trustee shall execute and deliver
the Participation Agreement Supplement substantially in the form of
Exhibit F;
(ii) the conditions precedent set forth in the
Participation Agreement Supplement shall have been satisfied;
(iii) the Lessee and the Underwriter shall execute and
deliver the Underwriting Agreement substantially in the form of
Exhibit G;
(iv) the Lessee and the Pass Through Trustee shall
execute and deliver one or more Pass Through Trust Agreements, each
substantially in the form of Exhibit H;
(v) the provisions of clauses (ii) (subject to Section
2.2(c) hereof and Section 3.3 of the Lease), (iii), (iv), (vi), (vii)
and (viii) of Section 10.2(a) shall be applicable to the Interim Debt
Refinancing; and
(vi) in connection with the Interim Debt Refinancing,
adjustments to Basic Rent, Stipulated Loss Values and Termination
Values shall be performed pursuant to Section 2.6, and, after giving
effect to the Interim Debt Refinancing, the percentage of Total
Equipment Cost financed by the issuance of Equipment Notes may be
increased by not more than 5% of the amount of the Owner Participant's
Commitment (subject to the Owner Participant maintaining an equity
investment of not less than an amount equal to 20% of the Total
Equipment Cost)(the amount of such increase, if any, the Increased
Debt Portio"), and proceeds of the Equipment Notes issued on the
Refinancing Date in an amount equal to the Increased Debt Portion, if
any, shall be payable to the Owner Trustee on the Refinancing Date for
purposes of distribution to the Owner Participant.
<PAGE> 63
59
10.3 Lessee's Assumption of the Certificates. Subject to
compliance by the Lessee with all of its obligations under the Operative
Agreements, each of the Owner Participant, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if
the Lessee elects to terminate the Lease in whole or part and to purchase some
or all of the Units of the Equipment leased thereunder pursuant to Section 22.6
of the Lease, then the Owner Trustee will transfer to the Lessee, without
recourse or warranty (except as to the absence of Lessor's Liens) all of the
Owner Trustee's right, title and interest in and to the Equipment so purchased,
and if the Lessee, in connection with such purchase, elects to assume all or an
appropriate portion of the related obligations of the Owner Trustee under the
Equipment Notes pursuant to Article VII of the Indenture, each of the parties
shall, at Lessee's sole cost and expense execute and deliver appropriate
documentation permitting the Lessee to assume, in the manner provided in
Article VII of the Indenture Equipment Notes in a principal amount determined
as provided in Article VII of the Indenture on the basis of full recourse to
the Lessee, maintaining the security interest in such Equipment created by the
Indenture, releasing the Owner Participant and the Owner Trustee from all
obligations in respect of the Equipment Notes so assumed (except any
obligations which shall have occurred prior to such assumption) and all such
other actions as are reasonably necessary to permit such assumption by the
Lessee. If, in connection with such assumption, the Lessee elects to pay the
purchase price for such Equipment in installments in accordance with Section
22.6 of the Lease, then any security interest retained by the Owner Trustee in
and to such Units shall be subject and subordinate in all respects to the Lien
of the Indenture, but the Owner Trustee shall have such cure rights and other
rights specified in the Indenture with respect to the remedies available to the
Indenture Trustee against the Lessee and such Equipment as it shall have
enjoyed as obligor under the Indenture and lessor under the Lease. The Lessee
shall pay all reasonable expenses of the Indenture Trustee in connection with
any assumption of the obligations in respect of the Equipment Notes.
10.4 Amendments and Waivers. Except as otherwise provided
in the Indenture, no term, covenant, agreement or condition of this Agreement
may be terminated, amended or compliance therewith waived (either generally or
in a particular instance, retroactively or prospectively) except by an
instrument or instruments in writing executed by each party against which
enforcement of the termination, amendment or waiver is sought.
10.5 Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by express mail or
<PAGE> 64
60
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly confirmed by any
of the methods set forth in clauses (a) or (b) above or this clause (c), in
each case addressed to each party hereto at its address set forth below or, in
the case of any such party hereto, at such other address as such party may from
time to time designate by written notice to the other parties hereto:
If to the Lessee: Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma
Attention: Assistant Treasurer
Telephone:
Facsimile:
Confirmation No:
If to the Owner
Trustee: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Telephone:
Facsimile:
Confirmation No:
with a copy to: the Owner Participant at the address set
forth below
If to the Owner
Participant:
Attention:
Telephone:
Facsimile:
Confirmation No:
If to the Indenture
Trustee or the Pass
Through Trustee: Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
(Phillips Trust No. 94-__)
Telephone:
Facsimile:
Confirmation No:
<PAGE> 65
61
If to the Interim Loan
Participant:
Telecopier:
Telephone:
, provided that in the case of any notice delivered pursuant to Section 6.1,
the Owner Participant shall also send notice to the attention of the Treasurer
of the Lessee.
10.6 No Guarantee of Debt. Nothing contained herein or in
the Lease, the Trust Indenture, the Trust Agreement, the Pass Through Trust
Agreement or the Tax Indemnify Agreement or in any certificate or other
statement delivered by the Lessee in connection with the transactions
contemplated hereby shall be deemed to be (a) a guarantee by the Lessee to the
Owner Trustee, the Owner Participant, the Indenture Trustee or the Loan
Participant that the Equipment will have any residual value or useful life, or
(b) a guarantee by the Indenture Trustee or the Lessee of payment of the
principal of, premium, if any, or interest on the Equipment Notes.
10.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by,
the parties hereto and their respective successors and assigns as permitted by
and in accordance with the terms hereof, including each successive holder of
the Beneficial Interest permitted under Section 6.1 hereof and each successive
holder of any Equipment Note issued and delivered pursuant to this Agreement or
the Indenture. Except as expressly provided herein or in the other Operative
Agreements, no party hereto may assign its interests herein without the consent
of the parties hereto.
10.8 Business Day. Notwithstanding anything herein or
in any other Operative Agreement (other than the Interim Indenture Supplement)
to the contrary, if the date on which any payment is to be made pursuant to
this Agreement or any other Operative Agreement is not a Business Day, the
payment otherwise payable on such date shall be payable on the next succeeding
Business Day with the same force and effect as if made on such succeeding
Business Day and (provided such payment is made on such succeeding Business
Day) no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business
Day.
10.9 GOVERNING LAW. THIS AGREEMENT AND THE BILL OF SALE
SHALL BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE; PROVIDED, HOWEVER, THAT THE PARTIES HERETO SHALL BE ENTITLED TO
ALL RIGHTS CONFERRED BY ANY APPLICABLE FEDERAL STATUTE, RULE OR REGULATION.
<PAGE> 66
62
10.10 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under the laws of any applicable jurisdiction, such
provision, as to such jurisdiction, shall be, to the extent permitted by law,
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement in such jurisdiction or in any other jurisdiction.
10.11 Counterparts. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
10.12 Headings and Table of Contents. The headings of the
Sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
10.13 Limitations of Liability.
(a) Liabilities of Participants. Neither the Indenture
Trustee, the Owner Trustee nor any 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
Agreements, and neither the Indenture Trustee, the Pass Through Trustee nor any
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 the
Indenture Trustee, the Pass Through Trustee or any Participant be liable to the
Lessee for any action or inaction on the part of the Owner Trustee in
connection with the transactions contemplated herein, whether or not such
action or inaction is caused by willful misconduct or gross negligence of the
Owner Trustee unless such action or inaction is at the direction of the
Indenture Trustee, the Pass Through Trustee or any Participant, as the case may
be, or such direction is expressly permitted hereby or by any other Operative
Agreement.
(b) No Recourse to the Owner Trustee. It is expressly
understood and agreed by and between the Owner Trustee, the Lessee, the Owner
Participant, the Indenture Trustee, the Pass Through Trustee and the Loan
Participant, and their respective successors and permitted assigns that,
subject to the proviso contained in this Section 10.13(b), all representations,
warranties and undertakings of the Owner Trustee hereunder shall be binding
upon the Owner Trustee, only in its capacity as Owner Trustee under the Trust
Agreement, and (except as expressly provided herein) the Owner Trustee shall
not be liable in its
<PAGE> 67
63
individual capacity for any breach thereof, except for its gross negligence or
willful misconduct, or for breach of its covenants, representations and
warranties contained herein, except to the extent covenanted or made in its
individual capacity; provided, however, that nothing in this Section 10.13(b)
shall be construed to limit in scope or substance those representations and
warranties of the Owner Trustee made expressly in its individual capacity set
forth herein. The term "Owner Trustee" as used in this Agreement shall include
any successor trustee under the Trust Agreement, or the Owner Participant if
the trust created thereby is revoked.
10.14 Confidentiality. (a) The Owner Participant, the
Owner Trustee, the Indenture Trustee and the Pass Through Trustee shall
maintain in confidence and not disclose to any Person any non-public
information furnished to it pursuant to any of the Operative Agreements
("Confidential Information") without the prior consent of the Lessee, except
(a) as required by law, rule, regulation or any governmental agency, (b) to the
extent that such Confidential Information is publicly available, (c) where such
Confidential Information was previously known to the Owner Participant, the
Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case
may be, free of any obligation to keep such information confidential, or such
Confidential Information is or becomes available to the Owner Participant, the
Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case
may be, on a non-confidential basis from a source other than the Lessee or its
agents or advisors, (d) as disclosure to third parties (including courts of
competent jurisdiction) in connection with or in response to any order, decree,
judgement, subpoena, notice of discovery or similar ruling or pleading, (e) as
part of its normal reporting or review procedure to its auditors, regulators,
parent company or affiliates, (f) to the extent necessary to obtain appropriate
insurance, to its insurance agent, provided, that prior to such disclosure,
such agent shall sign a confidentiality agreement binding the agent to
provisions substantially the same as the provisions of this Section 10.15, (g)
in the case of the Indenture Trustee and the Pass Through Trustee, to the
extent required by the terms of the Pass Through Trust Agreement and to the
extent required to avoid subjecting either the Indenture Trustee or the Pass
Through Trustee to the risk of civil liability or breach of fiduciary duty as
evidenced by an opinion of counsel to such person to such effect (a copy of
which opinion, addressed only to the Indenture Trustee and/or the Pass Through
Trustee, as applicable shall be delivered to the Lessee), or (h) in order to
enforce its rights and perform its obligations pursuant to the Operative
Agreements. The obligations of the Owner Participant, the Owner Trustee, the
Indenture Trustee or the Pass Through Trustee under this Section 10.15 shall
survive the termination of the Operative Agreements and the payment of the
Equipment Notes and all other amounts payable hereunder.
<PAGE> 68
64
(b) The Interim Loan Participant shall maintain in
confidence and not disclose to any Person any Confidential Information without
the prior consent of the Lessee, subject to the Interim Loan Participant's (a)
obligation to disclose any Confidential Information pursuant to a request or
order under applicable laws and regulations or pursuant to a subpoena or other
legal process, (b) right to disclose any Confidential Information to bank
examiners, to its affiliates, auditors and counsel, and to any prospective
purchasing bank approved by the Lessee, (c) right to disclose any Confidential
Information in connection with any litigation or dispute or the exercise of any
remedy hereunder; provided, however, that Confidential Information disclosed
pursuant to clause (b) or (c) of this sentence shall be so disclosed subject to
such procedures as are reasonably calculated to maintain the confidentiality
thereof. Notwithstanding the foregoing provisions of this section 10.14(b),
(a) the foregoing obligation of confidentiality shall not apply to any
Confidential Information that was known to the Interim Loan Participant or any
of their respective affiliates prior to the time it received such Confidential
Information from the Lessee pursuant to this Agreement, other than as a result
of the disclosure thereof by a Person who, to the knowledge or reasonable
belief of the Interim Loan Participant, was prohibited from disclosing it by
any duty of confidentiality arising (under this Agreement or otherwise) by
contract or law, and (b) the foregoing obligation of confidentiality shall not
apply to any Confidential Information that becomes part of the public domain
independently of any act of the Interim Loan Participant not permitted
hereunder or when identical or substantially similar information is received by
the Interim Loan Participant, without restriction as to its disclosure or use,
from a Person who was not prohibited from disclosing it by any duty of
confidentiality arising (under this Agreement or otherwise) by contract or law.
The obligations of the Interim Loan Participant under this section 10.14(a)
shall survive the termination of the Operative Agreements and the payment of
the Equipment Notes and all other amounts payable hereunder.
10.15 Survival of Indemnities. Notwithstanding anything in
this Agreement or in any other document or agreement to the contrary, any
indemnity provided by any Person hereunder or in any other Operative Agreement
shall survive the termination of this Agreement, the Lease and any other
Operative Agreement on the terms and conditions, and subject to the exclusions,
provided therein.
<PAGE> 69
65
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered, all as of the date first
above written.
Lessee: PHILLIPS PETROLEUM COMPANY
By:________________________________
Owner Trustee: WILMINGTON TRUST COMPANY, not in its
individual capacity except as
otherwise expressly provided herein
but solely as Owner Trustee
By:________________________________
__________________________________
Owner Participant:
By:________________________________
Indenture Trustee: SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By:________________________________
Interim Loan Participant: __________________________________
By:________________________________
<PAGE> 70
EXHIBIT A
PARTICIPATION AGREEMENT
CERTIFICATE OF ACCEPTANCE
I, a duly appointed and authorized representative of the
Lessor and PHILLIPS PETROLEUM COMPANY (the "Lessee") under the Lease (as
defined in that certain Participation Agreement (Phillips Trust 94-__) dated as
of ____________, 1994, among the Lessor, the Lessee and the Trustees
identified therein), do hereby certify that I have received and accepted
delivery, on behalf of the Lessor, and have delivered to, and on behalf of the
Lessee hereby accept delivery of, under the Lease, the Units listed on Schedule
A attached hereto:
PLACE ACCEPTED:
DATE ACCEPTED:
Dated: ______________, 1994
______________________________
Authorized Representative of
the Lessor and the Lessee
(Phillips Trust No. 94-__)
<PAGE> 71
EXHIBIT B
PARTICIPATION AGREEMENT
FORM OF
BILL OF SALE
PHILLIPS PETROLEUM COMPANY, a Delaware corporation (the
"Seller"), in consideration of the sum of One Dollar ($1) and other good and
valuable consideration paid by Wilmington Trust Company not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (Phillips Trust No. 94-__), dated as of ________________, 1994, by
and between the Owner Trustee (in its individual capacity) and
(_________________) (the "Owner Participant"), at or before the execution and
delivery of these presents, the receipt of which is hereby acknowledged, does
hereby grant, bargain, sell, transfer, assign and set over unto the Owner
Trustee and its successors and assigns all right, title and interest of the
Seller, in and to the units of equipment (the "Equipment") set forth on
Schedule A hereto which have been delivered by the Seller pursuant to the
Participation Agreement (Phillips Trust No. 94-_), dated as of
________________, 1994, among the Seller, Phillips Petroleum Company, as
Lessee, the Owner Participant, the Owner Trustee, Shawmut Bank Connecticut,
National Association, as Indenture Trustee and ______________, as Interim Loan
Participant.
And the Seller hereby warrants to the Owner Trustee and its
successors and assigns that at the time of delivery of the Equipment the Seller
had title thereto and good and lawful right to sell the Equipment and the
Equipment was free and clear of all liens, security interests and other
encumbrances of any nature except (as defined in Appendix A to the Lease
referred to in the Participation Agreement) Liens described in clauses (i),
(ii) and (v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not due and
payable, and the Seller covenants that it will defend such title to the
Equipment against the demands of all persons whomsoever based on claims
originating prior to the delivery of the Equipment by the Seller.
IN WITNESS WHEREOF, the Seller has caused this instrument to
be executed in its name by a duly authorized officer on the _____ day of
___________, 1994.
PHILLIPS PETROLEUM COMPANY
By ___________________________________
Name:
Title:
<PAGE> 72
EXHIBIT C
TRANSFEREE'S PARENT GUARANTY
(Phillips Trust No. 94-__)
TRANSFEREE'S PARENT GUARANTY (Phillips Trust No. 94-__), dated
as of ___________ __, ____, by ____________________, a ____________ corporation
(the "Guarantor"), to the Owner Trustee (in its individual capacity and as
Owner Trustee), the Indenture Trustee, the Lessee and each other Participant
(collectively, together with their successors and assigns and the holders from
time to time of the Equipment Notes, the "Beneficiaries" and, individually, a
"Beneficiary").
W I T N E S S E T H :
WHEREAS, ____________________, a ____________ corporation (the
"Transferor"), is party to the Participation Agreement (Phillips Trust No.
94-__), dated as of ______________, 1994 (as amended, modified or supplemented
from time to time, the "Participation Agreement"), among Phillips Petroleum
Company, the Transferor, Shawmut Bank Connecticut, National Association, as
Pass Through Trustee and as Indenture Trustee, Wilmington Trust Company, as
Owner Trustee, and each other Participant; and
WHEREAS, the Transferor wishes to transfer, inter alia, all of
its right, title and interest in and to the Participation Agreement, the Trust
Estate, the Trust Agreement, the Tax Indemnity Agreement (as such terms are
defined in the Participation Agreement), the Assignment and Assumption
Agreement (Phillips Trust No. 94-__) dated as of ________________, 1994
between the Assignor thereunder and the Transferee and each other Operative
Agreement (as defined in the Participation Agreement) to which the Transferor
is a party or by which it is bound (collectively, the "Relevant Documents"),
and all proceeds therefrom (if relevant) to, _________________, a _____________
corporation (together with its successors and assigns (other than a
"Transferee" by transfer made in accordance with and pursuant to Section 6.1 of
the Participation Agreement), in the capacity of Owner Participant under the
Participation Agreement and the other Operative Agreements, the "Transferee"),
an affiliate of the Guarantor, pursuant to the Assignment and Assumption
Agreement (Phillips Trust No. 94-__), dated as of the date hereof, between the
Transferor and the Transferee; and
WHEREAS, the terms of the Participation Agreement provide that
the aforementioned transfer is conditioned upon the execution and delivery of
this Guarantee by the Guarantor;
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NOW, THEREFORE, in order that the Transferor may make the
aforementioned transfer to the Transferee, the Guarantor hereby agrees with and
for the benefit of the Beneficiaries as follows:
(a) Definitions. As used in this Guarantee, terms defined in
the Participation Agreement are used herein as therein defined, unless
otherwise defined herein.
(b) Guarantee. The Guarantor hereby unconditionally and
irrevocably guarantees to the Beneficiaries and their respective successors,
indorsees and permitted transferees and assigns, the prompt and complete
payment by the Transferee when due (whether at the stated maturity, by
acceleration or otherwise) of, and the faithful performance of, and compliance
with, all payment obligations of the Transferee under the Relevant Documents
owed to such Beneficiary, in accordance with the terms thereof and the timely
performance of all other obligations of the Transferee owed to such Beneficiary
thereunder in accordance with the terms thereof (such payment and other
obligations, the "Obligations"), and the Guarantor further agrees to pay any
and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel) that may be paid or incurred by the Beneficiaries in
enforcing any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
No payment or payments made by the Transferee, the
Guarantor, any other guarantor or any other Person or received or collected by
any Beneficiary from the Transferee, the Guarantor, any other guarantor or any
other person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder until the Obligations
are paid and performed in full.
If for any reason any Obligation to be performed or observed
by the Transferee (whether affirmative or negative in character) shall not be
observed or performed in accordance with the terms thereof, or if any amount
payable by the Transferee referred to in Section 2(a) hereof shall not be paid
promptly when due and payable, the Guarantor shall promptly perform or observe
or cause to be performed or observed each such Obligation or undertaking and
shall pay such amount at the place and to the person or entity entitled thereto
pursuant to the Relevant Documents regardless of whether or not any Beneficiary
or anyone on behalf of any Beneficiary shall have instituted any suit, action
or proceeding or exhausted its remedies or taken any steps to enforce any
rights against the Transferee or any other person or entity to compel any such
performance or to collect all or any part of such amount pursuant to the
provisions of the Relevant
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Documents or at law or in equity, or otherwise, and regardless of any other
condition or contingency.
(c) No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Guarantee, the Guarantor
hereby irrevocably waives any rights of subrogation, reimbursement,
contribution, exoneration or indemnity that it may acquire against the
Transferee due to any payment or performance made hereunder until all of the
Obligations shall have been indefeasibly paid and performed in full; provided
that, without exercising any rights of subrogation, the Guarantor may exercise
any rights that it may have at law against the Transferee.
(d) Amendments, Etc. with Respect to the Obligations; Waiver
of Rights. The Guarantor shall remain fully obligated hereunder
notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for
payment or performance of any of the Obligations made by any Beneficiary may be
rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by any Beneficiary and any Relevant Document and/or any collateral
security document or other guarantee or document in connection therewith, may
be amended, modified, supplemented or terminated, in whole or in part, in
accordance with the provisions thereof from time to time, and any collateral
security, guarantee or right of offset at any time held by any Beneficiary for
the payment or performance of the Obligations may be sold, exchanged, waived,
surrendered or released. No Beneficiary shall have any obligation to protect,
secure, perfect or ensure any lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against the Guarantor, a Beneficiary may, but shall be
under no obligation to, make a similar demand on the Transferee or any other
guarantor, and any failure by a Beneficiary to make any such demand or to
collect any payments from the Transferee or any such other guarantor or any
release of the Transferee or such other guarantor shall not relieve the
Guarantor of its obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
any Beneficiary against the Guarantor. For the purposes hereof, "demand" shall
include the commencement and continuance of any legal proceedings. The
Guarantor represents and warrants that it owns, directly or indirectly, 100% of
the capital stock of the Transferee or is otherwise an Affiliate of the
Transferee and that its obligations hereunder shall continue unimpaired, even
if the Guarantor no longer owns or is affiliated with the Transferee.
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(e) Guarantee Absolute and Unconditional. The Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any Beneficiary upon
this Guarantee or acceptance of this Guarantee; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Transferee or the Guarantor and any
Beneficiary shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. The Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Transferee or the Guarantor with respect to the Obligations. The
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Guarantor)
that constitutes, or might be construed to constitute, an equitable or legal
discharge of the Transferee for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance. When pursuing its rights
and remedies hereunder against the Guarantor, any Beneficiary may, but shall be
under no obligation to, pursue such rights and remedies as it may have against
the Transferee or any other person or entity or against any collateral security
or guarantee for the Obligations or any right of offset with respect thereto,
and any failure by any Beneficiary to pursue such other rights or remedies or
to collect any payments from the Transferee or any such other person or entity
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Transferee or any such other person
or entity or any such collateral security, guarantee or right of offset, shall
not relieve the Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Guarantor. This Guarantee shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Guarantor and the successors and assigns thereof,
and shall inure to the benefit of the Beneficiaries, and their respective
successors, indorsees and permitted transferees and assigns, until the earlier
of (x) all of the Obligations and the obligations of the Guarantor under this
Agreement shall have been satisfied by payment and performance in full (subject
to paragraph (vi) below) or (y) except to the extent not assumed by a
Transferee (as defined in Section 6.1 of the Participation Agreement) or
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guaranteed as provided therein, the right, title and interest of the Transferee
shall have been transferred to a Person meeting the requirement of Section 6.1
of the Participation Agreement. The Guarantor further agrees that, without
limiting the generality of this Guarantee, if any Beneficiary (or any permitted
assignee thereof) shall be prevented by applicable law from exercising its
remedies (or any of them) against the Transferee under any Operative Agreement,
such Beneficiary (or any assignee thereof) shall be entitled to receive
hereunder from the Guarantor, upon demand therefor, the sums that would have
otherwise been due from the Transferee had such remedies been able to be
exercised.
(f) Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Guarantor,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Transferee or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made. The Guarantor shall not commence any "case"
(as defined in Title 11 of the United States Code) against the Transferee.
(g) Payments. The Guarantor hereby guarantees that payments
hereunder shall be paid without set-off, counterclaim, deduction or
withholding, and shall be made in U.S. Dollars.
(h) Representations and Warranties. The Guarantor hereby
represents and warrants that:
the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal
right to own and operate its property, to lease the property it operates
and to conduct the business in which it is currently engaged;
the Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize
its execution, delivery and performance of this Guarantee;
this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally;
the execution, delivery and performance of this Guarantee
will not violate any provision of any requirement of
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law or contractual obligation of the Guarantor and will not result in or
require the creation or imposition of any lien on any of the properties or
revenues of the Guarantor pursuant to any requirement of law or
contractual obligation of the Guarantor;
no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or governmental authority and no consent
of any other person (including, without limitation, any stockholder or
creditor of the Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee;
no litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of
the Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or any of
the transactions contemplated hereby or (ii) that could have a material
adverse effect on the financial condition of the Guarantor or its ability
to perform its obligations hereunder;
the balance sheet of the Guarantor as at ____________ and
the related statement of income and retained earnings for the fiscal year
then ended (copies of which have heretofore been furnished to each
Beneficiary) (U.S. Guarantor only) (have been prepared in accordance with
generally accepted accounting principles applied consistently throughout
the period involved,) (other guarantors have been prepaid in accordance
with applicable accounting principles and standards) are complete and
correct and present fairly the financial condition of the Guarantor as at
such date and the results of its operations for such fiscal year; and
the Guarantor is a (bank or other financial institution with
a combined capital, surplus and undivided profits of at least $___________)
(corporation whose tangible net worth is at least $___________), exclusive
of goodwill, as of the proposed date of transfer, as determined in
accordance with generally accepted accounting principles.
(i) Severability. Any provision of this Guarantee that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(j) Section Headings. The Section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
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(k) No Waiver; Cumulative Remedies. No Beneficiary shall by
any act (except by a written instrument pursuant to paragraph xiii hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of any Beneficiary, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by a Beneficiary of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that such Beneficiary would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
(l) Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter hereof and there
are no promises or representations by any Beneficiary relative to the subject
matter hereof not reflected herein.
(m) Amendments and Waivers. None of the terms or provisions
of this Guarantee may be waived, amended or supplemented or otherwise modified
except by a written instrument executed by the Guarantor and each Beneficiary.
(n) Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Beneficiaries and their respective successors and (permitted) assigns.
(o) GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND
BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK.
(p) Notices. All notices, requests and demands to or upon
the Guarantor or any Beneficiary to be effective shall be in writing or by
telegraph, facsimile or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, five days after deposit in the postal system, certified mail
pre- paid, or, in the case of telegraphic notice, when sent, answerback
received, addressed to (a) in the case of the Guarantor (address, telex and fax
information to be provided) and (b) in the case of any Beneficiary, the
address, telex or telecopy number provided for such party in the Participation
Agreement.
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IN WITNESS WHEREOF, the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
(NAME OF GUARANTOR)
______________________________
Title:
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EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Phillips Trust No. 94-__)
ASSIGNMENT AND ASSUMPTION AGREEMENT (Phillips Trust No.
94-__), dated as of_________, ___, between ____________________, a
_____________ corporation (the "Assignor"), and ____________, a ____________
corporation (the "Assignee").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to effect (a) the transfer
by the Assignor to the Assignee of all of the right, title and interest of the
Assignor (except as reserved below) in, under and with respect to, among other
things, (i) the Participation Agreement (Phillips Trust No. 94-__), dated as of
________________, 1994 among Phillips Petroleum Company, the Assignor, Shawmut
Bank Connecticut, National Association, as Indenture Trustee, Wilmington Trust
Company, as Owner Trustee and each other Participant (as amended, modified or
supplemented from time to time, the "Participation Agreement"), including,
without limitation, any indemnity payments payable to Assignor directly or
indirectly thereunder, (ii) the Trust Agreement identified in the Participation
Agreement (the "Trust Agreement"), (iii) the Trust Estate (as defined in the
Trust Agreement), (iv) the Tax Indemnity Agreement identified in the
Participation Agreement (the "Tax Indemnity Agreement") and (v) the proceeds
therefrom and (b) the assumption by the Assignee of the obligations of the
Assignor accruing thereunder; and
WHEREAS, such documents permit such transfer upon satisfaction
of certain conditions heretofore or concurrently herewith being complied with;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto do hereby
agree as follows (capitalized terms used herein without definition having the
meaning ascribed thereto in the Participation Agreement):
1. Assignment. The Assignor has sold, assigned,
conveyed, transferred and set over, and does hereby sell, assign, convey,
transfer and set over, unto the Assignee as of the date hereof all of its
present and future right, title and interest in, under and with respect to the
Trust Estate, the Participation Agreement, the Trust Agreement, the Tax
Indemnity Agreement and all other Operative Agreements to which the Assignor is
a party or any other contract, agreement, document or instrument relating to
the Trust Estate by which the Assignor is bound, and any
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proceeds therefrom, together with all other documents and instruments
evidencing any of such right, title and interest, except such rights of the
Assignor as have accrued to the Assignor prior to the date hereof (including
specifically, but without limitation, the right to receive any amounts due or
accrued to the Assignor under the Trust Agreement as of a date prior to such
date and the right to receive any indemnity payment pursuant to the
Participation Agreement or the Tax Indemnity Agreement with respect to events
occurring or circumstances existing prior to such date).
2. Assumption. The Assignee hereby undertakes all of
the duties and obligations of the "Owner Participant" whenever accrued (other
than duties and obligations of the Assignor attributable to acts or events
occurring on or prior to the date hereof under the Participation Agreement, the
Trust Agreement, any of the other Operative Agreements to which the Assignor is
a party or by which it is bound or any other contract, agreement, document or
other instrument relating to the Trust Estate to which the Assignor is a party
or by which it is bound), pursuant to the Participation Agreement, the Trust
Agreement, and each other Operative Agreement to which the Assignor is a party,
each of the contract, agreement, document or instrument hereby assigned and
each other contract, agreement, document or instrument relating to the Trust
Estate by which the Assignor is bound, and hereby confirms that it shall be
deemed a party to the Participation Agreement, the Trust Agreement and each
other Operative Agreement to which the Assignor is a party or by which it is
bound and each such other contract, agreement, document and instrument, and
shall be bound by all the terms thereof (including the agreements and
obligations of the Assignor set forth therein) as if therein named as the Owner
Participant. The assignment and assumption contemplated hereby shall not
release the Assignor from its obligations under the Participation Agreement or
the Trust Agreement except to the extent expressly assumed by the Assignee
pursuant to this Section 2.
3. Payments. The Assignor hereby covenants and agrees
to pay over to the Assignee, if and when received following the date hereof,
any amounts (including any sums payable as interest in respect thereof) paid to
or for the benefit of the Assignor that, under Section 1 hereof, belong to the
Assignee, and the Assignee hereby covenants and agrees to pay over to the
Assignor, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of the Assignee that, under Section 1 hereof, belong to the Assignor.
4. Further Assurances. The Assignor shall, at any time
and from time to time, upon the request of the Assignee, promptly and duly
execute and deliver any and all such further instruments and documents and take
such further action as the Assignee may reasonably request to obtain the full
benefits of this Assignment and of the right and powers herein granted.
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5. Investment Purpose. The Assignee hereby represents
that it is acquiring the trust and other interests hereby assigned to it for
its own account for the purpose of investment and not with a view to the
distribution or resale of either thereof.
6. Representations and Warranties. The Assignee
represents and warrants that:
(a) it has all requisite power and authority and legal
right to enter into and carry out the transactions contemplated hereby
and to carry out and perform the obligations of the Owner Participant
under the Operative Agreements except for obligations not assumed by
the Assignee pursuant to Section 2 hereof;
(b) on and as of the date hereof, the representations and
warranties of the Owner Participant set forth in Section 3.6 of the
Participation Agreement are true and correct as to the Assignee;
(c) the transfer to it of all of the Assignor's right,
title and interest as Owner Participant will not violate any
provisions of the Securities Act of 1933, as amended, or any other
applicable Federal or state laws or regulations;
(d) the transfer (i) does not involve the use of any
assets that are or could be deemed to be plan assets under 29 C.F.R.
Section 2510.3-101 of an employee benefit plan (other than a
government plan exempt from the coverage of ERISA) or (ii) if the
assets of an employee benefit plan are so used, will not constitute a
prohibited transaction which is not subject to an exemption contained
in ERISA or the Code or adopted thereunder;
(e) neither it nor any of its Affiliates is involved or
has been involved in any litigation adverse to the Lessee or is a
direct or indirect competitor of the Lessee or otherwise is in the
same industry as the Lessee (including, without limitation, (i) the
industries of petroleum exploration, production, refining and
marketing, (ii) natural gas gathering and processing and (iii)
chemical production or distribution); and
(f) it is a "Transferee" satisfying the conditions set
forth in clause (b) of Section 6.1 of the Participation Agreement.
7. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8. Counterparts. This Assignment may be executed in any
number of counterparts, all of which together shall
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constitute a single instrument. It shall not be necessary that any counterpart
be signed by both parties so long as each party shall sign at least one
counterpart.
9. Third Party Beneficiaries. The Assignee hereby
agrees, for the benefit of the Owner Trustee (in its individual capacity and as
Owner Trustee), the Indenture Trustee, the Lessee and each other Participant
(collectively, the "Beneficiaries"), that its representations, warranties and
covenants contained herein are also intended to be for the benefit of each
Beneficiary, and each Beneficiary shall be deemed to be an express third party
beneficiary with respect thereto, entitled to enforce directly and in its own
name any rights or claims it may have against such party as such beneficiary.
IN WITNESS WHEREOF, the parties hereto, through their
respective officers thereunto duly authorized, have duly executed this
Assignment as of the day and year first above written.
(ASSIGNOR)
By:_____________________
Title:
(ASSIGNEE)
By:_____________________
Title:
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EXHIBIT E-1
_______________
To Each of the Persons Named
on the Attached Schedule I:
Re: Equipment Leased to Phillips Petroleum
Company (Phillips Trust No. 94- )
Ladies and Gentlemen:
As counsel to _________, a ( ) corporation
("Assignee"), I advise you as follows in connection with the Assignment and
Assumption Agreement (Phillips Trust No. 94-__) dated as of ____________ (the
"Assignment Agreement") between Assignee and ________________, a _________
corporation ("Assignor"), and the transactions contemplated thereby.
Capitalized terms used herein and not defined herein shall have the respective
meanings attributed thereto in the Assignment Agreement. This opinion is being
furnished to you pursuant to the request of Assignee.
I have, or an attorney under my supervision has, examined the
Assignment Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Assignee) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. I have also
assumed that the parties (or assignees of their interests therein) to the
operative Documents (other than the Assignee) are in compliance with their
respective representations, warranties and covenants set forth in the Operative
Agreements as to the assignment or transfer of their rights or obligations
thereunder or any offer with respect thereto. As to all matters of fact
material to my opinions, I have, when relevant facts were not independently
established, relied upon statements, representations and warranties contained
in the Assignment Agreement and upon the statements and certificates furnished
to me.
In addition, in rendering the opinions expressed herein I have
assumed that (i) the Assignment Agreement has been duly authorized, executed,
authenticated and delivered by Assignor and constitutes the legal, valid and
binding obligation of Assignor,
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enforceable against Assignor in accordance with its terms, and (ii) Assignor
has the requisite power, authority and legal right to enter into and perform
its respective obligations under the Assignment Agreement.
A. Based upon the foregoing and subject to the
limitations expressed in paragraph B below, I am of the opinion that:
1. Assignee is a corporation duly organized, validly
existing and in good standing under the laws of the State of ( )
and has full corporate power and authority to execute, deliver and
perform the Assignment Agreement and to perform its obligations under
the Operative Agreements to which it is a party.
2. The Assignment Agreement does not require any
approval not already obtained of stockholders of the Assignee or any
approval or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Assignee, and has been duly
authorized, executed and delivered by Assignee.
3. Neither the execution and delivery of the Assignment
Agreement by Assignee, nor the consummation by Assignee of the
transactions contemplated thereby and performance of the obligations
of the "Owner Participant" under the Operative Agreements which have
been assumed by the Assignee under the Assignment Agreement, conflicts
with, results in a breach of or violates any of the terms, conditions
or provisions of (i) the (Certificate) (Articles) of Incorporation or
By-laws of Assignee or (ii) to the best of my knowledge, any order,
writ, injunction or decree of any court or governmental authority
against the Assignee or by which the Assignee or any of its properties
is bound.
4. Each of the Assignment Agreement and the Operative
Agreements to which the Assignee is a party constitutes a legal, valid
and binding obligation of Assignee enforceable against Assignee in
accordance with the terms thereof, except as the enforceability
thereof may be limited by (a) general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity
or at law), (b) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and (c) public policy considerations (in the case of any indemnity
provisions contained therein or in the Operative Agreements).
5. Neither the execution and delivery by Assignee of the
Assignment Agreement, nor the consummation by Assignee of any of the
transactions contemplated thereby or performance of the obligations of
the "Owner Participant" under the Operative Agreements which have been
assumed by
<PAGE> 86
3
the Assignee under the Assignment Agreement, violates any law,
governmental rule or regulation of the United States or the State of
( ) or any governmental subdivision thereof applicable in
each case to the Assignee 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 in the Operative Agreements) upon, any
property of the Assignee or 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 Assignee is a party or by which it or its properties may
be bound or affected.
6. The purchase by Assignee of the interests assigned
pursuant to the Assignment Agreement and the assumption by the
Assignee of the obligations of the "Owner Participant" under the
Operative Agreements to which the Owner Participant is a party and
which have been assumed by the Assignee pursuant to the Assignment
Agreement, do not require registration under the Securities Act of
1933, as amended.
7. To the best of my knowledge, there are no pending or,
to the knowledge of the Assignee, threatened actions or proceedings
against the Assignee before any court or administrative agency which,
if determined adversely to the Assignee, would materially adversely
affect the ability of the Assignee to perform its obligations under
the Assignment Agreement or under any Operative Agreement to which it
is a party.
B. I am qualified to practice law in the State of
( ) and I express no opinion as to any laws other than the laws of
the State of ( ) and the federal laws of the United States of America.
Very truly yours,
<PAGE> 87
SCHEDULE I
Phillips Petroleum Company,
as Lessee
__________________________
as Owner Participant
Wilmington Trust Company, as Owner
Trustee
Shawmut Bank Connecticut,
National Association, as Indenture Trustee
(Assignor)
Holders of Equipment Notes
from time to time
<PAGE> 88
EXHIBIT E-2
___________________
To Each of the Persons Named
on the Attached Schedule I:
Re: Equipment Leased to Phillips Petroleum
Company (Phillips Trust No. 94- )
Ladies and Gentlemen:
As counsel to ______________, a ( ) corporation
("Guarantor"), I advise you as follows in connection with the Guaranty
Agreement (Phillips Trust No. 94-__) dated as of ________ (the "Guaranty
Agreement") by Guarantor in favor of Phillips Petroleum Company, as Lessee
________________, as Owner Participant, each Lender named therein, Wilmington
Trust Company, as Owner Trustee and Shawmut Bank Connecticut, National
Association, as Indenture Trustee and the Holders from time to time of the
Equipment Notes and the transactions contemplated thereby. Capitalized terms
used herein and not defined herein shall have the respective meanings
attributed thereto in the Guaranty Agreement. This opinion is being furnished
to you pursuant to the request of Guarantor.
I have, or an attorney under my supervision has, examined the
Guaranty Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Guarantor) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. As to all
matters of fact material to my opinions, I have, when relevant facts were not
independently established, relied upon statements, representations and
warranties contained in the Guaranty Agreement and upon the statements and
certificates furnished to me.
In addition, in rendering the opinions expressed herein, I
have assumed that (i) the Assignment Agreement has been duly authorized,
executed, authenticated and delivered by the parties thereto and constitutes
the legal, valid and binding obligation of the parties thereto, enforceable
against each such party in accordance with its terms and (ii) each of Assignor
and
<PAGE> 89
2
Assignee has the requisite power, authority and legal right to enter into and
perform its respective obligations under the Assignment Agreement.
A. Based upon the foregoing and subject to the
limitations expressed in paragraph B below, I am of the opinion that:
1. Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of ( )
and has full corporate power and authority to execute, deliver and
perform the Guaranty Agreement.
2. The Guaranty Agreement has been duly authorized,
executed and delivered by Guarantor.
3. Neither the execution and delivery of the Guaranty
Agreement by Guarantor, nor the consummation by Guarantor of the
transactions contemplated thereby, conflicts with, results in a breach
of or violates any of the terms, conditions or provisions of the
(Certificate) (Articles) of Incorporation or By-laws of Guarantor or
will violate any provision of any requirement of law or contractual
obligation of the Guarantor or will result in or require the creation
or imposition of any lien on any of the properties or revenues of the
Guarantor pursuant to any requirement of law or contractual obligation
of the Guarantor.
4. No consent or authorization of, filing with, or
other act by or in respect of, any arbitrator or governmental
authority and no consent of any other person (including, without
limitation, any stockholder or creditor of the Guarantor) is required
in connection with the execution, delivery, performance, validity or
enforceability of this Guaranty.
5. To the best of my knowledge, no litigation,
investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guaranty or any of
the transactions contemplated hereby or (ii) that could have a
material adverse effect on the financial condition of the Guarantor or
its ability to perform its obligations thereunder.
6. The Guaranty Agreement constitutes a legal, valid and
binding obligation of Guarantor enforceable against Guarantor in
accordance with the terms thereof, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally.
<PAGE> 90
3
B. I am qualified to practice law in the State of
( ) and I express no opinion as to any laws other than the laws of
the State of ( ) and the federal laws of the United States of America.
Very truly yours,
<PAGE> 91
4
SCHEDULE I
Phillips Petroleum Company,
as Lessee
____________________________________
as Owner Participant
Wilmington Trust Company, as Owner
Trustee
Shawmut Bank Connecticut,
National Association, as Indenture Trustee
(Assignor)
Holders of Equipment Notes
from time to time
<PAGE> 1
EXHIBIT 4(c)(2)
________________________________________________________________________________
PARTICIPATION AGREEMENT
(Phillips Trust No. 94-__)
Dated as of ___________________, 1994
among
PHILLIPS PETROLEUM COMPANY,
as Lessee
WILMINGTON TRUST COMPANY,
as Owner Trustee
_____________________________
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Indenture Trustee
and
__________________________
as Interim Loan Participant
Transportation Equipment
AIRCRAFT
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN THE
EQUIPMENT COST; CLOSING; TRANSACTION COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Participation in Equipment Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing Date; Procedure for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions . . . . . . . . . . 6
2.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value; Confirmation and
Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Postponement of Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Representations and Warranties of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Representations and Warranties of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Representations and Warranties of the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Representations, Warranties and Covenants Regarding Beneficial Interest . . . . . . . . . . . . . . . 21
3.5 Representations and Warranties of the Interim Loan Participant . . . . . . . . . . . . . . . . . . . . 22
3.6 Representations and Warranties of the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . 23
3.7 Opinion Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Conditions Precedent to Investment by Each Participant . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 (Intentionally omitted.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Additional Conditions Precedent to Investment by Owner Participant . . . . . . . . . . . . . . . . . . 29
4.4 Conditions Precedent to the Obligation of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE . . . . . . . . . . . . . . . . . . 33
6.1 Restrictions on Transfer of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Lessor's Liens Attributable to the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.3 Lessor's Liens Attributable to the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Liens Created by the Indenture Trustee, the Loan Participants and the Pass Through Trustee . . . . . . 38
6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee . . . . . . . . . . . . . . . . . 39
6.6 Amendments to Operative Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.7 Merger Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.8 Rent Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.9 Pass Through Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7. LESSEE'S INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 General Indemnification and Waiver of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9. SUCCESSOR INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 Lessee's Assumption of the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.4 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.6 No Guarantee of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.8 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.12 Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.13 Limitations of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.15 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
EXHIBITS
Exhibit A - Form of Certificate of Acceptance
Exhibit B - Form of Bill of Sale
Exhibit C - Form of Transferee's Parent Guaranty
Exhibit D - Form of Assignment and Assumption Agreement
Exhibit E-1 - Form of Opinion of Counsel to Assignee
Exhibit E-2 - Form of Opinion of Counsel to Assignee Guarantor
Exhibit F - Form of Participation Agreement Supplement
Exhibit G - Form of Underwriting Agreement
Exhibit H - Form of Pass Through Trust Agreement
-ii-
<PAGE> 4
SCHEDULES
Schedule 1 - Description of Equipment
Schedule 2 - Participant's Commitments
Schedule 3 - Rental Factors
Schedule 4 - Stipulated Loss Values
Schedule 5 - Termination Values
Schedule 6 - Early Buyout Dates and Early Buyout Prices
-iii-
<PAGE> 5
EXHIBIT 4(c)(2)
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (Phillips Trust No. 94-__) dated
as of ___________________, 1994 (this "Agreement"), among (i) PHILLIPS
PETROLEUM COMPANY, a Delaware corporation (herein, together with its successors
and assigns, called the "Lessee"), (ii) WILMINGTON TRUST COMPANY, a Delaware
banking corporation, not in its individual capacity except as expressly stated
herein, but solely as trustee under the Trust Agreement (as hereinafter
defined) (herein in such capacity, together with its successors and assigns,
called the "Owner Trustee"), (iii) _______________________________________, a
Delaware Corporation (herein, together with its successors and assigns, called
the "Owner Participant"), (iv) SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
a national banking association, as trustee under the Indenture (as defined
below) (herein in such capacity, together with its successors and assigns,
called the "Indenture Trustee"), and (v) ______________, a __________________
banking corporation (herein in such capacity, together with its successors and
assigns, called the "Interim Loan Participant").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant has entered into the Trust Agreement (Phillips
Trust No. 94-__) with the Owner Trustee in its individual capacity pursuant to
which the Owner Trustee agrees, among other things, (i) to hold the Trust
Estate for the benefit of the Owner Participant thereunder on the terms
specified in the Trust Agreement, subject, however, to the Lien created under
the Indenture and, (ii) subject to the terms and conditions hereof, to purchase
on behalf of the Trust the Equipment described in Schedule 1 hereto from the
Lessee and concurrently therewith lease such Equipment to the Lessee;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Trustee has entered into the Indenture with the Indenture
Trustee pursuant to which the Owner Trustee agrees, among other things, for the
benefit of the holder or holders of the Equipment Notes, to issue on behalf of
the Trust to the Interim Loan Participant, the Equipment Notes as evidence of
the loan made by the Interim Loan Participant participating in the financing of
the Equipment Cost for the Equipment;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Owner Trustee is authorized and directed by the Owner Participant (i) to accept
delivery of the Bill of Sale evidencing the purchase and transfer of title of
each Unit of the Equipment to the Owner Trustee and (ii) to execute and deliver
the Lease
<PAGE> 6
relating to the Equipment pursuant to which, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to lease to the Lessee,
and the Lessee agrees to lease from the Owner Trustee, each Unit of Equipment
to be delivered on the Closing Date, such lease of Equipment of a Class to be
evidenced by the execution and delivery of a Lease Supplement to the Lease
covering such Class and such Units;
WHEREAS, the proceeds from the loan evidenced by the Equipment
Notes and made by the Interim Loan Participant will be applied, together with
the equity contribution made by the Owner Participant pursuant to this
Agreement, to effect the purchase of the Equipment contemplated hereby;
WHEREAS, on the Refinancing Date, pursuant to one or more Pass
Through Trust Agreements, one or more grantor trusts will be created in order
to facilitate the refinancing of the Equipment Notes issued to the Interim Loan
Participant on the Closing Date;
WHEREAS, on the Refinancing Date, the Pass Through Trustee
shall execute and deliver the Participation Agreement Supplement pursuant to
which the Pass Through Trustee shall become a party to this Agreement; and
WHEREAS, on the Refinancing Date, pursuant to the Indenture,
the Owner Trustee shall issue Equipment Notes on behalf of the Trust to the
Pass Through Trustee (acting on behalf of one or more grantor trusts and as
Loan Participant), and the proceeds of such Equipment Notes, together with
other amounts payable pursuant to the Operative Agreements, shall be applied to
the payment in full of all principal, interest and other amounts owing in
respect of the Equipment Notes issued to the Interim Loan Participant.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, receipt of which is
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. The capitalized terms used in this
Agreement (including the foregoing recitals) and not otherwise defined herein
shall have the respective meanings specified in Appendix A hereto, unless the
context hereof shall otherwise require. All references to Sections, Schedules
and Exhibits herein are to Sections, Schedules and Exhibits of this Agreement
unless otherwise indicated.
1.2 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall
<PAGE> 7
3
be applicable whether such action is taken directly or indirectly by such
Person.
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT
COST; CLOSING; TRANSACTION COSTS
2.1 Sale and Purchase. Subject to the terms and conditions
hereof and on the basis of the representations and warranties set forth herein,
the Lessee agrees to sell to the Owner Trustee and the Owner Trustee agrees to
purchase from the Lessee, the Units described in Schedule 1 as hereinafter
provided, and in connection therewith, the Owner Trustee agrees to pay to the
Lessee the cost for each Unit as specified in Schedule 1; provided, however,
that the Owner Trustee shall not be obligated to purchase on the Closing Date
any Unit that is destroyed, damaged, defective, in unsuitable condition or
otherwise unacceptable to the Lessee for lease pursuant to the Lease. The
Lessee shall deliver the Equipment to the Owner Trustee and the Owner Trustee
shall accept such delivery on a single delivery date as more fully provided
herein (the "Closing Date"); provided that the Closing Date shall occur on or
prior to ______________________.
2.2 Participation in Equipment Cost.
(a) Equity Participation. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, on the Closing Date, the Owner Participant agrees to participate
in the payment of the Equipment Cost for the Units delivered on the Closing
Date by making an equity investment in the beneficial ownership of such Units
in the amount equal to the product of the aggregate Equipment Cost for the
Units delivered on the Closing Date and the percentage set forth opposite the
Owner Participant's name in Schedule 2 (the Owner Participant's "Commitment").
The aggregate amount of the Owner Participant's Commitment shall not exceed
$___________. The Owner Participant's Commitment shall be paid on the Closing
Date to the Indenture Trustee to be held and applied by the Indenture Trustee
toward the payment of the Equipment Cost for the Units as provided in Section
2.3.
(b) Debt Participation. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, on the Closing Date, the Loan Participant agrees to participate
in the payment of the Equipment Cost for the Units delivered on the Closing
Date by making a secured loan, to be evidenced by the Equipment Notes, to the
Owner Trustee in the amount equal to the product of the aggregate Equipment
Cost for the Units delivered on the Closing Date and the percentage set forth
opposite the Loan Participant's name in Schedule 2 (the Loan Participant's
"Commitment"). The aggregate amount of the Loan Participant's Commitment shall
not exceed $______________.
<PAGE> 8
4
(c) Initial Lease Period Interest Payment. The Owner
Participant covenants and agrees solely for the benefit of the Lessee that it
will advance funds to the Owner Trustee sufficient to pay the interest (the
"Initial Lease Period Interest") on the Equipment Notes which accrues during
the period from the Closing Date to ______________,1995. If the Refinancing
Date occurs prior to ______________, 1995, then the Owner Participant shall
advance such funds to the Owner Trustee in two installments, with the first
installment due on the Refinancing Date in order to pay the interest which has
accrued on the Equipment Notes from and including the Closing Date to but
excluding the Refinancing Date and with the second installment due on
____________, 1995 in order to pay the interest which has accrued on the
Equipment Notes from and including the Refinancing Date to but excluding
______________, 1995. If the Refinancing Date does not occur prior to
____________, 1995, then the Owner Participant shall advance funds to the Owner
Trustee in a single installment on ______________, 1995 in order to pay the
interest which has accrued on the Equipment Notes from and including the
Closing Date to but excluding ______________, 1995. The Lessee shall provide
the Owner Participant with at least three days advance notice of the date and
amount of any Initial Lease Period Interest which will be due and payable. The
Owner Trustee shall upon receipt of funds advanced by the Owner Participant
pursuant to this Section 2.2(b) make such funds available to the Indenture
Trustee in order to pay the Initial Lease Period Interest. The Owner
Participant hereby agrees to the terms and conditions set forth in Section 3.5
of the Lease.
2.3 Closing Date; Procedure for Participation.
(a) Notice of Closing Date. Not later than 1:00 P.M.,
New York City time, on the third Business Day preceding the Closing Date, the
Lessee shall give the Owner Participant, the Indenture Trustee, the Owner
Trustee and the Interim Loan Participant notice (a "Notice of Delivery") by
facsimile or other form of telecommunication or telephone (to be promptly
confirmed in writing) of the Closing Date, which Notice of Delivery shall
specify in reasonable detail the number and type of Units to be delivered on
such date, the aggregate Equipment Cost of such Units, and the respective
amounts of the Owner Participant's Commitment and the Loan Participant's
Commitment required to be paid with respect to such Units provided if such
Units do not constitute all of the units of similar equipment contemplated by
the Term Sheet, there shall be no subsequent or additional closing without the
consent of all the parties hereto. Prior to 10:00 A.M., New York City time, on
the Closing Date, the Owner Participant shall make the amount of the Owner
Participant's Commitment required to be paid on the Closing Date available to
the Indenture Trustee, and immediately prior to the delivery and acceptance of
the Units specified in Section 2.3(b), the Loan Participant shall make the
amount of the Loan Participant's Commitment for the Equipment Cost required to
be paid on the Closing Date available to the Indenture Trustee, in either case,
<PAGE> 9
5
by transferring or delivering such amounts, in funds immediately available on
the Closing Date, to the Indenture Trustee, either directly to, or for deposit
in, the Indenture Trustee's account at Shawmut Bank Connecticut, National
Association (ABA No. ____________), for credit to account number
_________________. The making available by the Owner Participant of the amount
of its Commitment for the Equipment Cost shall be deemed a waiver of the Notice
of Delivery by the Owner Participant and the Owner Trustee and the making
available by the Loan Participant of the amount of its Commitment for the
Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Loan
Participant and the Indenture Trustee.
(b) Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place beginning at 10:00 A.M.,
New York City time, on the Closing Date at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, 10017 or at such other
place or time as the parties hereto shall agree. Upon receipt by the Indenture
Trustee on the Closing Date of the full amount of the Owner Participant's
Commitment and Loan Participant's Commitment in respect of the Units delivered
on the Closing Date, the Indenture Trustee on behalf of the Owner Trustee
shall, subject to the conditions set forth in Sections 4.1 and 4.3 having been
fulfilled to the satisfaction of the Owner Participant and the Interim Loan
Participant or waived by the Owner Participant and the Interim Loan
Participant, pay to the Lessee from the funds then held by the Indenture
Trustee, in immediately available funds, an amount equal to the Equipment Cost
for the Units delivered on the Closing Date, and simultaneously therewith, (i)
the Lessee shall deliver the Units to the Owner Trustee, (ii) the Owner Trustee
shall have accepted the Units, such acceptance to be conclusively evidenced by
the execution and delivery by the Owner Trustee or its authorized
representative (as provided in Section 2 of the Lease) of a Certificate of
Acceptance with respect to the Units in the form attached hereto as Exhibit A
(a "Certificate of Acceptance"), (iii) the Owner Trustee shall, pursuant to the
Lease, lease and deliver the Equipment delivered on the Closing Date to the
Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of the
Units under the Lease (such lease, delivery and acceptance of the Units under
the Lease being conclusively evidenced by the execution and delivery by the
Lessee and Owner Trustee of a Lease Supplement to the Lease concerning such
Units of Equipment so delivered), and (iv) the Owner Trustee shall execute and
deliver the Equipment Notes to the Loan Participant. Each of the Lessee, the
Owner Participant, the Owner Trustee, the Loan Participant and the Indenture
Trustee hereby agree to take all actions required to be taken by it in
connection therewith and pursuant to this Section 2.3(b).
<PAGE> 10
6
2.4 Owner Participant's Instructions to the Owner
Trustee; Satisfaction of Conditions.
(a) The Owner Participant agrees that the making
available to the Indenture Trustee of the amount of its Commitment for the
Units delivered on the Closing Date in accordance with the terms of this
Section 2 shall constitute, without further act, authorization and direction by
the Owner Participant to the Owner Trustee, subject, on the Closing Date, to
the conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the
satisfaction of the Owner Participant or waived by the Owner Participant, to
take the actions specified in Section 2.1 of the Trust Agreement with respect
to the Units on the Closing Date.
(b) The Owner Participant agrees, in the case of any
Replacement Unit substituted pursuant to Section 11 of the Lease, that the
Owner Trustee is authorized and directed to take the actions specified in such
Section 11 of the Lease with respect to such Replacement Unit upon due
compliance with the terms and conditions set forth in Section 11 of the Lease
with respect to such Replacement Unit.
(c) The Owner Participant agrees that the authorization by
the Owner Participant or its counsel to the Indenture Trustee to release to the
Lessee the Owner Participant's Commitment with respect to the Units delivered
on the Closing Date shall constitute, without further act, notice and
confirmation that all conditions to closing set forth in Sections 4.1 and 4.3
were either met to the satisfaction of the Owner Participant or, if not so met,
were waived by it with respect to such Units.
2.5 Expenses.
(a) If the Owner Participant shall have made its
investment provided for in Section 2.2 and the transactions contemplated by
this Agreement are consummated, either the Owner Participant will promptly pay,
or the Owner Trustee will promptly pay, with funds the Owner Participant hereby
agrees to pay to the Owner Trustee, the following (the "Transaction Costs") if
evidenced by an invoice in form reasonably satisfactory to the Owner
Participant delivered to the Owner Participant prior to the Basic Term
Commencement Date (it being understood and agreed that all Transaction Costs
will be incurred either in connection with the closing of the Overall
Transaction or with the refinancing of the Equipment Notes to occur on the
Refinancing Date):
(i) the cost of reproducing and printing the Operative
Agreements, the Equipment Notes, the Pass Through Certificates and the
offering materials relating to the Pass Through Certificates,
including all costs and fees in connection with the initial filing and
recording of the Lease, the Indenture and any other document required
to be
<PAGE> 11
7
filed or recorded pursuant to the provisions hereof or of any other
Operative Agreement and the fees and expenses of the rating agencies
in connection with rating the Pass Through Certificates;
(ii) the reasonable fees and expenses of Moore & Van
Allen, special counsel for the Owner Participant, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(iii) the fees, expenses and disbursements of the
Underwriters in connection with the offer and sale of the Pass Through
Certificates;
(iv) the fees, expenses and disbursements of Chemical
Securities, Inc., as equity placement agent for the Lessee, for their
services rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(v) the reasonable fees and expenses of Cravath, Swaine
& Moore, special counsel for the Interim Loan Participant and the
Underwriters, for their services rendered in connection with the
Overall Transaction and the refinancing of the Equipment Notes to
occur on the Refinancing Date;
(vi) the reasonable fees and expenses of Shipman &
Goodwin, special counsel for the Indenture Trustee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(vii) the reasonable fees and expenses of Potter Anderson
& Corroon, special counsel for the Owner Trustee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(viii) the reasonable fees and expenses of Shipman &
Goodwin, special counsel for the Pass Through Trustee, for their
services rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(ix) the reasonable fees and expenses of Simpson Thacher
& Bartlett, special counsel for the Lessee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(x) the fees and expenses of the Owner Trustee incurred
in connection with the closing of the Overall
<PAGE> 12
8
Transaction and the refinancing of the Equipment Notes to occur on the
Refinancing Date;
(xi) the initial fees and expenses of the Indenture
Trustee incurred in connection with the closing of the Overall
Transaction and the refinancing of the Equipment Notes to occur on the
Refinancing Date;
(xii) the initial fees and expenses of the Pass Through
Trustee;
(xiii) the reasonable fees and expenses of Avitas, Inc.,
for their services rendered in connection with delivering the
Appraisal required by Section 4.3(a);
(xiv) the costs incurred in connection with any
adjustment pursuant to Section 2.6(a), other than clause (C) thereof;
and
(xv) the reasonable fees and expenses of Crowe &
Dunlevy, special FAA counsel, for their services rendered in
connection with the Overall Transaction;
provided that the Lessee reserves the right (A) to pay directly all or a
portion of the Transaction Costs specified in clauses (iii), (iv) and (ix)
above and (B) to pay directly any other Transaction Costs in excess of ____% of
Total Equipment Cost, provided that the amount of Transaction Costs paid
directly by the Lessee pursuant to this clause (B) shall not exceed the excess,
if any, of (1) $______ over (2) the amount of Transaction Costs paid directly
by the Lessee pursuant to clause (A), provided, further, that the aggregate
amount of Transaction Costs shall not exceed ____% of Total Equipment Cost
without the consent of the Owner Participant not to be unreasonably withheld.
Notwithstanding the foregoing, Transaction Costs shall not include internal
costs and expenses such as salaries and overhead of whatsoever kind or nature
nor costs incurred by parties to this Participation Agreement pursuant to
arrangements with third parties for services (other than those expressly
referred to above), such as computer time procurement, financial analysis and
consulting, advisory services, and costs of a similar nature.
(b) Upon the consummation of the transactions
contemplated by this Agreement, the Lessee agrees to pay, to the extent such
fees and expenses do not constitute Transaction Costs as specified in Section
2.5(a), when due: (i) the reasonable expenses (including legal fees and
expenses) of the Owner Trustee, the Indenture Trustee, the Pass Through Trustee
and the Participants incurred subsequent to the delivery of the Equipment on
the Closing Date, in connection with any supplements, amendments, modifications
or alterations of any of the Operative Agreements which are (A) requested by,
or necessitated by action on the part of, the Lessee or entered into in
connection with, or as a result of, a Lease Default or a Lease Event of Default
or
<PAGE> 13
9
(B) required or contemplated by any Operative Agreement (including costs
incurred in connection with any adjustment pursuant to Section 2.6); (ii) the
ongoing fees and expenses (including legal fees and expenses) of the Owner
Trustee under the Operative Agreements; (iii) the ongoing fees and expenses of
the Indenture Trustee under the Operative Agreements; and (iv) the ongoing fees
and expenses of the Pass Through Trustee under the Operative Agreements; and
(v) the reasonable fees and expenses of any separate owner trustee or
co-trustee appointed pursuant to the Trust Agreement as a result of any
requirement of law or if otherwise required by any Operative Agreement or if
requested or consented to by the Lessee. The Lessee also agrees to pay all
amounts constituting Transaction Costs which the Owner Participant is not
required to pay by reason of the second proviso of Section 2.5(a).
(c) Subject to the next sentence, if the transactions
contemplated hereby are not consummated for any reason, the Lessee shall pay
all Transaction Costs. Notwithstanding anything contained herein to the
contrary, if the transactions contemplated hereby are not consummated solely as
a result of (A) the Owner Participant's default in its obligations to
consummate the transactions hereunder or (B) the Owner Participant's failure to
make its equity investment as required by Section 2.2(a) after the conditions
specified in Section 4 have been satisfied or waived by it in writing (other
than conditions the satisfaction of which are solely in the control of the
Owner Participant), the Owner Participant shall pay its own fees and expenses
and the fees and expenses of its legal counsel.
(d) Notwithstanding the foregoing provisions of this
Section 2.5, except as specifically provided in Section 7.2 or in any other
Operative Agreement, the Lessee shall have no liability for any costs or
expenses relating to any voluntary transfer of the Owner Participant's interest
in the Equipment (other than in connection with the exercise of remedies as
provided in Section 15 of the Lease) and no such costs or expenses shall
constitute Transaction Costs and the Lessee will not have any obligation with
respect to the costs and expenses resulting from any such transfer of any
equity interest by any transferee of the Owner Participant, whenever occurring.
2.6 Calculation of Adjustments to Basic Rent, Stipulated
Loss Value and Termination Value; Confirmation and
Verification.
(a) Calculation of Adjustments. In the event that (A)
the Transaction Costs paid by the Owner Participant pursuant to Section 2.5 are
less or more than _____% of the Total Equipment Cost or (B) prior to the
acceptance of the Equipment on the Closing Date: (1) there shall have occurred
a Change in Tax Law and (2) after having been advised in writing by the Owner
Participant of such Change in Tax Law and the proposed adjustment to the
payments of Basic Rent resulting therefrom, the Lessee
<PAGE> 14
10
shall have waived its right under Section 4.4(f) of this Agreement to decline
to proceed with the transaction, or (C) a refinancing or refunding as
contemplated by Section 10.2 occurs, or (D) the Closing Date is other than
________________, 1994, or (E) the Debt Rate applicable to the Equipment Notes
is other than ____%, or (F) the percentage of Total Equipment Cost financed by
the issuance of Equipment Notes is other than ________________%, (clauses
(A)-(F), collectively, the "Pricing Assumptions"), then, in each such case of a
Pricing Assumption not being correct, the Owner Participant shall recalculate
the payments or amounts, as the case may be, of Basic Rent, the Early Buy-Out
Price, Stipulated Loss Values and Termination Values in respect of the Units of
each Class of Equipment, (i) to preserve the Net Economic Return that the Owner
Participant would have realized had such Pricing Assumption been correct (or,
if such adjustment results from the Closing Date occurring after ____________,
1994, to increase the Net Economic Return that the Owner Participant will
realize by ___ basis points over the Net Economic Return that the Owner
Participant would have realized had the Closing Date occurred on
_________________, 1994) and (ii) to minimize to the greatest extent possible,
consistent with the foregoing clause (i), the present value (discounted
semiannually at an interest rate per annum equal to the Debt Rate) of the
payments of Basic Rent in respect of the Units of each Class of Equipment,
provided that any such adjustment will not cause the average life of the Owner
Participant's investment to increase by more than six months nor cause the
pay-back period for the Owner Participant's investment to increase by more than
three months provided, further, that any such adjustment shall not cause a
decrease in the Early Buy-Out Price except to the extent such decrease is
attributable to a reduction in the principal amount of the Equipment Notes
which will be outstanding on the Early Buy-Out Date. In performing any such
recalculation and in determining the Owner Participant's Net Economic Return,
the Owner Participant shall utilize the same methods and assumptions originally
used in making the computations of Basic Rent, the Early Buy-Out Price,
Stipulated Loss Values and Termination Values in respect of the Units of each
Class of Equipment with respect to the Basic Term for such Units initially set
forth in Schedules 3, 4, 5 and 6 to this Participation Agreement (other than
those assumptions changed as a result of any of the events described in clauses
(A) through (F) of the preceding sentence necessitating such recalculation; it
being agreed that such recalculation shall reflect solely any changes of
assumptions or facts resulting directly from the event or events necessitating
such recalculation). Such adjustments shall comply (to the extent the original
structure complied) with section 467 of the Code (or if section 467 is amended
subsequent to the Closing Date, to the extent the original structure would have
complied with section 467, as amended, the adjustment shall comply with section
467, as amended) and the requirements of Revenue Procedure 75-28, as amended.
<PAGE> 15
11
(b) Confirmation and Verification. Upon completion of
any recalculation described above in this Section 2.6, a duly authorized
officer of the Owner Participant shall provide a certificate to the Lessee
either (x) stating that the payments of Basic Rent, Early Buy-Out Price,
Stipulated Loss Values and Termination Values in respect of the Units of each
Class of Equipment with respect to the Basic Term for such Units as are then
set forth in Schedules 3, 4, 5 and 6 of this Participation Agreement do not
require change, or (y) setting forth such adjustments to the payments of Basic
Rent, Early Buy-Out Price, Stipulated Loss Values or Termination Values for
such Units with respect to the Basic Term for such Units as have been
calculated by the Owner Participant in accordance with Section 2.6(a) above.
Such certificate shall describe in reasonable detail the basis for any such
adjustments. If the Lessee shall so request, the recalculation of any such
adjustments described in this Section 2.6 shall be verified by a nationally
recognized firm of independent accountants selected by the Owner Participant
and reasonably acceptable to the Lessee, and any such recalculation of such
adjustment as so verified shall be binding on the Lessee and the Owner
Participant; provided the Owner Participant shall be afforded the opportunity
to review such calculations and discuss any objections it may have with respect
thereto with such accountants, and errors, if any, shall be corrected by the
firm of accountants. Such accounting firm shall be requested to make its
determination within 30 days. The Owner Participant shall provide to a
representative of such accounting firm, on a confidential basis, such
information as it may reasonably require, including the original assumptions
used by the Owner Participant and the methods used by the Owner Participant in
the original calculation of, and any recalculation of, Basic Rent, Early
Buy-Out Price, Stipulated Loss Values and Termination Values and such other
information as is necessary to determine whether the computation is accurate
and in conformity with the provisions of this Agreement. The costs of such
verification shall be borne by the Lessee. If such accounting firm's
verification shall result in a decrease in the net present value of the Basic
Rent in respect of the Units of any Class of Equipment under this Lease by more
than __ basis points, as compared to the net present value of Basic Rent
proposed by the Owner Participant, or shall result in a reduction in any
Stipulated Loss Value, Termination Value or the Early Buy-Out Price in respect
of any such Units by more than __ basis points, as compared to the value
proposed by the Owner Participant, then the Owner Participant agrees to
reimburse the Lessee for any amounts paid for such verification.
(c) Notwithstanding the foregoing, any adjustment made to
the payments of Basic Rent, Early Buy-Out Price, Stipulated Loss Values or
Termination Values with respect to the Basic Term, pursuant to the foregoing,
shall comply with the following requirements: (i) adjustments of payments of
Basic Rent shall be subject to Section 6.8, and (ii) adjustments of the Early
Buy-Out
<PAGE> 16
12
Price, Stipulated Loss Values and Termination Values for any Unit shall be
subject to Section 6.8.
(d) Invoices. All invoices in respect of Transaction
Costs shall be directed to the Owner Participant at the address set forth in
Schedule 7.
2.7 Postponement of Closing Date. (a) The scheduled
Closing Date specified in the Notice of Delivery (or subsequently specified in
a notice of postponement pursuant to this Section 2.7) may be postponed for any
reason (but to no later than ________________, 1994) if the Lessee gives the
Owner Participant, the Indenture Trustee, the Interim Loan Participant and the
Owner Trustee facsimile or telephonic (confirmed in writing) notice of the
postponement and notice of the date to which such Closing Date has been
postponed, the notice of postponement to be received by each party no later
than 5:30 P.M., New York City time, on the scheduled Closing Date specified in
the Notice of Delivery (or subsequently specified in a notice of postponement
pursuant to this Section 2.7), and the term "Closing Date" as used in this
Agreement shall mean the postponed "Closing Date".
(b) In the event of any postponement of a scheduled
Closing Date pursuant to this Section 2.7 (any such scheduled Closing Date
being referred to as a "Scheduled Closing Date" for the purposes of this
Section 2.7): (i) the Lessee will reimburse the Owner Participant and the
Interim Loan Participant for the loss of the use of their respective funds
deposited with the Indenture Trustee pursuant to Section 2.3(a) with respect to
each such Unit occasioned by such postponement or failure to deliver or accept
(unless, in the case of the Owner Participant's funds, such failure to accept
is caused by a default by the Owner Participant hereunder or by the Owner
Trustee (acting pursuant to instructions from the Owner Participant) under the
Trust Agreement, the Lease or the Indenture) by paying to the Owner Participant
and the Interim Loan Participant, respectively, on demand interest at the Prime
Rate, for the period from and including such Scheduled Closing Date to but
excluding the earlier of the date upon which such funds are returned (unless
such funds are returned after 10:00 A.M., New York City time, in which case
such date of return shall be included) or the actual date of delivery, and (ii)
the Indenture Trustee will return not later than 10:00 A.M. New York City time,
on the first Business Day following such Scheduled Closing Date, any funds
which it shall have received from the Owner Participant and the Interim Loan
Participant, respectively, as its Commitment for such Units, absent joint
instruction from Lessee, the Owner Participant and the Interim Loan Participant
to retain such funds until the specified date of postponement established under
Section 2.7(a).
(c) The Indenture Trustee agrees that, in the event it
has received telephonic notice (to be confirmed promptly in writing) from the
Lessee on a Scheduled Closing Date that such
<PAGE> 17
13
Scheduled Closing Date is to be postponed, it will if instructed in the
aforementioned notice from the Lessee (which notice shall specify the
securities to be purchased) use reasonable best efforts to invest, at the risk
of the Lessee (except as provided below with respect to the Indenture Trustee's
gross negligence or willful misconduct), the funds received by it from the
Owner Participant and the Interim Loan Participant with respect to their
respective Commitments in Permitted Investments in accordance with Lessee's
instructions. Any such Permitted Investments purchased by the Indenture
Trustee upon instructions from the Lessee shall be held in trust by the
Indenture Trustee (but not as part of the Indenture Estate under the Indenture)
for the benefit of the Owner Participant and the Interim Loan Participant,
respectively, whose funds are invested in Permitted Investments upon
instructions from the Lessee and any net profits on the investment of such
funds (including interest), if any, shall be for the account of and shall on
the Closing Date, or on the date such funds are returned to the Owner
Participant and the Interim Loan Participant, respectively, be paid over to,
the Lessee. The Lessee shall pay to the Indenture Trustee on the Closing Date
(if such Unit or Units are delivered and accepted pursuant hereto) the amount
of any net loss on the investment of such funds invested at the instruction of
the Lessee. If the funds furnished by the Owner Participant and the Interim
Loan Participant, respectively, with respect to such Unit or Units are required
to be returned to the Owner Participant and the Interim Loan Participant,
respectively, the Lessee shall, on the date on which such funds are so required
to be returned, reimburse the Indenture Trustee, for the benefit of the Owner
Participant and the Interim Loan Participant, respectively, for any net losses
incurred on such investments regardless of the cause of, or responsibility for,
such loss. The Indenture Trustee 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 gross negligence. In order to obtain funds for the
payment of Equipment Cost for such Unit or Units or to return funds furnished
by the Owner Participant and the Interim Loan Participant, respectively, to the
Indenture Trustee for the benefit of the Owner Participant and the Interim Loan
Participant, respectively, with respect to such Unit or Units, the Indenture
Trustee is authorized to sell any Permitted Investments purchased as aforesaid
with the funds received by it from the Owner Participant and the Interim Loan
Participant, respectively, in connection with such Unit or Units.
(d) Notwithstanding the provisions of Section 2.7(a), the
Owner Participant and the Interim Loan Participant, respectively shall not be
under any obligation to make its Commitment available beyond 1:00 P.M. New York
City time, on _____________________, 1994.
<PAGE> 18
14
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Owner Trustee.
The Owner Trustee, both in its individual capacity and as Owner Trustee,
represents and warrants to the Owner Participant, the Interim Loan Participant,
each of the other Trustees and the Lessee, notwithstanding the provisions of
Section 10.13 or any similar provision in any other Operative Agreement, that,
as of the date hereof:
(a) the Owner Trustee, in its individual capacity, is a
Citizen of the United States, and a banking corporation duly organized
and validly existing in good standing under the laws of Delaware, has
full corporate power and authority to carry on its business as now
conducted and to enter into and perform its obligations hereunder and
under the Trust Agreement and (assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant) has full
power and authority, as Owner Trustee and/or, to the extent expressly
provided herein or therein, in its individual capacity, to enter into
and perform its obligations under each of the Owner Trustee
Agreements;
(b) the Owner Trustee, in its individual capacity, has
duly authorized, executed and delivered the Trust Agreement and
(assuming the due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) the Owner Trustee in its trust
capacity and, to the extent expressly provided therein, in its
individual capacity, has duly authorized, executed and delivered each
of the other Owner Trustee Agreements and, as of the Closing Date, the
Equipment Notes, the Lease Supplement and the Indenture Supplement to
be delivered on the Closing Date; and the Trust Agreement constitutes
a legal, valid and binding obligation of the Owner Trustee, in its
individual capacity, enforceable against it in its individual capacity
in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity;
(c) assuming the due authorization, execution and
delivery of the Trust Agreement by the Owner Participant, each of the
Owner Trustee Agreements (other than the Trust Agreement) to which it
is a party constitutes, or when entered into will constitute, a legal,
valid and binding obligation of the Owner Trustee in its individual
capacity to the extent such agreements relate to the Owner Trustee in
its individual capacity, enforceable against it in its individual
capacity, in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by
general principles of equity;
<PAGE> 19
15
(d) neither the execution and delivery by the Owner
Trustee, in its individual capacity or as Owner Trustee, as the case
may be, of the Owner Trustee Agreements to be delivered on the Closing
Date, nor the consummation by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, of any of the
transactions contemplated hereby or thereby, nor the compliance by the
Owner Trustee, in its individual capacity, or as Owner Trustee, as the
case may be, with any of the terms and provisions hereof and thereof,
(i) requires or will require any approval of its stockholders, or
approval or consent of any trustees or holders of any indebtedness or
obligations of it in its individual capacity, or (ii) violates or will
violate its certificate of incorporation or by-laws, or contravenes or
will contravene any provision of, or constitutes or will constitute a
default under, or results or will result in any breach of, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sale
contract, bank loan or credit agreement, license or other agreement or
instrument to which the Owner Trustee in its individual capacity is a
party or by which it is bound, or contravenes or will contravene any
law, governmental rule or regulation of the State of Delaware or of
the United States of America governing the banking or trust powers of
the Owner Trustee, or any judgment or order applicable to or binding
on it;
(e) there are no Taxes payable by the Owner Trustee,
either in its individual capacity or as Owner Trustee, imposed by the
State of Delaware or any political subdivision thereof in connection
with the execution and delivery by the Owner Trustee in its individual
capacity of the Trust Agreement, and, in its individual capacity or as
Owner Trustee, as the case may be, of this Agreement, the other Owner
Trustee Agreements to be delivered on the Closing Date solely because
the Owner Trustee in its individual capacity is a corporation with its
principal place of business in Wilmington, Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware; and
there are no Taxes payable by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, imposed by the State
of Delaware or any political subdivision thereof in connection with
the acquisition of its interest in the Equipment (other than franchise
or other taxes based on or measured by any fees or compensation
received by the Owner Trustee for services rendered in connection with
the transactions contemplated hereby) solely because the Owner Trustee
in its individual capacity is a corporation with its principal place
of business in Wilmington, Delaware and performs certain of its duties
as Owner Trustee in the State of Delaware;
(f) there are no pending or, to its knowledge, threatened
actions or proceedings against the Owner Trustee, either in its
individual capacity or as Owner Trustee,
<PAGE> 20
16
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 Owner Trustee, in its individual capacity or
as Owner Trustee, as the case may be, to perform its obligations under
the Trust Agreement or the other Owner Trustee Agreements to be
delivered on the Closing Date;
(g) both its chief executive office, and the place where
its records concerning the Equipment and all its interest in, to and
under all documents relating to the Trust Estate, are located at
Wilmington, Delaware 19890, and the Owner Trustee, in its individual
capacity, agrees to give the Owner Participant, the Indenture Trustee
and the Lessee at least 30 days prior written notice of any relocation
of said chief executive office or said place from its present
location;
(h) no consent, approval, order or authorization of,
giving of notice to, or registration with, or taking of any other
action in respect of, any Delaware or local governmental authority or
agency or any United States federal governmental authority or agency
regulating the banking or trust powers of the Owner Trustee, in its
individual capacity, is required for the execution and delivery of, or
the carrying out by, the Owner Trustee in its individual capacity or
as Owner Trustee, as the case may be, of any of the transactions
contemplated hereby or by the Trust Agreement or of any of the
transactions contemplated by any of the other Owner Trustee
Agreements, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken;
(i) on the Closing Date, the Owner Trustee's right, title
and interest in and to the Equipment delivered on the Closing Date
shall be free of any Lessor's Liens attributable to the Owner Trustee
in its individual capacity;
(j) the proceeds received by the Owner Trustee from the
Owner Participant pursuant to the Trust Agreement will be administered
by it in accordance with Article IV of the Trust Agreement; and
(k) the Owner Trustee shall receive from the Lessee such
title as is conveyed to it by the Lessee, subject to the rights of the
Owner Trustee and the Lessee under the Lease and the security interest
created pursuant to the Indenture and the Indenture Supplement in
respect of the Units delivered on the Closing Date.
3.2 Representations and Warranties of the Lessee. The
Lessee represents and warrants to the Interim Loan Participant,
<PAGE> 21
17
the Trustees and the Owner Participant that, as of the date hereof:
(a) the Lessee is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, has the corporate power and authority to carry on its
business as now conducted, and has the requisite power and authority
to execute, deliver and perform its obligations under the Lessee
Agreements;
(b) the Lessee Agreements have been duly authorized by
all necessary corporate action (no shareholder approval being
required), executed and delivered (or in the case of the Lease
Supplement in respect of the Units delivered on the Closing Date will
on the Closing Date have been duly executed and delivered) by the
Lessee, and constitute (or in the case of the Lease Supplement in
respect of the Units delivered on the Closing Date will on the Closing
Date constitute) the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity;
(c) the execution, delivery and performance by the Lessee
of each Lessee Agreement and compliance by the Lessee with all of the
provisions thereof do not and will not contravene any law or
regulation, or any order of any court or governmental authority or
agency applicable to or binding on the Lessee or any of its
properties, or contravene the provisions of, or constitute a default
by the Lessee under, or result in the creation of any Lien (except for
Permitted Liens) upon the property of the Lessee under its certificate
of incorporation or by-laws or any indenture, mortgage, contract or
other agreement or instrument to which the Lessee is a party or by
which the Lessee or any of its property is bound or affected;
(d) there are no proceedings pending or, to the knowledge
of the Lessee, threatened against the Lessee in any court or before
any governmental authority or arbitration board or tribunal (i) in
which it is probable that an adverse decision will be rendered in a
matter for which no adequate provision has been made which could
reasonably be expected to materially adversely affect the business,
consolidated financial position or consolidated results of operations
and cash flows of the Lessee or (ii) which in any manner draws into
question the validity of, or seeks to restrain the transactions
contemplated by the Lessee Agreements or (iii) which affects its
ability to perform its obligations under the Lessee Agreements;
<PAGE> 22
18
(e) the consolidated balance sheet of the Lessee and its
consolidated subsidiaries as of December 31, 1993, and the related
consolidated statements of income, cash flow and changes in common
stockholders' equity for the fiscal year ended on such date reported
on by Ernst & Young and set forth in the Lessee's 1993 Form 10-K, as
filed with the Securities Exchange Commission, fairly present, in
conformity with generally accepted accounting principles, the
consolidated financial position of the Lessee and its consolidated
subsidiaries as of such date and the results of operations of and
cashflows for the Lessee and its consolidated subsidiaries for such
period. The unaudited consolidated balance sheet of the Lessee and
its consolidated subsidiaries as of June 30, 1994, and the related
unaudited consolidated statements of income, cash flow and changes in
common stockholders' equity for the six-month period ended June 30,
1994, fairly present, in conformity with generally accepted accounting
principles (except for the absence of footnotes) the financial
position of the Lessee and its consolidated subsidiaries as of such
date and the results of their operations for the period then ended,
subject to normal year-end adjustments. Since June 30, 1994, there
has been no material adverse change in the financial position of the
Lessee and its consolidated subsidiaries taken as a whole;
(f) no consent, approval or authorization of, or filing,
registration or qualification with, or the giving of notice to, any
governmental authority or other Person (including, without limitation,
any holder of indebtedness or obligations of the Lessee) is required
on the part of the Lessee in connection with the execution and
delivery by the Lessee of the Lessee Agreements;
(g) all filings and other actions necessary or reasonably
required to establish and perfect the right, title and interest of the
Owner Trustee under the Lease in and to the Equipment and the
remainder of the Trust Estate and to perfect the security interest of
the Indenture Trustee under the Indenture in the Indenture Estate will
have been made on or prior to the Closing Date (except for Uniform
Commercial Code financing statements in the process of being filed)
and, except as aforesaid, the Indenture will on the Closing Date
create a valid and perfected Lien on the Indenture Estate, subject to
any Lessor's Liens and Permitted Liens;
(h) no Lease Default or Lease Event of Default has
occurred and is continuing and to the knowledge of Lessee, no Event of
Loss has occurred;
(i) the execution and delivery of this Agreement and the
other Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not
<PAGE> 23
19
involve any non-exempt prohibited transaction within the meaning of
Section 406(a) of ERISA or Section 4975(c)(1)(A) through (D) of the
Code (such representation being made in reliance on the accuracy of
the representation of the Owner Participant in Section 3.6(h) of this
Agreement and on the accuracy of the representation of the Interim
Loan Participant in Section 3.5(c) of this Agreement);
(j) on the Closing Date, Lessee shall have, and the Bills
of Sale to be delivered on the Closing Date shall convey, to the Owner
Trustee title to the Units being delivered on the Closing Date, free
and clear of all Liens except Liens described in clauses (i), (ii) and
(v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not
due and payable;
(k) on the Closing Date, the Registration Statement does
not contain any untrue statement of a material fact or omit a material
fact which would make the statements contained therein misleading;
(l) on the Closing Date all sales, use or transfer taxes
due and payable upon the purchase of the Equipment by the Lessor and
on the lease thereof to the Lessee will have been paid or the Lessee
shall be liable for the payment thereof. No fees or other charges in
connection with the execution and delivery of the Operative Agreements
or the issuance and sale of the Equipment Notes to be delivered on the
Closing Date are payable for which the Lessee is not liable;
(m) no broker's or finder's or placement fee or
commission will be payable with respect to the transactions
contemplated by the Operative Agreements as a result of any action by
Lessee, except for the fees of Chemical Securities, Inc., which Lessee
agrees will be included in Transaction Costs (unless Lessee elects to
pay such fees directly pursuant to Section 2.5) and Lessee agrees that
it will hold the Owner Participant, the Lessor and the Indenture
Trustee harmless from any claim, demand or liability for any other
broker's or finder's or placement fees or commission alleged to have
been incurred as a result of any action by Lessee in connection with
this transaction;
(n) none of the proceeds from the issuance of the
Equipment Notes or from the acquisition by the Owner Participant of
its beneficial interest in the Trust Estate will be used directly or
indirectly by Lessee so as to result in a violation of Regulation G or
U of the Board of Governors of the Federal Reserve System;
(o) no governmental approval of any kind is required by
the Owner Participant or the Owner Trustee in connection
<PAGE> 24
20
with its execution, delivery and performance of this Agreement or any
Operative Agreement, solely by reason of any fact or circumstance
peculiar to the Lessee or the Lessee's proposed operations or use of
the Units of Equipment, specifically excluding, however, any consents
or approvals required by any statute or regulation governing banks and
their operations;
(p) the Units of Equipment are fully equipped to operate
in commercial service, are fully certificated under Part 91 of the FAA
Act, do not require any modifications, additions or improvements for
their intended use by the Lessee, and comply with all material
governmental requirements governing the service in which such Units
are being, and are anticipated to be, used by Lessee; the Units are in
the same condition as when delivered to Lessee by the manufacturer or
vendor, ordinary wear and tear excepted, and are in the condition
required by the Lease; the Lessee is unaware of any material
mechanical or structural defects in or damage to the Units and there
has not occurred any event which constitutes or would, with the
passage of time or giving of notice, or both, constitute an Event of
Loss; and
(q) the conveyance of the Units of Equipment effected by
the Bills of Sale are not void or voidable under any applicable state
or federal law (such representation being made in reliance on the
accuracy of the representations of the Participants and Trustees
contained in this Section 3).
3.3 Representations and Warranties of the Indenture
Trustee. The Indenture Trustee represents and warrants to the Interim Loan
Participant, the Owner Participant, the Owner Trustee and the Lessee that, as
of the date hereof:
(a) the Indenture Trustee is a national banking
association, duly organized and 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
United States of America pertaining to its banking, trust and
fiduciary powers to execute, deliver and carry out the terms of each
of the Indenture Trustee Agreements;
(b) the execution, delivery and performance by the
Indenture Trustee of each of the Indenture Trustee Agreements have
been duly authorized by the Indenture Trustee and will not violate its
articles of association or by-laws or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it is bound;
(c) the Indenture Trustee Agreements, when executed and
delivered, will constitute its legal, valid and binding
<PAGE> 25
21
obligation enforceable against it in accordance with its terms;
(d) there are no proceedings pending or, to the knowledge
of the Indenture Trustee, threatened, and to the knowledge of the
Indenture Trustee there is no existing basis for any such proceedings,
against or affecting the Indenture Trustee in or before any court or
before any governmental authority or arbitration board or tribunal
which, individually or in the aggregate, if adversely determined,
might impair the ability of the Indenture Trustee to perform its
obligations under the Indenture Trustee Agreements;
(e) no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body of the United States of America, governing the Indenture Trustee
in its trust capacity, is required for the due execution, delivery and
performance by the Indenture Trustee of the Indenture Trustee
Agreements, except as have been previously obtained, given or taken;
(f) the Indenture Trustee is not in default under any of
the Indenture Trustee Agreements;
(g) neither the Indenture Trustee, nor any Person
authorized to act on behalf of the Indenture Trustee, has directly or
indirectly offered any interest in the Trust Estate or the Equipment
Notes or any security similar to either thereof for sale to, or
solicited offers to buy any of the same from, or otherwise approached
or negotiated with respect to any of the same with, any Person; and
(h) there are no Taxes which may be imposed on or
asserted against the Indenture Estate or any part thereof or any
interest therein, the Owner Trustee, both in its individual capacity
and as Owner Trustee, or the Owner Participant by any state or local
government or taxing authority (except Taxes imposed on the fees
payable to the Indenture Trustee) required to be paid under the laws
of the State of Connecticut in connection with the execution, delivery
or performance by the Indenture Trustee of the Indenture Trustee
Agreements or the authentication of the Equipment Notes, which Taxes
result solely from the participation therein by a national banking
association located in the State of Connecticut as Indenture Trustee.
3.4 Representations, Warranties and Covenants Regarding
Beneficial Interest.
(a) The Owner Trustee represents and warrants to the
Lessee, each of the other Trustees and the Owner Participant that, as
of the date hereof and as of the Closing Date, neither the Owner
Trustee nor any Person authorized or
<PAGE> 26
22
employed by the Owner Trustee as agent or otherwise in connection with
the placement of the Beneficial Interest or any similar interest has
offered any of the Beneficial Interest or any similar interest for
sale to, or solicited offers to buy any thereof from, or otherwise
approached or negotiated with respect thereto with, any prospective
purchaser.
(b) The Lessee represents and warrants to the Trustees
and the Owner Participant that, as of the date hereof and as of the
Closing Date, neither the Lessee nor any Person authorized or employed
by the Lessee as agent or otherwise in connection with the placement
of the Beneficial Interest or any similar interest has offered any of
the Beneficial Interest or similar interest for sale to, or solicited
offers to buy any thereof from, or otherwise approached or negotiated
with respect thereto with, any Person other than the Owner Participant
and not more than (50) other institutional investors.
(c) Each of the Owner Trustee, the Owner Participant and
the Lessee agree severally but not jointly and with respect to itself
only that neither the Owner Trustee, the Owner Participant nor the
Lessee nor anyone acting on behalf of the Owner Trustee, the Owner
Participant or the Lessee will offer the Beneficial Interest, or any
part thereof or any similar interest for issue or sale to any
prospective purchaser, or solicit any offer to acquire any of the
Beneficial Interest, or any part thereof so as to bring the issuance
and sale of the Beneficial Interest within the provisions of Section 5
of the Securities Act of 1933, as amended.
3.5 Representations and Warranties of the Interim Loan
Participant. The Interim Loan Participant represents and warrants to the Owner
Participant, the Trustees, and the Lessee that, as of the date hereof:
(a) this Agreement has been duly authorized, executed and
delivered by the Interim Loan Participant; this Agreement constitutes
the legal, valid and binding obligation of the Interim Loan
Participant enforceable against it in accordance with its terms except
as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and by general principles of equity; and
(b) the Interim Loan Participant is advancing the loan
contemplated to be made by it hereunder in the ordinary course of its
business, and no part of such amount constitutes or could be deemed to
constitute the assets of any employee benefit plan under 29 CFR
Section 2510.3-101.
<PAGE> 27
23
3.6 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to the Trustees,
the Interim Loan Participant and the Lessee that, as of the date hereof:
(a) the Owner Participant is a Citizen of the United
States and a corporation duly organized, validly existing and 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;
(b) the Owner Participant has the corporate power and
authority to enter into the Owner Participant Agreements and to
perform its obligations thereunder, and such execution, delivery and
performance do not and will not contravene any law or any order of any
court or governmental authority or agency applicable to or binding on
the Owner Participant, or contravene the provisions of, or constitute
a default under, or result in the creation of any Lessor's Lien
attributable to the Owner Participant (other than the leasehold
interest of the Lessee under the Lease and the security interest of
the Indenture Trustee under the Indenture) upon the Equipment under,
its organization document or by-laws or any indenture, mortgage,
contract or other agreement or instrument to which the Owner
Participant is a party or by which it or any of its property is bound;
(c) the Owner Participant Agreements 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 indebtedness or
obligations of the Owner Participant, have been duly executed and
delivered by the Owner Participant and (assuming the due
authorization, execution and delivery by each other party thereto)
constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance
with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity;
(d) no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery or performance by the
Owner Participant of the Trust Agreement, the Tax Indemnity Agreement
and this Agreement;
(e) the Trust Estate is free of any Lessor's Liens
attributable to the Owner Participant;
<PAGE> 28
24
(f) there are no pending or, to the Owner Participant's
knowledge, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which would
materially adversely affect the Owner Participant's financial
condition or its ability to perform its obligations under the Trust
Agreement, the Tax Indemnity Agreement or this Agreement;
(g) as of the Closing Date the Owner Participant is
purchasing the Beneficial Interest to be acquired by it for its
account with no present intention of distributing such Beneficial
Interest or any part thereof in any manner which would violate the
Securities Act of 1933, as amended, but without prejudice, however, to
the right of the Owner Participant at all times to sell or otherwise
dispose of all or any part of such Beneficial Interest in compliance
with the Securities Act of 1933, as amended; provided, however, that
subject to the provisions of Section 6.1, the disposition of the
Beneficial Interest shall at all times be within the Owner
Participant's control. The Owner Participant acknowledges that its
Beneficial Interest has not been registered under the Securities Act
of 1933, as amended, and that neither the Owner Trustee nor the Lessee
contemplates filing, or is legally required to file, any such
registration statement;
(h) with respect to the source of an amount to be
advanced by the Owner Participant pursuant to Section 2.1, no part of
such amount constitutes or could be deemed to constitute the assets of
any employee benefit plan under 29 CFR Section 2510.3-101 (other than
a government plan exempt from the coverage of ERISA);
(i) no broker's or finder's or placement fee or
commission will be payable with respect to the transactions
contemplated by the Operative Agreements as a result of any action by
the Owner Participant except for the fees of _________
____________________ which have been paid by the Owner Participant,
and the Owner Participant agrees that it will hold Lessee, the
Indenture Trustee and Lessor harmless from any claim, demand or
liability for broker's or finder's or placement fees or commission
alleged to have been incurred as a result of any action by the Owner
Participant in connection with this transaction; and
(j) the Owner Participant Guarantor has a combined
capital and surplus of at least $_______________.
3.7 Opinion Acknowledgment. Each of the parties hereto,
with respect to such party, expressly consents to the rendering by its counsel
of the opinion referred to in Section 4.1(e) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the instructions of such
party, each of whom has consulted with and has been advised by its
<PAGE> 29
25
counsel as to the consequences of such request, instructions and consent.
SECTION 4. CLOSING CONDITIONS
4.1 Conditions Precedent to Investment by Each
Participant. The obligation of each Participant to make its investment or loan,
as applicable specified with respect to such Participant in Section 2 on the
Closing Date shall be subject to the following conditions (except that
paragraph (k) and clause (i) of paragraph (p) shall not be conditions precedent
to the Owner Participant's obligations hereunder and paragraph (t) and clause
(ii) of paragraph (p) shall not be conditions precedent to the Loan
Participant's obligations hereunder):
(a) Execution of Operative Agreements. On or before the
Closing Date, this Agreement, the Trust Agreement, the Lease, the
Lease Supplement in respect of the Units delivered on the Closing
Date, the Interim Lease Supplement, the Indenture, the Indenture
Supplement in respect of the Units delivered on the Closing Date, the
Interim Indenture Supplement and the Equipment Notes shall each be
satisfactory in form and substance to such Participant, shall have
been duly authorized, executed and delivered by the parties thereto
(except that the authorization, execution and delivery of this
Agreement and the other documents referred to above by a party hereto
or thereto shall not be a condition precedent to such party's
obligations hereunder), shall each be in full force and effect and
executed counterparts of each shall have been delivered to such
Participant or its counsel on or before the Closing Date (except that
executed Equipment Notes shall be delivered only to the Interim Loan
Participant); and no event shall have occurred and be continuing that
constitutes a Lease Default, a Lease Event of Default, an Indenture
Default or an Indenture Event of Default.
(b) Recordation Filing, Registration and Certification.
On or before the Closing Date (i) (A) each Unit shall be registered in
the name of the Owner Trustee, (B) each Unit shall have been duly
certified by the FAA as to type and airworthiness and (C) the FAA Bill
of Sale, the Lease and Lease Supplement covering the Units, the Trust
Agreement, the Indenture and the Indenture Supplement shall have been
duly filed for recordation with the FAA pursuant to the FAA Act, and
(ii) Uniform Commercial Code financing statements shall have been
filed in such places within the United States as the Owner Trustee,
the Indenture Trustee and any Participant may reasonably request for
the protection of the Owner Trustee's title to the Equipment and
interest in the Lease, or the security interest of the Indenture
Trustee in the Equipment and the Lease.
<PAGE> 30
26
(c) Closing Certificate of Lessee. On the Closing Date,
the Owner Trustee, the Indenture Trustee and each Participant shall
have received an Officer's Certificate dated such date of the Lessee,
to the effect that the representations and warranties of the Lessee
contained in Section 3.2 and Section 3.4(b) are true and correct in
all respects on the Closing Date with the same effect as though made
on and as of said date, except to the extent that such representations
and warranties relate solely to an earlier date (in which case such
representations and warranties were true and correct on and as of such
earlier date), and that the Lessee has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Lessee on or before said date.
(d) Closing Certificate of Owner Trustee. On the Closing
Date, the Lessee, the Indenture Trustee, the Pass Through Trustee and
each Participant shall have received an Officer's Certificate dated
such date from the Owner Trustee, to the effect that the
representations and warranties of the Owner Trustee contained in
Section 3.1 and Section 3.4(a) are true and correct in all respects on
the Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations
and warranties were true and correct on and as of such earlier date),
and that the Owner Trustee has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Owner Trustee on or before said
date.
(e) Opinions of Counsel. On the Closing Date, the Owner
Trustee, the Indenture Trustee and each Participant shall have
received the favorable written opinion of each of (i) the Lessee's
special counsel and counsel for the Lessee, (ii) counsel to the Owner
Trustee, (iii) counsel and special counsel to the Owner Participant
and the Owner Participant Guarantor, (iv) special counsel to the
Indenture Trustee and (v) special FAA Counsel.
(f) Title. On the Closing Date, after giving effect to
the transactions contemplated hereby, the Owner Trustee shall have
legal and beneficial title to each Unit of Equipment to be delivered
on the Closing Date, free and clear of all Liens, except Liens
described in clauses (i), (ii) and (v) of the definition of "Permitted
Liens" and Liens described in clauses (iii) and (iv) of such
definition for amounts which are not due and payable.
(g) Bills of Sale. On the Closing Date the Lessee shall
have delivered to the Owner Trustee (with copies to the Indenture
Trustee and each Participant) the Bill of Sale
<PAGE> 31
27
dated such date covering the Units to be settled for on such date,
transferring to the Owner Trustee legal and beneficial title to such
Units free of all Liens except Liens described in clauses (i), (ii)
and (v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not
due and payable, and warranting to the Owner Trustee that at the time
of delivery of each such Unit, the Lessee had legal and beneficial
title thereto and good and lawful right to sell the same, and title
thereto was free of all Liens, except Liens described in clauses (i),
(ii) and (v) of the definition of "Permitted Liens" and Liens
described in clauses (iii) and (iv) of such definition for amounts
which are not due and payable.
(h) Insurance Certificate and Opinion. On or before the
Closing Date, the Indenture Trustee and each Participant shall have
received a certificate in form acceptable to the Owner Participant in
its reasonable discretion signed by the insurer or by an independent
insurance broker evidencing insurance coverages required pursuant to
Section 12 of the Lease.
(i) Corporate Documents. Each of the Participants shall
have received such documents and evidence with respect to the Lessee,
the Owner Participant, the Owner Participant Guarantor, the Owner
Trustee, the Pass Through Trustee and the Indenture Trustee as the
Participants may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the
taking of all corporate and other proceedings in connection therewith
and compliance with the conditions herein or therein set forth.
(j) No Threatened Proceedings. No action or proceeding
shall have been instituted nor shall 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 Closing Date, to set aside,
restrain, enjoin or prevent the completion and consummation of this
Agreement or the Overall Transactions.
(k) Closing Certificate of Owner Participant. On the
Closing Date, the Lessee, the Interim Loan Participant, the Indenture
Trustee and the Pass Through Trustee shall have received an Officer's
Certificate dated such date from each of the Owner Participant and the
Owner Participant Guarantor, to the effect that the representations
and warranties of the Owner Participant contained in Section 3.6 and
that the representations and warranties of the Owner Participant
Guarantor contained in Section 8 of the Owner Participant Guaranty,
are true and correct in all respects on the Closing Date with the same
effect as though made on and as of said date, except to the extent
that such
<PAGE> 32
28
representations and warranties relate solely to an earlier date (in
which case such representations and warranties were true and correct
on and as of such earlier date), and that the Owner Participant has
performed and complied with all agreements and conditions herein
contained which are required to be performed or complied with by the
Owner Participant on or before said date.
(l) Closing Notice. The Indenture Trustee and the
Participants shall have received the Notice of Delivery required
pursuant to Section 2.3.
(m) Closing Certificate of Indenture Trustee. On the
Closing Date, the Lessee, the Owner Trustee and each Participant shall
have received an Officer's Certificate dated such date from the
Indenture Trustee, to the effect that the representations and
warranties of the Indenture Trustee contained in Section 3.3 are true
and correct in all respects on the Closing Date with the same effect
as though made on and as of said date, except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties were true and correct
on and as of such earlier date), and that the Indenture Trustee has
performed and complied with all agreements and conditions herein
contained which are required to be performed or complied with by the
Indenture Trustee on or before said date.
(n) (Intentionally omitted.)
(o) No Illegality. 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 regulatory
authorities that, in the opinion of such Participant or its counsel,
would make it illegal for such Participant to enter into any
transaction contemplated by the Operative Agreements.
(p) Participants' Investments. (i) The Owner
Participant shall have made available its Commitment in the amount
specified in, and otherwise in accordance with, Sections 2.2(a) and
2.3 and (ii) the Loan Participant shall have made available its
Commitment in the amount specified in, and otherwise in accordance
with, Sections 2.2(b) and 2.3.
(q) Consents. All approvals and consents of any trustees
or holders of any indebtedness or obligations of Lessee which are
required in connection with the transactions contemplated by this
Agreement, shall have been duly obtained and be in full force and
effect.
(r) Governmental Actions. All actions, if any, required
to have been taken on or prior to the Closing Date
<PAGE> 33
29
in connection with the transactions contemplated by this Agreement on
the Closing Date shall have been taken by any governmental or
political agency, subdivision or instrumentality of the United States
and all orders, permits, waivers, exemptions, authorizations and
approvals of such entities required to be in effect on the Closing
Date in connection with the transactions contemplated by this
Agreement on the Closing Date shall have been issued, and all such
orders, permits, waivers, exemptions, authorizations and approvals
shall be in full force and effect, on the Closing Date.
(s) Certificate of Acceptance. On or before the Closing
Date a Certificate of Acceptance with respect to the Units delivered
by the Lessee to the Lessor on the Closing Date shall have been duly
executed and delivered by the Lessee, as the authorized representative
of the Lessor.
(t) Tax Indemnity Agreement. On or before the Closing
Date, the Tax Indemnity Agreement shall be satisfactory in form and
substance to the Owner Participant, shall have been duly executed and
delivered by the Lessee and, assuming due authorization, execution and
delivery by the Owner Participant, shall be in full force and effect.
(u) Event of Loss. No Event of Loss or any event which
with the passage of time would become an Event of Loss shall have
occurred with respect to any Unit of Equipment
4.2 (Intentionally omitted.)
4.3 Additional Conditions Precedent to Investment by Owner
Participant. The obligation of the Owner Participant to provide the funds
specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date
with respect to any Unit to be delivered on the Closing Date shall be subject
to the following additional conditions:
(a) Appraisal. On or before the Closing Date, the Owner
Participant shall have received an opinion (the "Appraisal") of
Avitas, Inc., satisfactory in form and substance to the Owner
Participant, concluding that: (i) the fair market value of the Units
of each Class of Equipment being delivered on the Closing Date is
equal to the Total Equipment Cost with respect to such Units; (ii) (A)
the expected economic useful life of the Units of each Class of
Equipment will be at least equal to 134% of the aggregate length of
the Interim Term and the Basic Term for such Units and (B) at the
expiration of the Basic Term for the Units of each Class of
Equipment,without taking into account inflation or deflation from and
after the Closing Date or the existence of any purchase option, it is
reasonable to expect that such Units will have a fair market value of
at least 20% of the Equipment Cost for such Units;
<PAGE> 34
30
(iii) taking into account a reasonable estimate for inflation or
deflation, the estimated fair market value on the Early Buyout Date
for the Units of each Class of Equipment is less than or equal to the
Early Buyout Price for such Units; (iv) Basic Rent payable under the
Lease with respect to the Units of each Class of Equipment shall be
equal to the fair market rental value for such Units and (v) the
Equipment being delivered on the Closing Date is not "limited use
property" within the meaning of Rev. Proc. 76-30, 1976-2 C.B.
647;provided, however, that the Lessee makes no representation as to
the fair market value, useful life or estimated residual value of any
of the Equipment, and the Lessee shall not be responsible for, or
incur any liabilities as a result of, the contents of such Appraisal
or report to which it relates or, except to the extent provided in the
Tax Indemnity Agreement, any information supplied by Lessee in
connection therewith. The Appraisal shall further set forth the
estimated fair market value of the Units of each Class of the
Equipment at the end of the Basic Term taking into account inflation
or deflation.
(b) Opinion with Respect to Certain Aspects. On the
Closing Date, the Owner Participant shall have received the opinion of
Moore & Van Allen addressed to the Owner Participant, in form and
substance reasonably satisfactory to the Owner Participant, containing
such counsel's favorable opinion with respect to such tax matters as
the Owner Participant may reasonably request.
(c) No Tax Law Change. No Change in Tax Law shall have
occurred nor shall a judicial opinion on a tax issue have been
rendered prior to the acceptance and delivery of the Equipment on the
Closing Date which, if enacted, adopted or made effective, in the same
or substantially similar form, would, in the reasonable opinion of the
Owner Participant, render it disadvantageous or inadvisable for the
Owner Participant to enter into the transactions contemplated by the
Operative Agreements.
4.4 Conditions Precedent to the Obligation of the Lessee.
The obligation of the Lessee with respect to the sale of the Units to the Owner
Trustee and acceptance of the Units under the Lease is subject to the following
conditions as of the Closing Date:
(a) Corporate Documents. On or before the Closing Date,
the Lessee shall have received such documents and evidence with
respect to the Owner Participant, Owner Participant Guarantor, the
Owner Trustee, and the Indenture Trustee as the Lessee may reasonably
request in order to establish the consummation of the transactions
contemplated by this Agreement, the taking of all corporate and other
proceedings in connection therewith and compliance with the conditions
herein or therein set forth.
<PAGE> 35
31
(b) Operative Agreements. On or before the Closing Date,
the Operative Agreements shall have been duly authorized, executed and
delivered by the respective party or parties thereto (other than the
Lessee), and an executed counterpart of each thereof shall have been
delivered to the Lessee or its special counsel.
(c) Representations and Warranties True. On the Closing
Date, the representations and warranties of the Owner Trustee, the
Indenture Trustee and the Owner Participant contained in Section 3
hereof, and the representations and warranties of the Owner
Participant Guarantor contained in the Owner Participant Guaranty
shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date, and the Lessee shall have
received an Officer's Certificate dated such date from each of the
Owner Trustee as described in Section 4.1(d), the Owner Participant
and the Owner Participant Guarantor as described in Section 4.1(k) and
the Indenture Trustee as described in Section 4.1(m), addressed to the
Lessee and certifying as to the foregoing matters insofar as they
relate to the Owner Trustee, the Owner Participant, the Owner
Participant Guarantor and the Indenture Trustee as the case may be.
(d) Opinions of Counsel. On the Closing Date, the Lessee
shall have received the opinions of counsel referred to in Section
4.1(e) (other than that set forth in clause (i) therein), addressed to
the Lessee.
(e) No Threatened Proceedings. No action or proceeding
shall have been instituted nor shall 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 Closing Date, to set aside,
restrain, enjoin or prevent the completion and consummation of this
Agreement or the transactions contemplated hereby.
(f) No Tax Law Change. No Change in Tax Law shall have
occurred nor shall a judicial opinion on a tax issue have been
rendered prior to the acceptance and delivery of the Equipment on the
Closing Date, which, if enacted, adopted or made effective, in the
same or substantially similar form, would, in the reasonable opinion
of the Lessee, render it disadvantageous or inadvisable for the Lessee
to enter into the transactions contemplated by the Operative
Agreements.
(g) Participants' Investments. (i) There shall have
been duly issued and delivered by the Owner Trustee to the Interim
Loan Participant, against payment therefor, Equipment Notes dated the
Closing Date.
<PAGE> 36
32
(ii) The Owner Participant shall have made available its
Commitment in the amount specified in, and otherwise in accordance
with, Sections 2.2(a) and 2.3.
(iii) The Loan Participant shall have made its Commitment in
the amount specified in, and otherwise in accordance with, Sections
2.2(b) and 2.3.
(h) Rent Adjustment. If an adjustment to the payments of
Basic Rent in respect of a Unit of Equipment occurs pursuant to
Section 2.6, such adjustment shall not result in an increase in the
present value (discounted semiannually at an interest rate per annum
equal to the Debt Rate) of such amounts of Basic Rent in excess of __
basis points as compared to the present value of the amounts of Basic
Rent for such Unit of Equipment set forth in the applicable exhibit to
the Term Sheet. It being understood and agreed that if the Closing
Date occurs after _____________, 1994, such Closing Date shall require
an adjustment to the payments of Basic Rent in respect of all Units of
Equipment, which adjustment shall cause the present value of such
amounts of Basic Rent to be increased in excess of said __ basis
points, and in which case the Lessee shall be under no obligation to
consummate the transactions contemplated to occur on the Closing Date.
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE
The Lessee agrees that it will furnish directly to each
Participant the following:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Lessee, an audited
consolidated balance sheet of the Lessee and its consolidated
subsidiaries as of the end of such fiscal year and the related audited
consolidated statements of income, cash flows and changes in common
stockholders' equity for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Ernst & Young or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal year
of the Lessee, a consolidated balance sheet of the Lessee and its
consolidated subsidiaries, as of the end of such quarter and the
related (i) consolidated statement of income for such quarter and for
the portion of the Lessee's fiscal year ended at the end of such
quarter, and (ii) consolidated statement of cash flows for the portion
of the Lessee's fiscal year ended at the end of such quarter, setting
forth in each case in comparative form (A) for the consolidated
balance sheet, the figures as of the
<PAGE> 37
33
end of the Lessee's previous fiscal year, (B) for the consolidated
statement of income, the figures for the corresponding quarter and the
corresponding portion of the Lessee's previous fiscal year and (C) for
the consolidated statement of cash flows, the figures for the
corresponding portion of the Lessee's previous fiscal year, all
prepared in accordance with generally accepted accounting principles
(subject to normal year-end adjustments);
(c) promptly upon the mailing thereof, all registration
statements and reports filed with the Securities and Exchange
Commission;
(d) promptly upon any officer of the Lessee obtaining
knowledge of any condition or event which constitutes a Lease Event of
Default, an officer's certificate specifying the nature and period of
existence thereof and what action the Lessee has taken or is taking or
proposes to take with respect thereto;
(e) within the time period prescribed in subparagraph (a)
above, an officer's certificate, to the effect that the signer has
reviewed the activities of the Lessee during the immediately preceding
fiscal year and that he is not aware of any Lease Default or, if a
Lease Default shall exist, specifying such Lease Default and what
action the Lessee has taken or is taking or proposes to take with
respect thereto; and
(f) such additional information with respect to the
financial condition or the business of the Lessee or the Equipment as
the Owner Participant may reasonably request.
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE
6.1 Restrictions on Transfer of Beneficial Interest. The
Owner Participant agrees that it shall not, directly or indirectly, sell,
convey, assign, pledge, mortgage or otherwise transfer any of its Beneficial
Interest (whether by merger, consolidation, sale of assets or otherwise) prior
to the expiration or earlier termination of the Lease Term, without the prior
written consent of the Lessee and (so long as any Equipment Notes are
outstanding) the Indenture Trustee not to be unreasonably withheld, provided
that the Owner Participant may transfer the entire Beneficial Interest to an
Affiliate without the consent of the Lessee and the Indenture Trustee so long
as the Owner Participant remains primarily liable under all Owner Participant
Documents, provided, further, that the Owner Participant may transfer (whether
by merger, consolidation, sale of assets or otherwise) the entire Beneficial
Interest without the consent of the Lessee and the Indenture Trustee subject to
the following conditions:
<PAGE> 38
34
(a) the Owner Participant shall have delivered to the
Lessee a certificate of a Responsible Officer of the Owner Participant
setting forth in reasonable detail that (i) such transfer is
necessitated because of a change in law or regulation after the
Closing Date which makes it prohibitive or uneconomic for the Owner
Participant to continue to own the Beneficial Interest, (ii) such
transfer is due to a change in the Owner Participant's tax
circumstances its continued ownership of the Beneficial Interest has
become uneconomic or (iii) such transfer is pursuant to a
consolidation, merger, sale of all or substantially all of its assets
or a sale of all or substantially all of its lease portfolio (and in
which case clause (c) below shall not be applicable);
(b) the Person to whom such transfer is to be made (a
"Transferee") is (i) an institutional or corporate investor with
tangible net worth or, in the case of a bank or lending institution,
combined capital and surplus, at the time of such transfer of at least
$___________, all of the foregoing determined in accordance with
generally accepted accounting principles or (ii) any subsidiary or
Affiliate of any such institutional or corporate investor if such
investor guarantees the obligations so assumed by such subsidiary or
Affiliate pursuant to a guarantee substantially in the form of Exhibit
C;
(c) the Transferee is not involved and has not been
involved in any litigation adverse to the Lessee; no Affiliates of the
Transferee are involved or have been involved in any litigation
adverse to the Lessee where the amount in controversy is or was at
least $___________; and neither the Transferee nor any of its
Affiliates is a direct or indirect competitor of the Lessee or
otherwise is in the same industry as the Lessee (including, without
limitation, the industries of (i) petroleum exploration, production,
refining and marketing, (ii) natural gas gathering and processing and
(iii) chemical production or distribution);
(d) the Indenture Trustee and the Lessee shall have
received 30 days' prior written notice of such transfer specifying the
name and address of any proposed transferee and such additional
information as shall be necessary to determine whether the proposed
transfer satisfies the requirements of this Section 6.1;
(e) such Transferee enters into an assumption agreement
substantially in the form of Exhibit D;
(f) such transfer complies with and does not violate any
applicable Federal securities law and the securities law of any
applicable state;
<PAGE> 39
35
(g) the Lessee and the Indenture Trustee shall have
received an opinion of counsel of the Transferee (which counsel may be
Transferee's in-house counsel) substantially in the form of Exhibit
E-1, and, if a guarantee is delivered pursuant to Section 6.1(b), an
opinion of counsel of the guarantor of the Transferee (which may be
the guarantor's in-house counsel) substantially in the form of Exhibit
E-2;
(h) except as specifically consented to in writing by the
Lessee and the Indenture Trustee, the terms of the Operative
Agreements shall not be altered;
(i) such transfer shall transfer all of the Beneficial
Interest;
(j) all fees, expenses and charges of the parties hereto
(including, without limitation, reasonable legal fees and expenses of
special counsel) incurred in connection with each transfer of such
Beneficial Interest shall be paid by the Owner Participant or
Transferee;
(k) the Transferee delivers to the Lessee, the Owner
Trustee and the Indenture Trustee an Officer's Certificate of the
Transferee to the effect that such transfer (i) does not involve the
use of any assets that are or could be deemed to be plan assets under
29 C.F.R. Section 2510.3-101 of an employee benefit plan (other than a
government plan exempt from the coverage of ERISA) or (ii) if the
assets of an employee benefit plan are so used, will not constitute a
prohibited transaction which is not subject to an exemption contained
in ERISA or the Code or adopted thereunder.
(l) as a result of such transfer, no Indenture Default
attributable to the Owner Participant or the Owner Trustee shall have
occurred and be continuing;
(m) either (x) the transfer does not involve the sale of
the stock of any Owner Participant the sole asset of which is the
Beneficial Interest, or (y) if such a sale of stock is involved, the
transferee meets the requirements of clauses (a), (b), (c), (d), (f),
(g), (h), (i), (j) (but with reference to the stock), (k), (l) and
(n); and
(n) the Owner Participant and/or the Transferee shall
deliver an Officer's Certificate certifying as to compliance with the
transfer requirements contained herein.
Upon any such transfer, (i) except as the context otherwise requires, such
Transferee shall be deemed the "Owner Participant" for all purposes, and shall
enjoy the rights and privileges and perform the obligations of the Owner
Participant to the extent of the interest transferred hereunder and under each
other Operative Agreement to which the Owner Participant is a party, and,
except as the context otherwise requires, each reference in this
<PAGE> 40
36
Agreement and each other Operative Agreement to the "Owner Participant" shall
thereafter be deemed to include such Transferee for all purposes to the extent
of the interest transferred, (ii) the transferor shall continue to be entitled
to all the benefits and rights, including the right to indemnification,
hereunder and under each other Operative Agreement to which such transferor was
a party or by which it was bound except to the extent otherwise agreed in
writing and (iii) the transferor shall be released from all obligations
hereunder and under each other Operative Agreement to which such transferor is
a party or by which such transferor is bound to the extent such obligations are
expressly assumed by a Transferee; and provided, further, that in no event
shall any such transfer or assignment waive or release the transferor from any
liability on account of any breach existing immediately prior to such transfer
of any of its representations, warranties, covenants or obligations set forth
in the Operative Agreements or for any fraudulent or willful misconduct. Any
transfer or assignment of the Beneficial Interest in violation of this Section
6.1 shall be voidable at the direction of the Lessee or Indenture Trustee,
provided that the Lessee and the Indenture Trustee agree to respond promptly
and in any event within 60 days to a written request of the Owner Participant
to proceed with a transfer which fails to meet all of the requirements of this
Section 6.1. Any party's failure to respond within such 60 day period shall be
deemed to be consent by such party to the transaction pursuant to which such
transfer occurred. The restrictions set forth in this Section 6.1 shall not
apply to a contract between the Owner Participant and third parties with
respect to the sale or other transfer of the Equipment which is to be
consummated on or after the expiration or termination of the Lease when the
Equipment is owned by the Owner Trustee free and clear of any rights of the
Lessee therein and the lien of the Indenture (or of any indenture or security
agreement entered into pursuant to Section 10.2 or 10.3), provided that the
rights and interests granted thereunder shall be expressly stated to be in all
respects subject and subordinate to the rights of the parties under the
Operative Agreements. Notwithstanding anything herein to the contrary other
than as specifically set forth in Section 6.1(m), this Section 6.1 shall not be
construed to prohibit, limit or require that any consent be obtained in
connection with the sale of all or any portion of the capital stock of the
Owner Participant or the merger, consolidation, corporate restructuring or sale
of stock or assets by the parent company of the Owner Participant or any other
Affiliate of the Owner Participant.
6.2 Lessor's Liens Attributable to the Owner Participant.
(a) The Owner Participant hereby covenants and agrees with and for the benefit
of the other parties to this Agreement that the Owner Participant will not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Liens on or against any part of the Trust Estate or the Equipment attributable
to it (whether or not through its act or failure to act) or Lessor's Liens
arising as a result of taxes described in
<PAGE> 41
37
clause (iii) of the definition of Lessor's Liens which are imposed against the
Owner Trustee (not in its individual capacity but solely as Owner Trustee), and
the Owner Participant agrees that it will, at its own cost and expense, take
such action as may be necessary to duly discharge and satisfy in full any such
Lessor's Lien described above (by bonding or otherwise, so long as Lessee's
operation and use of the Equipment and the Lien of the Indenture are not
impaired); provided that the Owner Participant may contest any such Lessor's
Lien in good faith by appropriate proceedings so long as such proceedings do
not involve any material danger of the sale, forfeiture or loss of the
Equipment or any interest therein and do not interfere with the use, operation,
or possession of the Equipment by the Lessee under the Lease or the rights of
the Indenture Trustee under the Indenture.
(b) The Owner Participant agrees to indemnify and hold
harmless the Lessee, the Interim Loan Participant, the Indenture Trustee, the
Pass Through Trustee and the Loan Participant from time to time from and
against any loss, cost, expense or damage which may be suffered by such party
as a result of the failure of the Owner Participant to discharge and satisfy in
full any Lessor's Lien of the type identified in and when required to be
discharged and satisfied by it under Section 6.2(a).
6.3 Lessor's Liens Attributable to the Owner Trustee. (a)
The Owner Trustee, in its individual capacity and trust capacity, hereby
unconditionally agrees with and for the benefit of the other parties to this
Agreement that the Owner Trustee in its individual capacity will not directly
or indirectly create, incur, assume or suffer to exist any Lessor's Liens on or
against any part of the Trust Estate or the Equipment arising out of any act or
omission of or claim against the Owner Trustee in its individual capacity, and
the Owner Trustee in its individual capacity agrees that it will, at its own
cost and expense, take such action as may be necessary to duly discharge and
satisfy in full any such Lien attributable to the Owner Trustee in its
individual capacity (by bonding or otherwise, so long as Lessee's operation and
use of the Equipment and the Lien of the Indenture are not impaired); provided
that the Owner Trustee may contest any such Lessor's Lien in good faith by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture or loss of the Equipment or any interest therein
and do not interfere with the use, operation, or possession of the Equipment by
the Lessee under the Lease or the rights of the Indenture Trustee under the
Indenture.
(b) Indemnity for Lessor's Liens. The Owner Trustee, in
its individual capacity, agrees to indemnify and hold harmless the Lessee, the
Indenture Trustee, the Owner Participant, the Pass Through Trustee, the Owner
Trustee and the Holders from and against any loss, cost, expense or damage
which may be suffered by such party as a result of the failure of the Owner
Trustee to
<PAGE> 42
38
discharge and satisfy any Lessor's Liens attributable to it in its individual
capacity, as described in Section 6.3(a).
6.4 Liens Created by the Indenture Trustee, the Loan
Participants and the Pass Through Trustee. (a) The Indenture Trustee, in its
individual capacity, covenants and agrees with the Lessee, the Owner Trustee,
the Owner Participant and the Loan Participant that it shall not cause or
permit to exist any Lien on the Equipment or all or any portion of any Trust
Estate or the Indenture Estate arising as a result of (i) claims against the
Indenture Trustee in its individual capacity not related to its interest in the
Equipment and any Trust Estate, or to the administration of the Indenture
Estate pursuant to the Indenture, (ii) acts of the Indenture Trustee in its
individual capacity not contemplated by, or failure of the Indenture Trustee to
take any action it is expressly required to perform by, the Operative
Agreements, (iii) claims against the Indenture Trustee in its individual
capacity relating to Taxes or expenses that are not indemnified against by the
Lessee pursuant to Section 7 attributable to the actions of the Indenture
Trustee, solely in its individual capacity, 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 Equipment, the Indenture Estate or the
Operative Agreements, other than a transfer permitted by the Operative
Agreements and that the Indenture Trustee will, at its own cost and expense
(and without any right of reimbursement from any other party hereto), promptly
take such action as may be necessary duly to discharge any such Lien.
(b) The Indenture Trustee agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Pass Through Trustee and the
Loan Participants from time to time from and against any loss, cost, expense or
damage which may be suffered by such party as a result of the failure of the
Indenture Trustee to discharge and satisfy in full any Lien of the type
identified in and when required to be discharged and satisfied by it under
Section 6.4(a).
(c) The Pass Through Trustee covenants and agrees with
the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee
that it shall not cause or permit to exist any Lien on the Equipment or all or
any portion of any Trust Estate or the Indenture Estate arising as a result of
(i) claims against the Pass Through Trustee not related to its interest in the
Equipment and any Trust Estate, (ii) acts of the Pass Through Trustee not
contemplated by, or failure of such Loan Participant to take any action it is
expressly required to perform by, the Operative Agreements, (iii) claims
against the Pass Through Trustee relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7 or (iv) claims against
the Pass Through Trustee arising out of the transfer by such Loan Participant
of all or any portion of its interest in the Equipment, the Indenture Estate or
the Operative Agreements,
<PAGE> 43
39
other than a transfer permitted by the Operative Agreements and that such Loan
Participant will, at its own cost and expense (and without any right of
reimbursement from the Lessee), promptly take such action as may be necessary
duly to discharge any such Lien.
(d) The Pass Through Trustee agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Owner Trustee and the Indenture
Trustee from time to time from and against any loss, cost, expense or damage
which may be suffered by such party as a result of the failure of the Pass
Through Trustee to discharge and satisfy in full any Lien of the type
identified in and when required to be discharged and satisfied by it under
Section 6.4(c).
6.5 Covenants of Owner Trustee, Owner Participant and
Indenture Trustee. (a) The Owner Participant and the Owner Trustee in its
individual and trust capacity, hereby agree, severally and not jointly, with
the Lessee, the Loan Participant and the Indenture Trustee (i) not to amend,
supplement, or otherwise modify any provision of the Trust Agreement in such a
manner as to adversely affect the rights of the Lessee, the Pass Through
Trustee or the Indenture Trustee without the prior written consent of such
party and (ii) not to terminate or revoke the Trust Agreement, or the trusts
created by the Trust Agreement and such trusts shall not be subject to
revocation or termination by the Owner Participant prior to the payment in full
and discharge of the Equipment Notes and all other indebtedness secured by the
Indenture and the final discharge thereof pursuant to Section 10.01 thereof or
prior to the expiration or early termination of the Lease. Each of the Owner
Trustee and the Indenture Trustee agrees, for the benefit of the Lessee and the
Owner Participant, to comply with the provisions of the Indenture and not to
amend, supplement, or otherwise modify any provision of the Indenture in such a
manner as to adversely affect the rights of any such party without the prior
written consent of such party. Notwithstanding any provision herein or in any
of the Operative Agreements to the contrary, the Indenture Trustee's obligation
to take or refrain from taking any actions, or to use its discretion
(including, but not limited to, the giving or withholding of consent or
approval and the exercise of any rights or remedies under such Operative
Agreements), and any liability therefor, shall, in addition to any other
limitations provided herein or in the other Operative Agreements, be limited by
the provisions of the Indenture.
(b) Owner Trustee. The Owner Trustee, in its individual
capacity, agrees that if at any time it shall have knowledge that it has ceased
to be a Citizen of the United States, it will resign immediately as the Owner
Trustee if such citizenship is necessary under the FAA Act as in effect at such
time (whereupon the Owner Participant shall promptly appoint a successor Owner
Trustee subject to the terms of the Trust Agreement) or, if it is not necessary
under the FAA Act as in
<PAGE> 44
40
effect at such time, if it is informed in writing by the Lessee or the Owner
Participant that such lack of United States citizenship would have any adverse
effect on the Lessee or the Owner Participant. The Owner Trustee, in its
individual capacity, further agrees that if at any time it appears reasonably
probable that it will cease to be a Citizen of the United States based on
information that is (i) known to a Responsible Officer or (ii) generally known
to the public, it will promptly so notify, to the extent permitted by law, all
parties to this Agreement.
(c) Owner Participant. The Owner Participant agrees that
if (i) it shall cease to be, or believes itself likely to cease to be, a
Citizen of the United States and (ii) the Equipment shall or would therefore
become ineligible for registration in the name of the Owner Trustee under the
Act and regulations then applicable thereunder, then the Owner Participant
acting continuously and in good faith, shall give notice thereof to the Lessee
and the Indenture Trustee and shall (at its own expense and without any
reimbursement or indemnification from the Lessee) promptly effect a voting
trust or other similar arrangement or take any other action as may be necessary
to prevent any deregistration, or to maintain the United States registration,
of the Equipment. It is agreed that the Owner Participant shall be liable to
pay promptly on request (A) to each of the other parties hereto and to each
Holder any damages actually suffered by any such other party or Holder as the
result of the representation and warranty of the Owner Participant in Section
3.6(a) as to citizenship proving to be untrue as of the Closing Date, and (B)
to the Lessee, any sublessee or any Holder any damages which may be actually
incurred by the Lessee, any Sublessee or any Holder as a result of the Owner
Participant's failure to comply with its obligations pursuant to the first
sentence of this Section 6.02(c). Each party hereto agrees, upon the request
and at the sole expense of the Owner Participant, to cooperate with the Owner
Participant to undertake any reasonable request in complying with its
obligations under the provisions of the first sentence of this Section 6.02(c).
(d) Owner Trustee Activities Limited. So long as the
Indenture is in effect, the Owner Trustee, not in its individual capacity, but
solely as trustee under the Trust Agreement, shall not incur any indebtedness
for borrowed money except as expressly contemplated herein or in any other
Operative Agreement and shall not engage in any business or other activity
other than the transactions contemplated herein or in any other Operative
Agreement and all necessary or appropriate activity related thereto.
6.6 Amendments to Operative Agreements. The Trustees and
Participants will not terminate the Operative Agreements to which the Lessee is
not or will not be a party, except in accordance with the Operative Agreements
in effect on the Closing
<PAGE> 45
41
Date (as amended, modified or supplemented from time to time in accordance with
the terms hereof and of the Operative Agreements), or amend, supplement, waive
or modify such Operative Agreements in any manner that increases the
obligations or liabilities, or decreases the rights, of, or is adverse to, the
Lessee under the Operative Agreements, without, in each such case, the prior
written consent of the Lessee. The Owner Participant and the Trustees (as
applicable) agree that, in any event, they will not amend Section 2.10 or
Section 9.05 of the Indenture or Section 9.01 or Section 11.01 of the Trust
Agreement without the prior written consent of the Lessee.
6.7 Merger Covenant. Notwithstanding anything in any
Operative Agreement to the contrary, the Lessee shall not consolidate with or
merge into any other Person, or permit any other Person to merge into it, or,
directly or indirectly, sell, convey, transfer or lease all or a substantial
part of its assets as an entirety to any Person unless (i) the Person formed by
such consolidation or surviving such merger (if other than the Lessee) or the
Person which acquires by sale, conveyance, transfer or lease all or a
substantial part of the assets of the Lessee shall execute and deliver to the
Owner Trustee, the Owner Participant and the Indenture Trustee an agreement in
form reasonably acceptable to such parties containing the assumption by such
successor corporation of the due and punctual performance and observance of
each covenant and condition of this Agreement and each of the other Lessee
Agreements to be performed or observed by the Lessee (and in the case of any
such sale, conveyance or lease, the Lessee shall not be released from its
obligations under the Lessee Agreements), and (ii) immediately after giving
effect to such transaction, no Lease Default or Lease Event of Default shall
have occurred and be continuing, whether as a result of such consolidation or
merger or such sale, conveyance, transfer or lease or otherwise. Upon such
consolidation or merger, or any sale, conveyance, transfer or lease of all or a
substantial part of the assets of the Lessee as an entirety in accordance with
this Section 6.7, the successor corporation formed by such consolidation or
into which the Lessee is merged or to which such sale, conveyance, transfer or
lease is made shall succeed to, and be substituted for (except as limited
above), and may exercise every right and power of, the Lessee under this
Agreement and the other Operative Agreements with the same effect as if such
successor corporation had been named as the Lessee herein. If the Lessee shall
have consolidated with or merged into any other Person or sold, conveyed,
transferred or leased all or a substantial part of its assets, such assets to
include the Lessee's leasehold interest in the Lease, the Person owning such
leasehold interest after such event shall deliver to the Owner Participant and
the Indenture Trustee (a) an Officer's Certificate certifying as to the
compliance with the requirements of this Section 6.7 and (b) an opinion of
counsel (which counsel may be such Person's in-house counsel) confirming that
the assumption agreement pursuant to which such Person assumed the obligations
of the Lessee shall have been duly authorized,
<PAGE> 46
42
executed and delivered by such Person and that such agreement is the legal,
valid and binding obligation of such Person, enforceable against such Person in
accordance with its terms and that such assumption does not violate securities
laws and does not cause the Owner Participant to suffer any unindemnified tax
risk arising from assumption. In connection with such assumption, the Lessee
shall, at the direction of Lessor, take such action as is reasonably necessary
to protect the Lessor's interest in the Equipment. All reasonable fees,
expenses and charges of the parties hereto (including the costs of such parties
in ensuring the compliance by the Lessee with this Section 6.7) incurred in
connection with such sale, conveyance, transfer or lease shall be paid by the
Lessee. Except as specifically consented to in writing by the Owner Trustee
and the Indenture Trustee, the terms of the Operative Agreements shall not be
amended in connection with a sale, conveyance, transfer or lease permitted by
this Section 6.7. The Lessee shall provide the Lessor, the Indenture Trustee
and the Owner Participant with 30 days' prior written notice of a transaction
subject to the provisions of this Section 6.7, provided that if the Lessee is
unable to provide 30 days' advance notice by reason of its legal or contractual
restrictions, the Lessee shall provide such notice as soon as possible,
consistent with its legal and contractual restrictions.
6.8 Rent Sufficiency. Anything contained herein, the
Lease or any other Operative Agreement or other agreement to the contrary
notwithstanding, the aggregate amount of Basic Rent payable on any Payment Date
under the Lease (as any such amount may be adjusted pursuant to Section 2.6
hereof or Section 3.4 of the Lease), together with any amounts paid by Owner
Trustee pursuant to Section 2.2(c) and amounts paid by the Lessee pursuant to
Section 3.5 of the Lease, shall be, under any circumstances and in any event,
at least equal to the aggregate amount of the scheduled installments of
principal of and interest on the Equipment Notes due on such Payment Date.
Anything contained herein, the Lease or any other Operative Agreement or other
agreement to the contrary notwithstanding, the amount of the Termination Value,
Stipulated Loss Value and Early Buy-Out Price payable on any date on account of
any Unit of Equipment, together with any other amounts payable pursuant to
Section 10.2, 11.2 or 22.6 of the Lease, as the case may be, shall be, under
any circumstance and in any event, at least equal to the amount of any payments
then required to be made on account of the outstanding principal of and
premium, if any, and interest on the Equipment Notes pursuant to Section 2.10
of the Indenture.
6.9 Pass Through Certificates. If at any time the Lessee
shall own any Pass Through Certificates, the Lessee shall not vote such Pass
Through Certificates or otherwise participate in the giving of any direction,
consent or waiver to be taken pursuant to the Pass Through Trust Agreement.
The Lessee agrees not to amend Section 1.04(c) of the Pass Through Trust
Agreement.
<PAGE> 47
43
SECTION 7. LESSEE'S INDEMNITIES
7.1 General Tax Indemnity.
(a) Tax Indemnitee Defined. For purposes of this Section
7.1, "Tax Indemnitee" means the Owner Participant, its Affiliates, the Owner
Trustee both in its individual capacity and as trustee, the Trust Estate, the
Interim Loan Participant, the Indenture Trustee both in its individual capacity
and as trustee, and each of their respective successors or assigns permitted
under the terms of the Operative Agreements.
(b) Taxes Indemnified. Subject to the exclusions stated
in subsection (c) below, the Lessee agrees to indemnify and hold harmless each
Tax Indemnitee, taking into account the income tax consequences to the Tax
Indemnitee of the accrual or receipt of an indemnity payment, against all fees,
taxes (including, without limitation, sales, use, excise and property), levies,
assessments, duties, charges or withholdings, together with any and all
penalties, additions to tax, fines or interest thereon ("Taxes") imposed upon
any Tax Indemnitee, the Lessee or all or any part of the Equipment by any
federal, state or local government, political subdivision, or taxing authority
in the United States, upon, with respect to or in connection with:
(i) the Equipment or any part of any of the Equipment
or interest therein;
(ii) the purchase, acquisition, ownership, delivery,
transport, location, leasing, subleasing, possession, registration,
use, operation, condition, maintenance, repair, return, abandonment,
storage, sale or other application or disposition of or with respect
to the Equipment or any part thereof or interest therein; and
(iii) the rental payments, receipts of earnings arising
from any Unit of Equipment or payable pursuant to the Lease.
(c) Taxes Excluded. The indemnity provided for in
paragraph (b) above shall not apply to any of the following:
(i) As to any Tax Indemnitee, taxes on, based on or
measured by the gross or net income or receipts of such Tax Indemnitee
(including any capital gains, excess profits or alternative minimum
Taxes, and any Taxes on or measured by any items of tax preference),
and any accumulated earnings, personal holding company, succession,
estate, capital, net worth, value added (except to the extent any such
tax is in place or clearly in lieu of a sales, use, license, excise or
property tax), franchise, or conduct of or doing business Taxes
imposed upon such Tax Indemnitee;provided, however, sales, use,
license, excise or property taxes shall not be excluded under this
subparagraph; provided, further, that,
<PAGE> 48
44
notwithstanding the foregoing proviso, sales or use taxes imposed by
any state or local taxing jurisdiction in the United States in
connection with the transactions contemplated by the Operative
Agreements shall be excluded under this subparagraph if (x) not later
than the Closing Date the Lessee shall have given written notice to
the Owner Participant identifying such jurisdiction and requesting
that the Owner Participant provide (at Lessee's cost and expense) a
sales tax certificate that will enable the Owner Participant or Lessor
to receive an exemption from or reduction in sales tax, (y) such sales
tax certificate is reasonably available to or obtainable by the Owner
Participant, and (z) such sales tax certificate is not provided to the
Lessee within such reasonable period following the Closing Date as
will enable the Owner Participant to apply for and obtain a
certificate (or, in the case of New York (if New York is identified in
such notice), on the Closing Date or as soon as practicable
thereafter);
(ii) Taxes imposed or accrued on any Equipment with
respect to any period after the earliest of (x) the return of
possession of the Equipment to the Owner Participant or the placement
of the Equipment in storage at the request of the Owner Participant,
in either case pursuant to and in accordance with Section 6 of the
Lease, (y) the termination of the Lease Term with respect to such
Equipment pursuant to Section 10.1 of the Lease, or (z) the discharge
in full of the Lessee's obligation to pay the Termination Value or the
Stipulated Loss Value and all other amounts due, if any, under Section
10 or 11.2 of the Lease, as the case may be, with respect to the
Equipment;
(iii) As to any Tax Indemnitee, (y) Taxes which arise out
of or are caused by any breach by such Tax Indemnitee of any of its
representations, warranties or covenants in any of the Operative
Agreements, or the gross negligence or willful misconduct of such Tax
Indemnitee, or (z) Taxes arising from a Lessor Lien with respect to
such Tax Indemnitee;
(iv) As to any Tax Indemnitee, Taxes which become
payable as a result of a sale, assignment, transfer or other
disposition (whether voluntary or involuntary) by such Tax Indemnitee
of all or any portion of its interest in the Equipment or any part
thereof, the Trust Estate, any Indebtedness or any of the Operative
Agreements or rights created thereunder or any transfer of any
interest in such Tax Indemnitee other than a disposition which occurs
as the result of the exercise of remedies for a Lease Event of
Default;
(v) As to any Tax Indemnitee, Taxes imposed by a taxing
authority in a jurisdiction if any to the extent that
<PAGE> 49
45
such Taxes would in any event have been imposed on such Tax Indemnitee
if no Units of Equipment had been located, operated, used leased or
rented to or in such jurisdiction;
(vi) Taxes which result from the Owner Trustee's
engaging on behalf of the Trust Estate in transactions other than
those permitted or contemplated by the Operative Agreements unless
attributable to the exercise of default remedies pursuant to Article V
of the Trust Indenture;
(vii) As to any Tax Indemnitee, Taxes to the extent they
exceed the Taxes that would have been imposed had the initial Tax
Indemnitee not transferred, sold or otherwise disposed of any interest
held by such Tax Indemnitee;
(viii) As to any Tax Indemnitee, Taxes imposed on any Tax
Indemnitee or any other person who, together with such Tax Indemnitee,
is treated as one employer for employee benefit plan purposes, as a
result of, or in connection with, any "prohibited transaction," within
the meaning or the provisions of the Code or regulations thereunder or
as set forth in Section 406 of ERISA or the regulations implementing
ERISA, engaged in by any Tax Indemnitee other than, with respect to
Owner Participant, Taxes for such prohibited transaction that results
from any misrepresentation made, or other breach committed, by Lessee
or any holder of indebtedness under any documents delivered in
connection with the transactions contemplated hereunder;
(ix) As to the Owner Participant, Taxes described in
clause (i) above imposed by any taxing authority that is not the
United States federal government, any agency or subdivision thereof,
any state, any agency of any state or any political subdivision
thereof ("Foreign Taxing Jurisdiction") as a direct result of the
operation or location of one or more Units of Equipment in such
Foreign Taxing Jurisdiction; provided, however, that this exclusion
will not apply if such Taxes would not have been imposed if the Owner
Participant had not (1) been engaged in business in such Foreign
Taxing Jurisdiction (other than as a result of its ownership and lease
of such Units of Equipment therein) or (2) maintained a permanent
establishment (as that term is defined in the Income Tax Treaties of
the United States) therein (other than a permanent establishment that
the Owner Participant is treated as having as a result of its
ownership and lease of such Units of Equipment therein); and
(x) As to any Tax Indemnitee, Taxes for so long as such
Taxes are being contested in accordance with the provisions of Section
7(g) hereof provided the Lessee is in compliance with its obligations
under Section 7(g) hereof.
(d) (Intentionally Omitted.)
<PAGE> 50
46
(e) Payments to Lessee.
(i) If any Tax Indemnitee shall realize a Tax benefit
as a result of any Taxes paid or indemnified against by the Lessee
under this Section 7.1 (whether by way of deduction, credit,
allocation or apportionment or otherwise), such Tax Indemnitee shall
pay to the Lessee, an amount equal to the amount of such Tax benefit,
increased by the Tax Indemnitee's additional saved Taxes attributable
to the payment being made to the Lessee hereunder provided, however,
that if a Payment Event of Default exists and is continuing, such
payment shall be held by Owner Participant until such Payment Event of
Default is cured, provided, further, that when such Payment Event of
Default is cured payment shall be made to the Lessee.
(ii) Upon receipt by a Tax Indemnitee of a refund or
credit of all or part of any Taxes paid or indemnified against by the
Lessee, such Tax Indemnitee shall pay to the Lessee, an amount equal
to the amount of such refund plus any interest received by or credited
to such Tax Indemnitee with respect to such refund increased or
decreased, as the case may be, by the Tax Indemnitee's net additional
or saved taxes attributable to the receipt of such amounts from the
taxing authority and the payment being made to the Lessee hereunder
provided, however, that if a Payment Event of Default exists and is
continuing, such payment shall be held by Owner Participant until such
Payment Event of Default is cured,provided, furthe, that when such
Payment Event of Default is cured payment shall be made to the Lessee.
(iii) Payments made to the Lessee under subparagraphs (i)
or (ii) of this subsection 7.1(e) shall be subject to the limitation
that the amount paid to the Lessee by any Tax Indemnitee, after
subtracting the actual reduction in income taxes realized by such Tax
Indemnitee with respect to the payment thereof, shall not exceed the
amount of the indemnity payment previously made by the Lessee after
subtracting the actual increase in income taxes previously incurred by
such Tax Indemnitee with respect to the receipt thereof. Any such
excess shall not be paid but shall instead be carried forward and
shall reduce the Lessee's obligations to make subsequent payments
under subparagraph (b) to the Tax Indemnitee. The Tax Indemnitee
shall in good faith use diligence in filing its Tax returns and in
dealing with taxing authorities to seek and claim any such tax
benefits or refunds and to minimize the Taxes indemnifiable by the
Lessee under paragraph (b).
(f) Procedures and Verification. Any amount payable to a
Tax Indemnitee pursuant to paragraph (b) shall be paid within 30 days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the basis for such indemnity
and the
<PAGE> 51
47
computation of the amount so payable, provided that such amount need not be
paid prior to the later of (i) the date on which such Taxes are paid or (ii) in
the case of amounts which are being contested pursuant to paragraph (g) hereof,
the time such contest (including all appeals) is finally resolved. Each Tax
Indemnitee shall promptly forward to the Lessee any notice, bill or advice
received by it from the relevant taxing authority concerning any Tax against
which the Lessee may be required to indemnify hereunder. Any amount payable to
the Lessee pursuant to paragraph (e) shall be paid within 15 days after the Tax
Indemnitee realizes a tax benefit or receives a refund giving rise to a payment
under paragraph (e), and shall be accompanied by a written statement by the Tax
Indemnitee setting forth in reasonable detail the basis for computing the
amount of such payment. Within 30 days following the Lessee's receipt of any
computation from the Tax Indemnitee, the Lessee may request that an
independent, nationally recognized, accounting firm selected by Lessee and
reasonably acceptable to Owner Participant determine whether such computations
of the Tax Indemnitee are correct. Such accounting firm shall be requested to
make the determination contemplated by this paragraph (f) within 30 days of its
selection. In the event such accounting firm shall determine that such
computations are incorrect, such firm then shall notify the parties of the
incorrect computations and discuss with them the manner in which the
computations should be recomputed. The Tax Indemnitee shall cooperate with
such accounting firm and supply it with all information necessary to permit it
to accomplish such determination. Information supplied by the Tax Indemnitee
shall be kept confidential by such accounting firm. In the absence of manifest
error the computations of such accounting firm shall be final, binding and
conclusive upon the parties. All fees and expenses of the accounting firm
payable under this Section 7.1(f) shall be borne by the Lessee unless such
verification shall disclose an error in such Tax Indemnitee's favor of the
greater of ___% of the amount of such payment determined by such Tax Indemnitee,
or $______, in which case such cost shall be borne by such Tax Indemnitee.
(g) Contest. If a written claim is made against any Tax
Indemnitee for any such Tax referred to in this Section 7.1, the Tax Indemnitee
shall promptly (and in no event later than 30 days after the Tax Indemnitee's
receipt of such claim) notify Lessee of such claim provided, however, that the
failure of the Indemnitee to so notify Lessee shall not preclude any indemnity
hereunder unless such failure adversely affects the Lessee's ability to
require such Indemnitee to contest the Tax or to contest the Tax itself.
If (i) a written claim shall be made for any Tax for which Lessee is
obligated pursuant to this Section 7.1, and (ii) either (y) under applicable
law of the Tax Authority Lessee is allowed to directly contest such Tax in its
own name and such contest does not involve an unindemnified Tax of the Tax
Indemnitee, or (z) the contest involves solely a claim for indemnified Taxes
or,
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48
in a contest involving indemnified and unindemnified Taxes the claim for
indemnified Taxes can be severed, then Lessee shall be permitted to contest the
imposition of such Tax (including in its own name in the case of Taxes
described in clause (y) of this paragraph) ("Lessee Controlled Contest");
provided, however, that Lessee shall be permitted to contest the imposition of
such Tax only if Lessee agrees to pay, and shall timely pay, all reasonable
costs and expenses (including without limitation, all reasonable costs,
expenses, losses, legal and accountant's fees and disbursements, penalties and
interest) incurred in contesting such claim. Lessee shall control the contest
of Taxes governed by this paragraph and shall consult in good faith with the
Tax Indemnitee regarding such contest.
In the case of Taxes not governed by the previous paragraph
(Indemnitee Controlled Contest"), such Tax Indemnitee will contest such claim
in good faith provided that (i) Lessee requests in writing that the Tax
Indemnitee contest such claim within 30 days after the Tax Indemnitee has
notified Lessee of the existence of the claim, (ii) prior to the first to occur
of (x) any administrative proceedings beyond the audit stage of the contest, or
(y) any court proceedings, Lessee has furnished the Tax Indemnitee, at Lessee's
expense, with a written opinion of Simpson Thacher & Bartlett, or other
independent counsel selected by Lessee and reasonably acceptable to such Tax
Indemnitee, that there is a reasonable basis to contest such claim, (iii)
Lessee agrees to pay, and shall timely pay, all reasonable costs and expenses
(including, without limitation, all reasonable costs, expenses, losses, legal
and accountant's fees and disbursements, penalties and interest) which such Tax
Indemnitee may incur in contesting such claim, (iv) no Lease Event of Default
shall have occurred and be continuing, unless Lessee shall have posted a
satisfactory bond or other security with respect to the costs of such contest
and the loss, and (v) the amount of the required indemnity payments with
respect to such Taxes (together with any recurring or related actual or
potential claims in other taxable periods relating to the same Taxes) would be
$_________ or more.
At its sole discretion, the Tax Indemnitee may elect to conduct the
contest or authorize Lessee to conduct the contest of any Tax under an
Indemnitee Controlled Contest. The Tax Indemnitee shall consult in good faith
with Lessee concerning the method of any contest controlled by the Tax
Indemnitee hereunder. If a Tax Indemnitee (or Lessee, in the case of a Lessee
Controlled Contest) contests a Tax by making a payment thereof, then Lessee
shall advance to (or on behalf of, in the case of a Lessee Controlled Contest)
such Tax Indemnitee, an amount equal to the Taxes and any penalties, additions
to tax, fines and interest thereon that are paid by such Tax Indemnitee in
connection with such contest. If the contest of any Tax or the return on which
the Tax is reported also involves other Taxes which are not required to be
indemnified by Lessee pursuant to this Section 7.1 ("Non-Indemnified Items"),
then the Tax Indemnitee shall not discriminate against such Tax in favor of
<PAGE> 53
49
any Non-Indemnified Items. Unless Lessee has failed to satisfy the
requirements for contesting, or continuing to contest, any indemnified Taxes,
no Tax Indemnitee shall settle the contest of such Tax without the consent of
Lessee (except with respect to Non- Indemnified Items), which consent shall not
be unreasonably withheld or delayed given all the facts and circumstances. All
reasonable costs and expenses of any contest by Lessee or by any Tax Indemnitee
shall be borne by Lessee (except with respect to Non-Indemnified Items) which
costs and expenses shall be paid promptly after receipt of notice.
Notwithstanding anything contained in this Section 7.1, a Tax
Indemnitee will not be required to contest, or to continue to contest and
Lessee shall not be permitted to contest or continue to contest, the validity,
applicability or amount of any tax (or portion thereof) (i) if such Tax
Indemnitee waives its right to indemnity hereunder with respect to such Tax (or
such portion thereof); (ii) if such contest would result in risk of an
imposition of criminal penalties, any material danger of sale, forfeiture or
loss (or loss of use) of the Equipment or any interest therein; and (iii) in
the case of a Indemnitee Controlled Contest, if an Event of Default has
occurred and is continuing, unless Lessee provides such Tax Indemnitee with
security in a manner reasonably satisfactory to such Tax Indemnitee.
(h) In the event any reports with respect to Taxes are
required to be made, the Lessee will either prepare and file such reports (and
in the case of reports which are required to be filed on the basis of
individual items of Equipment, such reports shall be prepared and filed in such
manner as to show as required the interests of each Tax Indemnitee in such item
of Equipment) or, if it shall not be permitted to file the same, it will notify
each Tax Indemnitee of such reporting requirements, prepare such reports in
such manner as shall be satisfactory to each Tax Indemnitee and deliver the
same to each Tax Indemnitee within a reasonable period prior to the date the
same is to be filed. The Lessee shall provide such information as the Owner
Participant or the Lessor may reasonably require from the Lessee to enable the
Owner Participant and the Lessor to fulfill their respective tax filing, tax
audit, and tax litigation obligations.
(i) The provisions of this Section 7.1 shall continue in
full force and effect, notwithstanding the expiration or termination of any
Operative Agreement, until all obligations hereunder have been met and all
liabilities hereunder paid in full.
7.2 General Indemnification and Waiver of Certain Claims.
(a) Claims Defined. For the purposes of this Section
7.2, "Claims" shall mean any and all costs, expenses, liabilities, obligations,
losses, damages, penalties, actions or
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suits or claims of whatsoever kind or nature (whether or not on the basis of
negligence, strict or absolute liability or liability in tort or otherwise)
which may be imposed on, incurred by, suffered by, or asserted against an
Indemnified Person, as defined herein, or any Unit and, except as otherwise
expressly provided in this Section 7.2, shall include, but not be limited to,
all reasonable out-of-pocket costs, disbursements and expenses (including legal
fees and expenses) paid or incurred by an Indemnified Person in connection
therewith or related thereto.
(b) Indemnified Person Defined. For the purposes of this
Section 7.2, "Indemnified Person" means the Owner Participant and its
Affiliates, the Owner Trustee (both in its individual capacity and as Owner
Trustee), the Interim Loan Participant, the Indenture Trustee, and each of
their respective directors, officers, employees, successors and permitted
assigns, agents and servants, the Trust Estate, the Indenture Estate and the
Pass Through Trustee (the respective directors, officers, employees, successors
and permitted assigns, agents and servants of the Owner Participant and its
Affiliates, the Owner Trustee and the Indenture Trustee, as applicable,
together with the Owner Participant, the Owner Trustee and the Indenture
Trustee, as the case may be, being referred to herein collectively as the
"Related Indemnitee Group" of the Owner Participant, the Indenture Trustee and
the Owner Trustee, respectively).
(c) Claims Indemnified. Whether or not any Unit is
accepted under the Lease, or a closing occurs with respect thereto, and subject
to the exclusions stated in subsection (d) below, Lessee agrees to indemnify,
protect, defend and hold harmless each Indemnified Person on an after-tax basis
against Claims resulting from or arising out of (whether or not such
Indemnified Person shall be indemnified as to such Claim by any other Person):
(i) this Agreement or any other Operative Agreement or
any of the transactions contemplated hereby and thereby or the
ownership, lease, operation, possession, modification, improvement,
abandonment, use, non-use, maintenance, sublease, substitution,
control, repair, storage, transport, condition, titling, alteration,
transfer or other application or disposition, return, overhaul,
testing or registration of any Unit (including, without limitation,
injury, death or property damage of passengers, shippers or others) or
environmental matters (including without limitation noise pollution)
whether or not in compliance with the terms of the Lease;
(ii) the construction, manufacture, financing,
refinancing, design, purchase, acceptance, rejection, delivery,
non-delivery or condition of any Unit (including, without limitation,
latent and other defects, whether or not discoverable, and any claim
for patent, trademark or copyright infringement); and
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51
(iii) the initial offer, sale or delivery of (x) the
Equipment Notes and the Pass Through Certificates and (y) the
Beneficial Interest and (z) any refinancing with respect thereto
(including, without limitation, with regard to the matters identified
in Section 10.2(a)(iv)).
(d) Claims Excluded. The following are excluded from the
agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the extent
attributable to acts or omissions or events occurring entirely after
(A) in the case of the exercise and full and complete performance by
the Lessee of a purchase option with respect to such Unit under
Section 22.2 of the Lease, the exercise by the Lessee of an early
termination option with respect to such Unit under Section 10 of the
Lease (whether or not the Lessor exercises its rights under Section
10.3) or the occurrence of an Event of Loss with respect to such Unit
under Section 11 of the Lease, the last to occur of (x) the payment of
all amounts due from the Lessee in connection with any such event and
(y) the release of the Lien of the Indenture on such Unit or (B) in
all other cases, the last to occur of (x) the earlier to occur of the
termination of the Lease with respect to such Unit or the expiration
of the Lease Term, (y) the return of such Unit to the Lessor (it being
understood that, so long as any Unit is in storage as provided in
Section 6.3 or 15.4 of the Lease, the date of return thereof for the
purpose of this clause (i) shall be the last day of the Storage Period
or the storage period provided in said Section 15.4, as the case may
be), and (z) the release of the Lien of the Indenture on such Unit;
and it being further understood that during any such storage period
the Lessee takes responsibility only for its own acts, omissions,
gross negligence or willful misconduct);
(ii) Claims which are Taxes, whether or not the Lessee
is required to indemnify therefor under Section 7.1 hereof or the Tax
Indemnity Agreement, the Lessee's entire obligation with respect to
Taxes and losses of tax benefits being fully set out in such Section
7.1 or the Tax Indemnity Agreement;
(iii) with respect to any particular Indemnified Person,
Claims to the extent attributable to the gross negligence or willful
misconduct of (other than gross negligence or willful misconduct
imputed as a matter of law to such Indemnified Person solely by reason
of its interest in the Equipment) such Indemnified Person;
(iv) with respect to any particular Indemnified Person,
Claims to the extent attributable to the incorrectness in any material
respect of any representation or warranty by such Indemnified Person
in the Operative
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Agreements or any document or certificate executed in connection
therewith; or
(v) with respect to any particular Indemnified Person,
the failure by such Indemnified Person to perform or observe any
agreement, covenant or condition required to be performed or observed
by such Indemnified Person in any of the Operative Agreements
including, without limitation, the creation or existence of a Lessor
Lien or a Lien required to be discharged by the Indenture Trustee or
the Loan Participant under Section 6.4; or
(vi) Claims to the extent attributable to any offer,
sale or other disposition (voluntary or involuntary) by or on behalf
of or for the account of (x) the Lessor of all or any part of its
interest in the Equipment or (y) any other Indemnified Person of all
or any part of such Indemnified Person's interest in the Equipment,
the Trust Estate, the Indenture Estate, or in the Operative Agreements
except, in the case of both clauses (x) or (y), (i) in connection with
the exercise of remedies as a result, and during the continuance, of a
Lease Event of Default under a Lease or (ii) pursuant to the exercise
by the Lessee of its purchase options or other rights under the Lease
or (iii) in connection with a refinancing pursuant to Section 10.2
hereof or (iv) in connection with an assumption of the Equipment Notes
pursuant to Section 10.14 hereof; or
(vii) Claims to the extent attributable to a failure on
the part of the Indenture Trustee or the Owner Trustee, as the case
may be, to distribute in accordance with the Trust Indenture or the
Trust Agreement, as the case may be, any amounts received and
distributable by it thereunder; or
(viii) Claims to the extent attributable to the
authorization or giving or withholding of any future amendments,
supplements, waivers or consents with respect to any of the Operative
Agreements other than as provided in Section 2.5(b) or as may be
required by any Operative Agreement; or
(ix) any Claim that is included in Transaction Expenses
and for which the Owner Participant is responsible pursuant to Section
2.5(a) hereof or that is incurred by any Indemnified Person to the
extent that such Indemnified Person shall have expressly agreed in any
Operative Agreements to bear such expense without right of
reimbursement under any Operative Agreement; or
(x) any Claim for any amount constituting an amount
payable by the Lessor under the Indenture or the Equipment Notes
resulting from an Indenture Event of Default that does not also
constitute a Lease Event of Default under the Lease; or
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(xi) any Claim that would not have been incurred but for
the appointment of a successor Owner Trustee without the consent of
the Lessee except in connection with the exercise of remedies as a
result of and during the continuance of a Lease Event of Default under
the Lease.
(e) Insured Claims. In the case of any Claim indemnified
by the Lessee hereunder which is covered by a policy of insurance maintained by
the Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified
Person agrees, at the Lessee's expense, to provide reasonable cooperation to
the insurers in the exercise of their rights to investigate, defend or
compromise such Claim as may be required to retain the benefits of such
insurance with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall, after
obtaining knowledge thereof, promptly notify the Lessee of any Claim as to
which indemnification is sought; provided, however, that the failure to give
such notice shall not release the Lessee from any of its obligations under this
Section 7, except to the extent that failure to give notice of any action, suit
or proceeding against such Indemnified Person shall have a material adverse
affect on Lessee's ability to defend such Claim or recover proceeds under any
insurance policies maintained by Lessee hereunder. Subject to the provisions
of the following paragraph, the Lessee shall at its sole cost and expense be
entitled to control, and shall assume full responsibility for, the defense of
such claim or liability; provided that the Lessee shall keep the Indemnified
Person which is the subject of such proceeding fully apprised of the status of
such proceeding and shall provide such Indemnified Person with all information
with respect to such proceeding as such Indemnified Person shall reasonably
request.
Notwithstanding any of the foregoing to the contrary, the
Lessee shall not be entitled to control and assume responsibility for the
defense of such claim or liability if (1) a Lease Event of Default shall have
occurred and be continuing, (2) such proceeding will involve any material
danger of the sale, forfeiture or loss of, or the creation of any Lien (other
than any lien permitted under the Operative Agreements or a Lien which is
adequately bonded to the satisfaction of such Indemnified Person) on, any Unit
of Equipment, or any part of the Trust Estate or impairment of the Lien of the
Indenture thereon, (3) in the good faith opinion of such Indemnified Person,
there exists an actual or potential conflict of interest such that it is
advisable for such Indemnified Person to retain control of such proceeding or
(4) such claim or liability involves the possibility of criminal sanctions to
such Indemnified Person. In the circumstances described in clauses (1) through
(4) of the preceding sentence, the Indemnified Person shall be entitled to
control and assume responsibility for the defense of such claim or liability at
the expense of the Lessee. In addition, any Indemnified Person may participate
in any proceeding controlled
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54
by the Lessee pursuant to this Section 7.2, at its own expense in respect of
any such proceeding as to which the Lessee shall have acknowledged in writing
its obligation to indemnify the Indemnified Person pursuant to this Section
7.2, and at the expense of Lessee in respect of any such proceeding as to which
the Lessee shall not have so acknowledged its obligation to the Indemnified
Person pursuant to this Section 7.2. Lessee may in any event participate in
all such proceedings at its own cost. Nothing contained in this Section 7.2(f)
shall be deemed to require an Indemnified Person to contest any Claim or to
assume responsibility for or control of any judicial proceeding with respect
thereto.
(g) Subrogation. If a Claim indemnified by the Lessee
under this Section 7.2 is paid in full by the Lessee and/or an insurer under a
policy of insurance maintained by the Lessee, the Lessee and/or such insurer,
as the case may be, shall be subrogated to the extent of such payment to the
rights and remedies of the Indemnified Person (other than under insurance
policies maintained by such Indemnified Person at its own expense) on whose
behalf such Claim was paid with respect to the transaction or event giving rise
to such Claim. So long as no Lease Event of Default shall have occurred and be
continuing, should an Indemnified Person receive any refund, in whole or in
part, with respect to any Claim paid by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not in excess of the amount the Lessee or any
of its insurers has paid in respect of such Claim paid or payable by such
Indemnified Person on account of such refund) to the Lessee.
(h) Waiver of Certain Claims. The Lessee hereby waives
and releases any Claim now or hereafter existing against any Indemnified Person
arising out of death or personal injury to personnel of the Lessee, loss or
damage to property of the Lessee, or the loss of use of any property of the
Lessee, which may result from or arise out of the condition, use or operation
of the Equipment during the Lease Term, including without limitation any latent
or patent defect whether or not discoverable.
(i) No Guaranty. The general indemnification provisions
of this Section 7.2 do not constitute a guaranty by the Lessee that the
principal of, interest on or any amounts payable with respect to the Equipment
Notes will be paid.
(j) Survival of Obligations. The indemnities and
agreements of the Lessee provided for in this Article 7 shall survive the
closing of this transaction and the expiration or other termination of this
Participation Agreement and the other Operative Agreements.
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SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease, and expressly agrees that
with respect to the Lease, so long as no Lease Event of Default has occurred
and is continuing thereunder, it or any Person acting on its authority, shall
not, through its or any such Person's actions or inactions, interfere with
Lessee's rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by Lessee or any permitted sublessee of the
Equipment leased thereunder.
SECTION 9. SUCCESSOR INDENTURE TRUSTEE
(a) In the event that the Indenture Trustee gives notice
of its resignation pursuant to Section 8.02 of the Trust Indenture, a successor
Indenture Trustee shall be appointed pursuant to said Section 8.02.
(b) In the event that either the Owner Trustee or the
Lessee obtains actual knowledge of the existence of any of the grounds for
removal of the Indenture Trustee set forth in Section 8.02 of the Indenture,
the Owner Trustee or the Lessee, as the case may be, shall promptly notify the
other by telephone, confirmed in writing and the parties entitled to act
promptly thereafter may remove the Indenture Trustee and appoint a successor
Indenture Trustee.
SECTION 10. MISCELLANEOUS
10.1 Consents. The Owner Participant covenants and
agrees that it shall not unreasonably withhold its consent to any consent
requested of the Owner Trustee under the terms of the Operative Agreements that
by its terms is not to be unreasonably withheld by the Owner Trustee.
10.2 Refinancing.
(a) Generally. So long as no Lease Default or Lease
Event of Default shall be in existence and subject to the satisfaction of the
terms and conditions set forth in this Section 10.2, the Lessee shall have the
right, on not more than two occasions during the Lease Term (excluding any
refinancing pursuant to Section 10.2(e)), to require the Owner Participant and
the Owner Trustee to effect an optional prepayment of any or all of the
Equipment Notes pursuant to Section 2.10(c) of the Indenture as part of a
refunding or refinancing operation, upon the following terms and conditions:
(i) the Owner Participant, the Indenture Trustee, the
Owner Trustee, and any other appropriate parties agree to enter into a
financing or loan agreement (which may involve an underwriting
agreement in connection with a public offering) proposed by the Lessee
which is in form and
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56
substance reasonably satisfactory to the Owner Participant, providing
for (x) the issuance and sale by the Owner Trustee or such other party
as may be appropriate on the date specified in such agreement (for the
purposes of this Section 10.2, the "Refunding Date") of debt
securities in an aggregate principal amount (in the lawful currency of
the United States) equal to the principal amount of the Equipment
Notes to be refunded or refinanced on the Refunding Date;
(ii) the Lessee and the Owner Trustee will amend the
Lease such that (w) if the Refunding Date is not a Rent Payment Date,
the Lessee shall on the Refunding Date prepay that portion of the next
succeeding installment of Basic Rent as shall equal the aggregate
interest accrued on the Equipment Notes outstanding to the Refunding
Date, (x) Basic Rent payable under the Lease in respect of the period
from and after the Refunding Date shall be recalculated to preserve
the Net Economic Return which the Owner Participant would have
realized had such refunding not occurred, provided that the net
present value of Basic Rent shall be minimized to the extent
consistent therewith, and (y) amounts payable under the Lease in
respect of the Early Buyout Price, Stipulated Loss Value and
Termination Value from and after the Refunding Date shall be
appropriately recalculated to preserve the Net Economic Return which
the Owner Participant would have realized had such refunding or
refinancing not occurred (it being agreed that any recalculations
pursuant to subclauses (x) and (y) of this clause (ii) shall be
performed in accordance with the requirements of Section 2.6 hereof);
(iii) the Owner Trustee will enter into an agreement to
provide for the securing thereunder of the debt securities issued by
the Owner Trustee pursuant to clause (a) of this Section 10.2 in like
manner as the Equipment Notes and/or will enter into such amendments
and supplements to the Indenture proposed by the Lessee as being
necessary to effect such refunding or refinancing, which agreements,
amendments and/or supplements shall be reasonably satisfactory in form
and substance to the Owner Participant;provided that, notwithstanding
the foregoing (but subject to the provisions of clause (i) above), the
Lessee reserves the right to set the economic terms and other terms
not customarily negotiated between an owner participant and a lender
of the refunding or refinancing transaction to be so offered;
provided, further, that no such amendment or supplement will increase
the obligations or impair the rights of the Owner Participant under
the Operative Agreements without the consent of the Owner Participant;
and
(iv) in the case of a refunding or refinancing involving
a public offering of debt securities, neither the Owner Trustee nor
the Owner Participant shall be the
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57
"issuer", "obligor" or "underwriter" for securities law purposes, and
the offering materials (including any registration statement) for the
refunding or refinancing transaction shall be reasonably satisfactory
to the Owner Participant (and shall not in any event identify the
Owner Participant unless required by law);
(v) unless otherwise agreed by the Owner Participant,
the Lessee shall pay to the Owner Trustee or to the Person entitled
thereto as Supplemental Rent an amount equal to the Make-Whole Amount,
if any, payable on the Refunding Date;
(vi) the Owner Participant, the Owner Trustee, the
Indenture Trustee and the Pass Through Trustee shall have received (1)
such opinions of counsel as they may reasonably request concerning
compliance with the Securities Act of 1933, as amended, and any other
applicable law relating to the sale of securities and (2) such other
opinions of counsel and such certificates and other documents, each in
form and substance satisfactory to them, as they may reasonably
request in connection with compliance with the terms and conditions of
thisSection 10.2;
(vii) all necessary authorizations, approvals and
consents shall have been obtained;
(viii) the Owner Participant shall not be required to
undertake due diligence in order to avoid transactions that could be
deemed prohibited transactions within the meaning of Section
4975(c)(1)(A) through (D) of the Code;
provided, however, that (x) no refunding or refinancing of the Equipment Notes
will be permitted if within 30 days after receipt of a request from the Lessee
to effect a refunding or refinancing pursuant to this Section 10.2(a) and of
information regarding the terms of such refunding or refinancing necessary to
render the opinion referred to below, the Owner Participant determines in good
faith that the Owner Participant or the Owner Trustee will bear any loss or
expense or adverse tax or other consequence as a result of such refunding or
refinancing (including, without limitation, with respect to matters arising
under ERISA and any adverse tax consequences resulting from the application of
Revenue Procedure 75-21 or 75-28 or Section 467 of the Code) and gives notice
of such determination in reasonable detail to Lessee, unless Lessee shall have
agreed to indemnify the Owner Participant for such loss or expense or such
adverse tax or other consequences in a manner reasonably satisfactory to the
Owner Participant, as the case may be; (y) the Lessee shall pay to or reimburse
the Participants, the Owner Trustee and the Indenture Trustee for all
reasonable costs and expenses (including reasonable attorneys fees) paid or
incurred by them in connection with such refunding or refinancing and (z) no
refunding or refinancing shall result in the reasonable opinion of the Owner
<PAGE> 62
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Participant in a material risk of a change in accounting treatment of the
Lease. Subject to the terms and conditions set forth in this Section 10.2,
each party hereto agrees to cooperate in good faith with the Lessee in
effecting any such refunding or refinancing, including entering into such
further agreements, certificates, documents and doing such further things as
may be reasonably requested by Lessee to effect such refunding or refinancing.
(b) Other Prepayments, Redemptions, etc. No prepayment
or redemption and cancellation by the Owner Trustee or the Owner Participant of
any Equipment Note (other than pursuant to Section 2.10(a) and (b) of the
Indenture and this Section 10.2) shall be made without the prior written
consent of the Lessee.
(c) Notice. The Lessee will promptly provide to the
Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee notice of the final terms and conditions of any such refunding
or refinancing (other than pricing terms) within ten Business Days prior to the
execution and delivery of the documents contemplated hereunder in connection
therewith.
(d) No Obligation of Owner Participant. Notwithstanding
anything to the contrary contained in this Section 10.2, in no event shall the
Owner Participant have any obligation to initiate or structure any refinancing
or refunding of Equipment Notes or to take, or to cause the Owner Trustee to
take, any action in connection therewith other than such as is required by this
Section 10.2.
(e) Interim Debt Refinancing. In addition to the
refunding and refinancing rights under Section 10.2(a), Lessee shall have the
right to require the Owner Participant and the Owner Trustee to effect an
optional prepayment on the Refinancing Date of all of the Equipment Notes
issued on the Closing Date pursuant to Section 2.10(c) of the Indenture with
the proceeds of the Equipment Notes to be sold to the Pass Through Trustee on
the Refinancing Date (such refinancing, the "Interim Debt Refinancing"), upon
the following terms and conditions:
(i) the Pass Through Trustee shall execute and deliver
the Participation Agreement Supplement substantially in the form of
Exhibit F;
(ii) the conditions precedent set forth in the
Participation Agreement Supplement shall have been satisfied;
(iii) the Lessee and the Underwriter shall execute and
deliver the Underwriting Agreement substantially in the form of
Exhibit G;
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(iv) the Lessee and the Pass Through Trustee shall
execute and deliver one or more Pass Through Trust Agreements, each
substantially in the form of Exhibit H;
(v) the provisions of clauses (ii) (subject to Section
2.2(c) hereof and Section 3.3 of the Lease), (iii), (iv), (vi), (vii)
and (viii) of Section 10.2(a) shall be applicable to the Interim Debt
Refinancing; and
(vi) in connection with the Interim Debt Refinancing,
adjustments to Basic Rent, Stipulated Loss Values and Termination
Values shall be performed pursuant to Section 2.6, and, after giving
effect to the Interim Debt Refinancing, the percentage of Total
Equipment Cost financed by the issuance of Equipment Notes may be
increased by not more than 5% of the amount of the Owner Participant's
Commitment (subject to the Owner Participant maintaining an equity
investment of not less than an amount equal to 20% of the Total
Equipment Cost) (the amount of such increase, if any, the "Increased
Debt Portio"), and proceeds of the Equipment Notes issued on the
Refinancing Date in an amount equal to the Increased Debt Portion, if
any, shall be payable to the Owner Trustee on the Refinancing Date for
purposes of distribution to the Owner Participant.
10.3 Lessee's Assumption of the Certificates. Subject to
compliance by the Lessee with all of its obligations under the Operative
Agreements, each of the Owner Participant, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if
the Lessee elects to terminate the Lease in whole or part and to purchase some
or all of the Units of the Equipment leased thereunder pursuant to Section 22.6
of the Lease, then the Owner Trustee will transfer to the Lessee, without
recourse or warranty (except as to the absence of Lessor's Liens) all of the
Owner Trustee's right, title and interest in and to the Equipment so purchased,
and if the Lessee, in connection with such purchase, elects to assume all or an
appropriate portion of the related obligations of the Owner Trustee under the
Equipment Notes pursuant to Article VII of the Indenture, each of the parties
shall, at Lessee's sole cost and expense execute and deliver appropriate
documentation permitting the Lessee to assume, in the manner provided in
Article VII of the Indenture Equipment Notes in a principal amount determined
as provided in Article VII of the Indenture on the basis of full recourse to
the Lessee, maintaining the security interest in such Equipment created by the
Indenture, releasing the Owner Participant and the Owner Trustee from all
obligations in respect of the Equipment Notes so assumed (except any
obligations which shall have occurred prior to such assumption) and all such
other actions as are reasonably necessary to permit such assumption by the
Lessee. If, in connection with such assumption, the Lessee elects to pay the
purchase price for such Equipment in installments in accordance with Section
22.6 of the Lease, then any security interest
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retained by the Owner Trustee in and to such Units shall be subject and
subordinate in all respects to the Lien of the Indenture, but the Owner Trustee
shall have such cure rights and other rights specified in the Indenture with
respect to the remedies available to the Indenture Trustee against the Lessee
and such Equipment as it shall have enjoyed as obligor under the Indenture and
lessor under the Lease. The Lessee shall pay all reasonable expenses of the
Indenture Trustee in connection with any assumption of the obligations in
respect of the Equipment Notes.
10.4 Amendments and Waivers. Except as otherwise provided in
the Indenture, no term, covenant, agreement or condition of this Agreement may
be terminated, amended or compliance therewith waived (either generally or in a
particular instance, retroactively or prospectively) except by an instrument or
instruments in writing executed by each party against which enforcement of the
termination, amendment or waiver is sought.
10.5 Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by express mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly confirmed by any
of the methods set forth in clauses (a) or (b) above or this clause (c), in
each case addressed to each party hereto at its address set forth below or, in
the case of any such party hereto, at such other address as such party may from
time to time designate by written notice to the other parties hereto:
If to the Lessee: Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma
Attention: Assistant Treasurer
Telephone:
Facsimile:
Confirmation No:
If to the Owner
Trustee: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Telephone:
Facsimile:
Confirmation No:
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with a copy to: the Owner Participant at the address set
forth below
If to the Owner
Participant:
Attention: Vice President,
Leveraged Leasing
Telephone:
Facsimile:
With a copy to :
Attention: Vice President,
Leveraged Leasing
Telephone:
Facsimile:
If to the Indenture
Trustee or the Pass
Through Trustee: Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration (Phillips
Trust No. 94-__)
Telephone:
Facsimile:
Confirmation No:
Telecopier:
Telephone:
, provided that in the case of any notice delivered pursuant to Section 6.1,
the Owner Participant shall also send notice to the attention of the Treasurer
of the Lessee.
10.6 No Guarantee of Debt. Nothing contained herein or in
the Lease, the Trust Indenture, the Trust Agreement, the Pass Through Trust
Agreement or the Tax Indemnify Agreement or in any certificate or other
statement delivered by the Lessee in connection with the transactions
contemplated hereby shall be deemed to be (a) a guarantee by the Lessee to the
Owner Trustee, the Owner Participant, the Indenture Trustee or the Loan
Participant that the Equipment will have any residual value or useful life, or
(b) a guarantee by the Indenture Trustee or the Lessee of payment of the
principal of, premium, if any, or interest on the Equipment Notes.
10.7 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the
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terms hereof, including each successive holder of the Beneficial Interest
permitted under Section 6.1 hereof and each successive holder of any Equipment
Note issued and delivered pursuant to this Agreement or the Indenture. Except
as expressly provided herein or in the other Operative Agreements, no party
hereto may assign its interests herein without the consent of the parties
hereto.
10.8 Business Day. Notwithstanding anything herein or in any
other Operative Agreement (other than the Interim Indenture Supplement) to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement or any other Operative Agreement is not a Business Day, the payment
otherwise payable on such date shall be payable on the next succeeding Business
Day with the same force and effect as if made on such succeeding Business Day
and (provided such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date
to the time of such payment on such next succeeding Business Day.
10.9 GOVERNING LAW. THIS AGREEMENT AND THE BILLS OF SALE
SHALL BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE; PROVIDED, HOWEVER, THAT THE PARTIES HERETO SHALL BE ENTITLED TO
ALL RIGHTS CONFERRED BY ANY APPLICABLE FEDERAL STATUTE, RULE OR REGULATION.
10.10 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under the laws of any applicable jurisdiction, such
provision, as to such jurisdiction, shall be, to the extent permitted by law,
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement in such jurisdiction or in any other jurisdiction.
10.11 Counterparts. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
10.12 Headings and Table of Contents. The headings of the
Sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
10.13 Limitations of Liability.
(a) Liabilities of Participants. Neither the Indenture
Trustee, the Owner Trustee nor any Participant shall have any obligation or
duty to the Lessee, to any other Participant or to others with respect to the
transactions
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contemplated hereby, except those obligations or duties of such Participant
expressly set forth in this Agreement and the other Operative Agreements, and
neither the Indenture Trustee, the Pass Through Trustee nor any 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 the Indenture Trustee, the
Pass Through Trustee or any Participant be liable to the Lessee for any action
or inaction on the part of the Owner Trustee in connection with the
transactions contemplated herein, whether or not such action or inaction is
caused by willful misconduct or gross negligence of the Owner Trustee unless
such action or inaction is at the direction of the Indenture Trustee, the Pass
Through Trustee or any Participant, as the case may be, or such direction is
expressly permitted hereby or by any other Operative Agreement.
(b) No Recourse to the Owner Trustee. It is expressly
understood and agreed by and between the Owner Trustee, the Lessee, the Owner
Participant, the Indenture Trustee, the Pass Through Trustee and the Loan
Participant, and their respective successors and permitted assigns that,
subject to the proviso contained in this Section 10.13(b), all representations,
warranties and undertakings of the Owner Trustee hereunder shall be binding
upon the Owner Trustee, only in its capacity as Owner Trustee under the Trust
Agreement, and (except as expressly provided herein) the Owner Trustee shall
not be liable in its individual capacity for any breach thereof, except for its
gross negligence or willful misconduct, or for breach of its covenants,
representations and warranties contained herein, except to the extent
covenanted or made in its individual capacity; provided, however, that nothing
in this Section 10.13(b) shall be construed to limit in scope or substance
those representations and warranties of the Owner Trustee made expressly in its
individual capacity set forth herein. The term "Owner Trustee" as used in this
Agreement shall include any successor trustee under the Trust Agreement, or the
Owner Participant if the trust created thereby is revoked.
10.14 Confidentiality. (a) The Owner Participant, the
Owner Trustee, the Indenture Trustee and the Pass Through Trustee shall
maintain in confidence and not disclose to any Person any non-public
information furnished to it pursuant to any of the Operative Agreements
("Confidential Information") without the prior consent of the Lessee, except
(a) as required by law, rule, regulation or any governmental agency, (b) to the
extent that such Confidential Information is publicly available, (c) where such
Confidential Information was previously known to the Owner Participant, the
Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case
may be, free of any obligation to keep such information confidential, or such
Confidential Information is or becomes available to the Owner Participant, the
Owner Trustee, the Indenture Trustee or the Pass Through Trustee, as the case
may be, on a non-confidential basis
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64
from a source other than the Lessee or its agents or advisors, (d) as
disclosure to third parties (including courts of competent jurisdiction) in
connection with or in response to any order, decree, judgement, subpoena,
notice of discovery or similar ruling or pleading, (e) as part of its normal
reporting or review procedure to its auditors, regulators, parent company or
affiliates, (f) to the extent necessary to obtain appropriate insurance, to its
insurance agent, provided, that prior to such disclosure, such agent shall sign
a confidentiality agreement binding the agent to provisions substantially the
same as the provisions of this Section 10.15, (g) in the case of the Indenture
Trustee and the Pass Through Trustee, to the extent required by the terms of
the Pass Through Trust Agreement and to the extent required to avoid subjecting
either the Indenture Trustee or the Pass Through Trustee to the risk of civil
liability or breach of fiduciary duty as evidenced by an opinion of counsel to
such person to such effect (a copy of which opinion, addressed only to the
Indenture Trustee and/or the Pass Through Trustee, as applicable (shall be
delivered to the Lessee), or (h) in order to enforce its rights and perform its
obligations pursuant to the Operative Agreements. The obligations of the Owner
Participant, the Owner Trustee, the Indenture Trustee or the Pass Through
Trustee under this Section 10.15 shall survive the termination of the Operative
Agreements and the payment of the Equipment Notes and all other amounts payable
hereunder.
(b) The Interim Loan Participant shall maintain in
confidence and not disclose to any Person any Confidential Information without
the prior consent of the Lessee, subject to the Interim Loan Participant's (a)
obligation to disclose any Confidential Information pursuant to a request or
order under applicable laws and regulations or pursuant to a subpoena or other
legal process, (b) right to disclose any Confidential Information to bank
examiners, to its affiliates, auditors and counsel, and to any prospective
purchasing bank approved by the Lessee, (c) right to disclose any Confidential
Information in connection with any litigation or dispute or the exercise of any
remedy hereunder; provided, however, that Confidential Information disclosed
pursuant to clause (b) or (c) of this sentence shall be so disclosed subject to
such procedures as are reasonably calculated to maintain the confidentiality
thereof. Notwithstanding the foregoing provisions of this section 10.14(b),
(a) the foregoing obligation of confidentiality shall not apply to any
Confidential Information that was known to the Interim Loan Participant or any
of their respective affiliates prior to the time it received such Confidential
Information from the Lessee pursuant to this Agreement, other than as a result
of the disclosure thereof by a Person who, to the knowledge or reasonable
belief of the Interim Loan Participant, was prohibited from disclosing it by
any duty of confidentiality arising (under this Agreement or otherwise) by
contract or law, and (b) the foregoing obligation of confidentiality shall not
apply to any Confidential Information
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65
that becomes part of the public domain independently of any act of the Interim
Loan Participant not permitted hereunder or when identical or substantially
similar information is received by the Interim Loan Participant, without
restriction as to its disclosure or use, from a Person who was not prohibited
from disclosing it by any duty of confidentiality arising (under this Agreement
or otherwise) by contract or law. The obligations of the Interim Loan
Participant under this section 10.14(a) shall survive the termination of the
Operative Agreements and the payment of the Equipment Notes and all other
amounts payable hereunder.
10.15 Survival of Indemnities. Notwithstanding anything in
this Agreement or in any other document or agreement to the contrary, any
indemnity provided by any Person hereunder or in any other Operative Agreement
shall survive the termination of this Agreement, the Lease and any other
Operative Agreement on the terms and conditions, and subject to the exclusions,
provided therein.
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered, all as of the date first
above written.
<PAGE> 70
66
Lessee: PHILLIPS PETROLEUM COMPANY
By:________________________________
Owner Trustee: WILMINGTON TRUST COMPANY, not in
its individual capacity except as
otherwise expressly provided
herein but solely as Owner Trustee
By:________________________________
Owner Participant: ___________________________
By:________________________________
Indenture Trustee: SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By:________________________________
Interim Loan Participant: ___________________________
By:________________________________
<PAGE> 71
EXHIBIT A
PARTICIPATION AGREEMENT
CERTIFICATE OF ACCEPTANCE
I, a duly appointed and authorized representative of the
Lessor and PHILLIPS PETROLEUM COMPANY (the "Lessee") under the Lease (as
defined in that certain Participation Agreement (Phillips Trust 94-__) dated as
of ___________________, 1994, among the Lessor, the Lessee and the Trustees
identified therein), do hereby certify that I have received and accepted
delivery, on behalf of the Lessor, and have delivered to, and on behalf of the
Lessee hereby accept delivery of, under the Lease, the Units listed on Schedule
A attached hereto:
PLACE ACCEPTED:
DATE ACCEPTED:
Dated: ________________, 1994
______________________________
Authorized Representative of
the Lessor and the Lessee
(Phillips Trust No. 94-__)
<PAGE> 72
EXHIBIT B
PARTICIPATION AGREEMENT
FORM OF
BILL OF SALE
PHILLIPS PETROLEUM COMPANY, a Delaware corporation (the
"Seller"), in consideration of the sum of One Dollar ($1) and other good and
valuable consideration paid by Wilmington Trust Company not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (Phillips Trust No. 94-__), dated as of _________________, 1994, by
and between the Owner Trustee (in its individual capacity) and
(_________________) (the "Owner Participant"), at or before the execution and
delivery of these presents, the receipt of which is hereby acknowledged, does
hereby grant, bargain, sell, transfer, assign and set over unto the Owner
Trustee and its successors and assigns all right, title and interest of the
Seller, in and to the units of equipment (the "Equipment") set forth on
Schedule A hereto which have been delivered by the Seller pursuant to the
Participation Agreement (Phillips Trust No. 94-__), dated as of
_______________, 1994, among the Seller, Phillips Petroleum Company, as Lessee,
the Owner Participant, the Owner Trustee, Shawmut Bank Connecticut, National
Association, as Indenture Trustee and ______________________, as Interim Loan
Participant.
And the Seller hereby warrants to the Owner Trustee and its
successors and assigns that at the time of delivery of the Equipment the Seller
had title thereto and good and lawful right to sell the Equipment and the
Equipment was free and clear of all liens, security interests and other
encumbrances of any nature except (as defined in Appendix A to the Lease
referred to in the Participation Agreement) Liens described in clauses (i),
(ii) and (v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not due and
payable, and the Seller covenants that it will defend such title to the
Equipment against the demands of all persons whomsoever based on claims
originating prior to the delivery of the Equipment by the Seller.
IN WITNESS WHEREOF, the Seller has caused this instrument to
be executed in its name by a duly authorized officer on the _____ day of
________________, 1994.
PHILLIPS PETROLEUM COMPANY
By ______________________________
Name:
Title:
<PAGE> 73
EXHIBIT C
TRANSFEREE'S PARENT GUARANTY
(Phillips Trust No. 94-__)
TRANSFEREE'S PARENT GUARANTY (Phillips Trust No. 94-__), dated
as of ___________ __, ____, by ____________________, a ____________ corporation
(the "Guarantor"), to the Owner Trustee (in its individual capacity and as
Owner Trustee), the Indenture Trustee, the Lessee and each other Participant
(collectively, together with their successors and assigns and the holders from
time to time of the Equipment Notes, the "Beneficiaries" and, individually, a
"Beneficiary").
W I T N E S S E T H :
WHEREAS, ____________________, a ____________ corporation (the
"Transferor"), is party to the Participation Agreement (Phillips Trust No.
94-__), dated as of _____________, 1994 (as amended, modified or supplemented
from time to time, the "Participation Agreement"), among Phillips Petroleum
Company, the Transferor, Shawmut Bank Connecticut, National Association, as
Indenture Trustee, Wilmington Trust Company, as Owner Trustee, and each other
Participant; and
WHEREAS, the Transferor wishes to transfer, inter alia, all of
its right, title and interest in and to the Participation Agreement, the Trust
Estate, the Trust Agreement, the Tax Indemnity Agreement (as such terms are
defined in the Participation Agreement), the Assignment and Assumption
Agreement (Phillips Trust No. 94-__) dated as of ____________, 1994 between the
Assignor thereunder and the Transferee and each other Operative Agreement (as
defined in the Participation Agreement) to which the Transferor is a party or
by which it is bound (collectively, the "Relevant Documents"), and all proceeds
therefrom (if relevant) to, _________________, a _____________ corporation
(together with its successors and assigns (other than a "Transferee" by
transfer made in accordance with and pursuant to Section 6.1 of the
Participation Agreement), in the capacity of Owner Participant under the
Participation Agreement and the other Operative Agreements, the "Transferee"),
an affiliate of the Guarantor, pursuant to the Assignment and Assumption
Agreement (Phillips Trust No. 94-__), dated as of the date hereof, between the
Transferor and the Transferee; and
WHEREAS, the terms of the Participation Agreement provide that
the aforementioned transfer is conditioned upon the execution and delivery of
this Guarantee by the Guarantor;
<PAGE> 74
2
NOW, THEREFORE, in order that the Transferor may make the
aforementioned transfer to the Transferee, the Guarantor hereby agrees with and
for the benefit of the Beneficiaries as follows:
(a) Definitions. As used in this Guarantee, terms defined in
the Participation Agreement are used herein as therein defined, unless
otherwise defined herein.
(b) Guarantee. The Guarantor hereby unconditionally and
irrevocably guarantees to the Beneficiaries and their respective successors,
indorsees and permitted transferees and assigns, the prompt and complete
payment by the Transferee when due (whether at the stated maturity, by
acceleration or otherwise) of, and the faithful performance of, and compliance
with, all payment obligations of the Transferee under the Relevant Documents
owed to such Beneficiary, in accordance with the terms thereof and the timely
performance of all other obligations of the Transferee owed to such Beneficiary
thereunder in accordance with the terms thereof (such payment and other
obligations, the "Obligations"), and the Guarantor further agrees to pay any
and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel) that may be paid or incurred by the Beneficiaries in
enforcing any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
No payment or payments made by the Transferee, the
Guarantor, any other guarantor or any other Person or received or collected by
any Beneficiary from the Transferee, the Guarantor, any other guarantor or any
other person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder until the Obligations
are paid and performed in full.
If for any reason any Obligation to be performed or observed
by the Transferee (whether affirmative or negative in character) shall not be
observed or performed in accordance with the terms thereof, or if any amount
payable by the Transferee referred to in Section 2(a) hereof shall not be paid
promptly when due and payable, the Guarantor shall promptly perform or observe
or cause to be performed or observed each such Obligation or undertaking and
shall pay such amount at the place and to the person or entity entitled thereto
pursuant to the Relevant Documents regardless of whether or not any Beneficiary
or anyone on behalf of any Beneficiary shall have instituted any suit, action
or proceeding or exhausted its remedies or taken any steps to enforce any
rights against the Transferee or any other person or entity to compel any such
performance or to collect all or any part of such amount pursuant to the
provisions of the Relevant
<PAGE> 75
3
Documents or at law or in equity, or otherwise, and regardless of any other
condition or contingency.
(c) No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Guarantee, the Guarantor
hereby irrevocably waives any rights of subrogation, reimbursement,
contribution, exoneration or indemnity that it may acquire against the
Transferee due to any payment or performance made hereunder until all of the
Obligations shall have been indefeasibly paid and performed in full; provided
that, without exercising any rights of subrogation, the Guarantor may exercise
any rights that it may have at law against the Transferee.
(d) Amendments, Etc. with Respect to the Obligations; Waiver
of Rights. The Guarantor shall remain fully obligated hereunder
notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for
payment or performance of any of the Obligations made by any Beneficiary may be
rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by any Beneficiary and any Relevant Document and/or any collateral
security document or other guarantee or document in connection therewith, may
be amended, modified, supplemented or terminated, in whole or in part, in
accordance with the provisions thereof from time to time, and any collateral
security, guarantee or right of offset at any time held by any Beneficiary for
the payment or performance of the Obligations may be sold, exchanged, waived,
surrendered or released. No Beneficiary shall have any obligation to protect,
secure, perfect or ensure any lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against the Guarantor, a Beneficiary may, but shall be
under no obligation to, make a similar demand on the Transferee or any other
guarantor, and any failure by a Beneficiary to make any such demand or to
collect any payments from the Transferee or any such other guarantor or any
release of the Transferee or such other guarantor shall not relieve the
Guarantor of its obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
any Beneficiary against the Guarantor. For the purposes hereof, "demand" shall
include the commencement and continuance of any legal proceedings. The
Guarantor represents and warrants that it owns, directly or indirectly, 100% of
the capital stock of the Transferee or is otherwise an Affiliate of the
Transferee and that its obligations hereunder shall continue unimpaired, even
if the Guarantor no longer owns or is affiliated with the Transferee.
<PAGE> 76
4
(e) Guarantee Absolute and Unconditional. The Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any Beneficiary upon
this Guarantee or acceptance of this Guarantee; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Transferee or the Guarantor and any
Beneficiary shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. The Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Transferee or the Guarantor with respect to the Obligations. The
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Guarantor)
that constitutes, or might be construed to constitute, an equitable or legal
discharge of the Transferee for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance. When pursuing its rights
and remedies hereunder against the Guarantor, any Beneficiary may, but shall be
under no obligation to, pursue such rights and remedies as it may have against
the Transferee or any other person or entity or against any collateral security
or guarantee for the Obligations or any right of offset with respect thereto,
and any failure by any Beneficiary to pursue such other rights or remedies or
to collect any payments from the Transferee or any such other person or entity
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Transferee or any such other person
or entity or any such collateral security, guarantee or right of offset, shall
not relieve the Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Guarantor. This Guarantee shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Guarantor and the successors and assigns thereof,
and shall inure to the benefit of the Beneficiaries, and their respective
successors, indorsees and permitted transferees and assigns, until the earlier
of (x) all of the Obligations and the obligations of the Guarantor under this
Agreement shall have been satisfied by payment and performance in full (subject
to paragraph (vi) below) or (y) except to the extent not assumed by a
Transferee (as defined in Section 6.1 of the Participation Agreement) or
<PAGE> 77
5
guaranteed as provided therein, the right, title and interest of the Transferee
shall have been transferred to a Person meeting the requirement of Section 6.1
of the Participation Agreement. The Guarantor further agrees that, without
limiting the generality of this Guarantee, if any Beneficiary (or any permitted
assignee thereof) shall be prevented by applicable law from exercising its
remedies (or any of them) against the Transferee under any Operative Agreement,
such Beneficiary (or any assignee thereof) shall be entitled to receive
hereunder from the Guarantor, upon demand therefor, the sums that would have
otherwise been due from the Transferee had such remedies been able to be
exercised.
(f) Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Guarantor,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Transferee or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made. The Guarantor shall not commence any "case"
(as defined in Title 11 of the United States Code) against the Transferee.
(g) Payments. The Guarantor hereby guarantees that payments
hereunder shall be paid without set-off, counterclaim, deduction or
withholding, and shall be made in U.S. Dollars.
(h) Representations and Warranties. The Guarantor hereby
represents and warrants that:
the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal
right to own and operate its property, to lease the property it operates
and to conduct the business in which it is currently engaged;
the Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize
its execution, delivery and performance of this Guarantee;
this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally;
<PAGE> 78
6
the execution, delivery and performance of this Guarantee
will not violate any provision of any requirement of law or contractual
obligation of the Guarantor and will not result in or require the creation
or imposition of any lien on any of the properties or revenues of the
Guarantor pursuant to any requirement of law or contractual obligation of
the Guarantor;
no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or governmental authority and no consent
of any other person (including, without limitation, any stockholder or
creditor of the Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee;
no litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of
the Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or any of
the transactions contemplated hereby or (ii) that could have a material
adverse effect on the financial condition of the Guarantor or its ability
to perform its obligations hereunder;
the balance sheet of the Guarantor as at ____________ and
the related statement of income and retained earnings for the fiscal year
then ended (copies of which have heretofore been furnished to each
Beneficiary) (U.S. Guarantor only) (have been prepared in accordance with
generally accepted accounting principles applied consistently throughout
the period involved,) (other guarantors have been prepaid in accordance
with applicable accounting principles and standards) are complete and
correct and present fairly the financial condition of the Guarantor as at
such date and the results of its operations for such fiscal year; and
the Guarantor is a (bank or other financial institution with
a combined capital, surplus and undivided profits of at least $__________)
(corporation whose tangible net worth is at least $__________), exclusive
of goodwill, as of the proposed date of transfer, as determined in
accordance with generally accepted accounting principles.
(i) Severability. Any provision of this Guarantee that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE> 79
7
(j) Section Headings. The Section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
(k) No Waiver; Cumulative Remedies. No Beneficiary shall by
any act (except by a written instrument pursuant to paragraph xiii hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of any Beneficiary, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by a Beneficiary of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that such Beneficiary would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
(l) Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter hereof and there
are no promises or representations by any Beneficiary relative to the subject
matter hereof not reflected herein.
(m) Amendments and Waivers. None of the terms or provisions
of this Guarantee may be waived, amended or supplemented or otherwise modified
except by a written instrument executed by the Guarantor and each Beneficiary.
(n) Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Beneficiaries and their respective successors and (permitted) assigns.
(o) GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND
BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK.
(p) Notices. All notices, requests and demands to or upon
the Guarantor or any Beneficiary to be effective shall be in writing or by
telegraph, facsimile or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, five days after deposit in the postal system, certified mail
pre- paid, or, in the case of telegraphic notice, when sent, answerback
received, addressed to (a) in the case of the Guarantor (address, telex and fax
information to be provided) and (b) in the case of any Beneficiary, the
address, telex or
<PAGE> 80
8
telecopy number provided for such party in the Participation Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
(NAME OF GUARANTOR)
______________________________
Title:
<PAGE> 81
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Phillips Trust No. 94-__)
ASSIGNMENT AND ASSUMPTION AGREEMENT (Phillips Trust No. 94-__),
dated as of_________, ___, between ____________________, a _____________
corporation (the "Assignor"), and ____________, a ____________ corporation (the
"Assignee").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to effect (a) the transfer
by the Assignor to the Assignee of all of the right, title and interest of the
Assignor (except as reserved below) in, under and with respect to, among other
things, (i) the Participation Agreement (Phillips Trust No. 94-__), dated as of
_________________, 1994 among Phillips Petroleum Company, the Assignor, Shawmut
Bank Connecticut, National Association, as Indenture Trustee, Wilmington Trust
Company, as Owner Trustee and each other Participant (as amended, modified or
supplemented from time to time, the "Participation Agreement"), including,
without limitation, any indemnity payments payable to Assignor directly or
indirectly thereunder, (ii) the Trust Agreement identified in the Participation
Agreement (the "Trust Agreement"), (iii) the Trust Estate (as defined in the
Trust Agreement), (iv) the Tax Indemnity Agreement identified in the
Participation Agreement (the "Tax Indemnity Agreement") and (v) the proceeds
therefrom and (b) the assumption by the Assignee of the obligations of the
Assignor accruing thereunder; and
WHEREAS, such documents permit such transfer upon satisfaction
of certain conditions heretofore or concurrently herewith being complied with;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto do hereby
agree as follows (capitalized terms used herein without definition having the
meaning ascribed thereto in the Participation Agreement):
1. Assignment. The Assignor has sold, assigned,
conveyed, transferred and set over, and does hereby sell, assign, convey,
transfer and set over, unto the Assignee as of the date hereof all of its
present and future right, title and interest in, under and with respect to the
Trust Estate, the Participation Agreement, the Trust Agreement, the Tax
Indemnity Agreement and all other Operative Agreements to which the Assignor is
a party or any other contract, agreement, document or instrument relating to
the Trust Estate by which the Assignor is bound, and any
<PAGE> 82
2
proceeds therefrom, together with all other documents and instruments
evidencing any of such right, title and interest, except such rights of the
Assignor as have accrued to the Assignor prior to the date hereof (including
specifically, but without limitation, the right to receive any amounts due or
accrued to the Assignor under the Trust Agreement as of a date prior to such
date and the right to receive any indemnity payment pursuant to the
Participation Agreement or the Tax Indemnity Agreement with respect to events
occurring or circumstances existing prior to such date).
2. Assumption. The Assignee hereby undertakes all of
the duties and obligations of the "Owner Participant" whenever accrued (other
than duties and obligations of the Assignor attributable to acts or events
occurring on or prior to the date hereof under the Participation Agreement, the
Trust Agreement, any of the other Operative Agreements to which the Assignor is
a party or by which it is bound or any other contract, agreement, document or
other instrument relating to the Trust Estate to which the Assignor is a party
or by which it is bound), pursuant to the Participation Agreement, the Trust
Agreement, and each other Operative Agreement to which the Assignor is a party,
each of the contract, agreement, document or instrument hereby assigned and
each other contract, agreement, document or instrument relating to the Trust
Estate by which the Assignor is bound, and hereby confirms that it shall be
deemed a party to the Participation Agreement, the Trust Agreement and each
other Operative Agreement to which the Assignor is a party or by which it is
bound and each such other contract, agreement, document and instrument, and
shall be bound by all the terms thereof (including the agreements and
obligations of the Assignor set forth therein) as if therein named as the Owner
Participant. The assignment and assumption contemplated hereby shall not
release the Assignor from its obligations under the Participation Agreement or
the Trust Agreement except to the extent expressly assumed by the Assignee
pursuant to this Section 2.
3. Payments. The Assignor hereby covenants and agrees
to pay over to the Assignee, if and when received following the date hereof,
any amounts (including any sums payable as interest in respect thereof) paid to
or for the benefit of the Assignor that, under Section 1 hereof, belong to the
Assignee, and the Assignee hereby covenants and agrees to pay over to the
Assignor, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of the Assignee that, under Section 1 hereof, belong to the Assignor.
4. Further Assurances. The Assignor shall, at any time
and from time to time, upon the request of the Assignee, promptly and duly
execute and deliver any and all such further instruments and documents and take
such further action as the Assignee may reasonably request to obtain the full
benefits of this Assignment and of the right and powers herein granted.
<PAGE> 83
3
5. Investment Purpose. The Assignee hereby represents
that it is acquiring the trust and other interests hereby assigned to it for
its own account for the purpose of investment and not with a view to the
distribution or resale of either thereof.
6. Representations and Warranties. The Assignee
represents and warrants that:
(a) it has all requisite power and authority and legal
right to enter into and carry out the transactions contemplated hereby
and to carry out and perform the obligations of the Owner Participant
under the Operative Agreements except for obligations not assumed by
the Assignee pursuant to Section 2 hereof;
(b) on the date hereof it is a "citizen of the United
States" within the meaning of Section 101(16) of the Federal Aviation
Act and the rules and regulations of the FAA thereunder (without
making use of a voting trust agreement or voting powers agreement);
(c) on and as of the date hereof, the representations and
warranties of the Owner Participant set forth in Section 3.6 of the
Participation Agreement are true and correct as to the Assignee;
(d) the transfer to it of all of the Assignor's right,
title and interest as Owner Participant will not (violate any
provision of the Federal Aviation Act, or any rules or regulations
promulgated thereunder, or create a relationship that would be in
violation thereof, or)(only for Aircraft Trusts) violate any
provisions of the Securities Act of 1933, as amended, or any other
applicable Federal or state laws or regulations;
(e) the transfer (i) does not involve the use of any
assets that are or could be deemed to be plan assets under 29 C.F.R.
Section 2510.3-101 of an employee benefit plan (other than a
government plan exempt from the coverage of ERISA) or (ii) if the
assets of an employee benefit plan are so used, will not constitute a
prohibited transaction which is not subject to an exemption contained
in ERISA or the Code or adopted thereunder.
((f) neither it nor any of its Affiliates is involved or
has been involved in any litigation adverse to the Lessee or is a
direct or indirect competitor of the Lessee or otherwise is in the
same industry as the Lessee (including, without limitation, (i) the
industries of petroleum exploration, production, refining and
marketing, (ii) natural gas gathering and processing and (iii)
chemical production or distribution); and
<PAGE> 84
4
(g) it is a "Transferee" satisfying the conditions set
forth in clause (b) of Section 6.1 of the Participation Agreement.
7. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8. Counterparts. This Assignment may be executed in any
number of counterparts, all of which together shall constitute a single
instrument. It shall not be necessary that any counterpart be signed by both
parties so long as each party shall sign at least one counterpart.
9. Third Party Beneficiaries. The Assignee hereby
agrees, for the benefit of the Owner Trustee (in its individual capacity and as
Owner Trustee), the Indenture Trustee, the Lessee and each other Participant
(collectively, the "Beneficiaries"), that its representations, warranties and
covenants contained herein are also intended to be for the benefit of each
Beneficiary, and each Beneficiary shall be deemed to be an express third party
beneficiary with respect thereto, entitled to enforce directly and in its own
name any rights or claims it may have against such party as such beneficiary.
IN WITNESS WHEREOF, the parties hereto, through their
respective officers thereunto duly authorized, have duly executed this
Assignment as of the day and year first above written.
(ASSIGNOR)
By:_____________________
Title:
(ASSIGNEE)
By:_____________________
Title:
<PAGE> 85
EXHIBIT E-1
___________________
To Each of the Persons Named
on the Attached Schedule I:
Re: Equipment Leased to Phillips Petroleum
Company (Phillips Trust No. 94-__)
Ladies and Gentlemen:
As counsel to _________, a ( ) corporation
("Assignee"), I advise you as follows in connection with the Assignment and
Assumption Agreement (Phillips Trust No. 94__) dated as of ____________ (the
"Assignment Agreement") between Assignee and ________________, a _________
corporation ("Assignor"), and the transactions contemplated thereby.
Capitalized terms used herein and not defined herein shall have the respective
meanings attributed thereto in the Assignment Agreement. This opinion is being
furnished to you pursuant to the request of Assignee.
I have, or an attorney under my supervision has, examined the
Assignment Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Assignee) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. I have also
assumed that the parties (or assignees of their interests therein) to the
operative Documents (other than the Assignee) are in compliance with their
respective representations, warranties and covenants set forth in the Operative
Agreements as to the assignment or transfer of their rights or obligations
thereunder or any offer with respect thereto. As to all matters of fact
material to my opinions, I have, when relevant facts were not independently
established, relied upon statements, representations and warranties contained
in the Assignment Agreement and upon the statements and certificates furnished
to me.
In addition, in rendering the opinions expressed herein I have
assumed that (i) the Assignment Agreement has been duly authorized, executed,
authenticated and delivered by Assignor and constitutes the legal, valid and
binding obligation of Assignor,
<PAGE> 86
2
enforceable against Assignor in accordance with its terms, and (ii) Assignor
has the requisite power, authority and legal right to enter into and perform
its respective obligations under the Assignment Agreement.
A. Based upon the foregoing and subject to the
limitations expressed in paragraph B below, I am of the opinion that:
1. Assignee is a corporation duly organized, validly
existing and in good standing under the laws of the State of ( )
and has full corporate power and authority to execute, deliver and
perform the Assignment Agreement and to perform its obligations under
the Operative Agreements to which it is a party.
2. The Assignment Agreement does not require any
approval not already obtained of stockholders of the Assignee or any
approval or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Assignee, and has been duly
authorized, executed and delivered by Assignee.
3. Neither the execution and delivery of the Assignment
Agreement by Assignee, nor the consummation by Assignee of the
transactions contemplated thereby and performance of the obligations
of the "Owner Participant" under the Operative Agreements which have
been assumed by the Assignee under the Assignment Agreement, conflicts
with, results in a breach of or violates any of the terms, conditions
or provisions of (i) the (Certificate) (Articles) of Incorporation or
By-laws of Assignee or (ii) to the best of my knowledge, any order,
writ, injunction or decree of any court or governmental authority
against the Assignee or by which the Assignee or any of its properties
is bound.
4. Each of the Assignment Agreement and the Operative
Agreements to which the Assignee is a party constitutes a legal, valid
and binding obligation of Assignee enforceable against Assignee in
accordance with the terms thereof, except as the enforceability
thereof may be limited by (a) general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity
or at law), (b) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and (c) public policy considerations (in the case of any indemnity
provisions contained therein or in the Operative Agreements).
5. Neither the execution and delivery by Assignee of the
Assignment Agreement, nor the consummation by Assignee of any of the
transactions contemplated thereby or performance of the obligations of
the "Owner Participant" under the Operative Agreements which have been
assumed by
<PAGE> 87
3
the Assignee under the Assignment Agreement, violates any law,
governmental rule or regulation of the United States or the State of
( ) or any governmental subdivision thereof applicable in
each case to the Assignee 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 in the Operative Agreements) upon, any
property of the Assignee or 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 Assignee is a party or by which it or its properties may
be bound or affected.
6. The purchase by Assignee of the interests assigned
pursuant to the Assignment Agreement and the assumption by the
Assignee of the obligations of the "Owner Participant" under the
Operative Agreements to which the Owner Participant is a party and
which have been assumed by the Assignee pursuant to the Assignment
Agreement, do not require registration under the Securities Act of
1933, as amended.
7. To the best of my knowledge, there are no pending or, to
the knowledge of the Assignee, threatened actions or proceedings
against the Assignee before any court or administrative agency which,
if determined adversely to the Assignee, would materially adversely
affect the ability of the Assignee to perform its obligations under
the Assignment Agreement or under any Operative Agreement to which it
is a party.
B. I am qualified to practice law in the State of
( ) and I express no opinion as to any laws other than the laws of
the State of ( ) and the federal laws of the United States of America.
Very truly yours,
<PAGE> 88
SCHEDULE I
Phillips Petroleum Company,
as Lessee
_________________________________
as Owner Participant
Wilmington Trust Company, as Owner
Trustee
Shawmut Bank Connecticut,
National Association, as Indenture Trustee
(Assignor)
Holders of Equipment Notes
from time to time
<PAGE> 89
EXHIBIT E-2
___________________
To Each of the Persons Named
on the Attached Schedule I:
Re: Equipment Leased to Phillips Petroleum
Company (Phillips Trust No. 94-__)
Ladies and Gentlemen:
As counsel to ______________, a ( ) corporation
("Guarantor"), I advise you as follows in connection with the Guaranty
Agreement (Phillips Trust No. 94-__) dated as of ________ (the "Guaranty
Agreement") by Guarantor in favor of Phillips Petroleum Company, as Lessee
__________________________, as Owner Participant, each Lender named therein,
Wilmington Trust Company, as Owner Trustee and Shawmut Bank Connecticut,
National Association, as Indenture Trustee and the Holders from time to time of
the Equipment Notes and the transactions contemplated thereby. Capitalized
terms used herein and not defined herein shall have the respective meanings
attributed thereto in the Guaranty Agreement. This opinion is being furnished
to you pursuant to the request of Guarantor.
I have, or an attorney under my supervision has, examined the
Guaranty Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Guarantor) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. As to all
matters of fact material to my opinions, I have, when relevant facts were not
independently established, relied upon statements, representations and
warranties contained in the Guaranty Agreement and upon the statements and
certificates furnished to me.
In addition, in rendering the opinions expressed herein, I
have assumed that (i) the Assignment Agreement has been duly authorized,
executed, authenticated and delivered by the parties thereto and constitutes
the legal, valid and binding obligation of the parties thereto, enforceable
against each such party in accordance with its terms and (ii) each of Assignor
and
<PAGE> 90
2
Assignee has the requisite power, authority and legal right to enter into and
perform its respective obligations under the Assignment Agreement.
A. Based upon the foregoing and subject to the
limitations expressed in paragraph B below, I am of the opinion that:
1. Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of ( )
and has full corporate power and authority to execute, deliver and
perform the Guaranty Agreement.
2. The Guaranty Agreement has been duly authorized,
executed and delivered by Guarantor.
3. Neither the execution and delivery of the Guaranty
Agreement by Guarantor, nor the consummation by Guarantor of the
transactions contemplated thereby, conflicts with, results in a breach
of or violates any of the terms, conditions or provisions of the
(Certificate) (Articles) of Incorporation or By-laws of Guarantor or
will violate any provision of any requirement of law or contractual
obligation of the Guarantor or will result in or require the creation
or imposition of any lien on any of the properties or revenues of the
Guarantor pursuant to any requirement of law or contractual obligation
of the Guarantor.
4. No consent or authorization of, filing with, or
other act by or in respect of, any arbitrator or governmental
authority and no consent of any other person (including, without
limitation, any stockholder or creditor of the Guarantor) is required
in connection with the execution, delivery, performance, validity or
enforceability of this Guaranty.
5. To the best of my knowledge, no litigation,
investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guaranty or any of
the transactions contemplated hereby or (ii) that could have a
material adverse effect on the financial condition of the Guarantor or
its ability to perform its obligations thereunder.
6. The Guaranty Agreement constitutes a legal, valid and
binding obligation of Guarantor enforceable against Guarantor in
accordance with the terms thereof, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally.
<PAGE> 91
3
B. I am qualified to practice law in the State of
( ) and I express no opinion as to any laws other than the laws of
the State of ( ) and the federal laws of the United States of America.
Very truly yours,
<PAGE> 92
4
SCHEDULE I
Phillips Petroleum Company,
as Lessee
__________________________________
as Owner Participant
Wilmington Trust Company, as Owner
Trustee
Shawmut Bank Connecticut,
National Association, as Indenture Trustee
(Assignor)
Holders of Equipment Notes
from time to time
<PAGE> 1
EXHIBIT 4(c)(3)
________________________________________________________________________________
PARTICIPATION AGREEMENT
(Phillips Trust No. 94-__)
Dated as of ________________, 1994
among
PHILLIPS PETROLEUM COMPANY,
as Lessee
WILMINGTON TRUST COMPANY,
as Owner Trustee
_________________________,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Indenture Trustee
and
_____________________,
as Interim Loan Participant
Transportation Equipment
VEHICLES
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT COST; CLOSING; TRANSACTION COSTS . . . . . . . 3
2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Participation in Equipment Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing Date; Procedure for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Owner Participant's Instructions to the Owner Trustee; Satisfaction of Conditions . . . . . . . 6
2.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Calculation of Adjustments to Basic Rent, Stipulated Loss Value and Termination Value;
Confirmation and Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Postponement of Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Representations and Warranties of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . 13
3.2 Representations and Warranties of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Representations and Warranties of the Indenture Trustee . . . . . . . . . . . . . . . . . . . 20
3.4 Representations, Warranties and Covenants Regarding Beneficial Interest . . . . . . . . . . . 22
3.5 Representations and Warranties of the Interim Loan Participant . . . . . . . . . . . . . . . . 22
3.6 Representations and Warranties of the Owner Participant . . . . . . . . . . . . . . . . . . . 23
3.7 Opinion Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Conditions Precedent to Investment by Each Participant . . . . . . . . . . . . . . . . . . . . 25
4.2 (Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Additional Conditions Precedent to Investment by Owner Participant . . . . . . . . . . . . . . 29
4.4 Conditions Precedent to the Obligation of the Lessee . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE . . . . . . . . . . . . . . 33
6.1 Restrictions on Transfer of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Lessor's Liens Attributable to the Owner Participant . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.3 Lessor's Liens Attributable to the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Liens Created by the Indenture Trustee, the Loan Participants and the Pass Through Trustee . . 38
6.5 Covenants of Owner Trustee, Owner Participant and Indenture Trustee . . . . . . . . . . . . . 39
6.6 Amendments to Operative Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.7 Merger Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.8 Rent Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.9 Pass Through Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7. LESSEE'S INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.1 General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.2 General Indemnification and Waiver of Certain Claims . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9. SUCCESSOR INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 Lessee's Assumption of the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.4 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.6 No Guarantee of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.8 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.12 Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.13 Limitations of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.15 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
EXHIBITS
Exhibit A - Form of Certificate of Acceptance
Exhibit B - Form of Bill of Sale
Exhibit C - Form of Transferee's Parent Guaranty
Exhibit D - Form of Assignment and Assumption Agreement
Exhibit E-1 - Form of Opinion of Counsel to Assignee
Exhibit E-2 - Form of Opinion of Counsel to Assignee Guarantor
Exhibit F- Form of Participation Agreement Supplement
Exhibit G- Form of Underwriting Agreement
Exhibit H- Form of Pass Through Trust Agreement
-ii-
<PAGE> 4
SCHEDULES
Schedule 1 - Description of Equipment
Schedule 2 - Participant's Commitments
Schedule 3 - Rental Factors
Schedule 4 - Stipulated Loss Values
Schedule 5 - Termination Values
Schedule 6 - Early Buyout Dates and Early Buyout Prices
-iii-
<PAGE> 5
EXHIBIT 4(c)(3)
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (Phillips Trust No. 94-__) dated
as of ________________, 1994 (this "Agreement"), among (i) PHILLIPS PETROLEUM
COMPANY, a Delaware corporation (herein, together with its successors and
assigns, called the "Lessee"), (ii) WILMINGTON TRUST COMPANY, a Delaware
banking corporation, not in its individual capacity except as expressly stated
herein, but solely as trustee under the Trust Agreement (as hereinafter
defined) (herein in such capacity, together with its successors and assigns,
called the "Owner Trustee"), (iii) ___________________________________________,
a national banking association (herein, together with its successors and
assigns, called the "Owner Participant"), (iv) SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, a national banking association, as trustee under the
Indenture (as defined below) (herein in such capacity, together with its
successors and assigns, called the "Indenture Trustee"), and (v)
_________________________, a New York banking corporation (herein in such
capacity, together with its successors and assigns, called the "Interim Loan
Participant").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant has entered into the Trust Agreement (Phillips
Trust No. 94-__) with the Owner Trustee in its individual capacity pursuant to
which the Owner Trustee agrees, among other things, (i) to hold the Trust
Estate for the benefit of the Owner Participant thereunder on the terms
specified in the Trust Agreement, subject, however, to the Lien created under
the Indenture and, (ii) subject to the terms and conditions hereof, to purchase
on behalf of the Trust the Equipment described in Schedule 1 hereto from the
Lessee and concurrently therewith lease such Equipment to the Lessee;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Trustee has entered into the Indenture with the Indenture
Trustee pursuant to which the Owner Trustee agrees, among other things, for the
benefit of the holder or holders of the Equipment Notes, to issue on behalf of
the Trust to the Interim Loan Participant, the Equipment Notes as evidence of
the loan made by the Interim Loan Participant participating in the financing of
the Equipment Cost for the Equipment;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Owner Trustee is authorized and directed by the Owner Participant (i) to accept
delivery of the Bill of Sale evidencing the purchase and transfer of title of
each Unit of the Equipment to the Owner Trustee and (ii) to execute and deliver
the Lease
<PAGE> 6
relating to the Equipment pursuant to which, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to lease to the Lessee,
and the Lessee agrees to lease from the Owner Trustee, each Unit of Equipment
to be delivered on the Closing Date, such lease of Equipment of a Class to be
evidenced by the execution and delivery of a Lease Supplement to the Lease
covering such Class and such Units;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Lessee and the Owner Participant have entered into the Tax
Indemnity Agreement relating to the Equipment;
WHEREAS, the proceeds from the loan evidenced by the Equipment
Notes and made by the Interim Loan Participant will be applied, together with
the equity contribution made by the Owner Participant pursuant to this
Agreement, to effect the purchase of the Equipment contemplated hereby;
WHEREAS, on the Refinancing Date, pursuant to one or more Pass
Through Trust Agreements, one or more grantor trusts will be created in order
to facilitate the refinancing of the Equipment Notes issued to the Interim Loan
Participant on the Closing Date;
WHEREAS, on the Refinancing Date, the Pass Through Trustee
shall execute and deliver the Participation Agreement Supplement pursuant to
which the Pass Through Trustee shall become a party to this Agreement; and
WHEREAS, on the Refinancing Date, pursuant to the Indenture,
the Owner Trustee shall issue Equipment Notes on behalf of the Trust to the
Pass Through Trustee (acting on behalf of one or more grantor trusts and as
Loan Participant), and the proceeds of such Equipment Notes, together with
other amounts payable pursuant to the Operative Agreements, shall be applied to
the payment in full of all principal, interest and other amounts owing in
respect of the Equipment Notes issued to the Interim Loan Participant.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, receipt of which is
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. The capitalized terms used in this
Agreement (including the foregoing recitals) and not otherwise defined herein
shall have the respective meanings specified in Appendix A hereto, unless the
context hereof shall otherwise require. All references to Sections, Schedules
and Exhibits herein are to Sections, Schedules and Exhibits of this Agreement
unless otherwise indicated.
<PAGE> 7
3
1.2 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN THE EQUIPMENT
COST; CLOSING; TRANSACTION COSTS
2.1 Sale and Purchase. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, the Lessee agrees to sell to the Owner Trustee and the Owner
Trustee agrees to purchase from the Lessee, the Units described in Schedule 1
as hereinafter provided, and in connection therewith, the Owner Trustee agrees
to pay to the Lessee the cost for each Unit as specified in Schedule 1;
provided, however, that the Owner Trustee shall not be obligated to purchase on
the Closing Date any Unit that is destroyed, damaged, defective, in unsuitable
condition or otherwise unacceptable to the Lessee for lease pursuant to the
Lease. The Lessee shall deliver the Equipment to the Owner Trustee and the
Owner Trustee shall accept such delivery on a single delivery date as more
fully provided herein (the "Closing Date"); provided that the Closing Date
shall occur on or prior to _________________, 1994.
2.2 Participation in Equipment Cost.
(a) Equity Participation. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, on the Closing Date, the Owner Participant agrees to participate
in the payment of the Equipment Cost for the Units delivered on the Closing
Date by making an equity investment in the beneficial ownership of such Units
in the amount equal to the product of the aggregate Equipment Cost for the
Units delivered on the Closing Date and the percentage set forth opposite the
Owner Participant's name in Schedule 2 (the Owner Participant's "Commitment").
The aggregate amount of the Owner Participant's Commitment shall not exceed
$___________. The Owner Participant's Commitment shall be paid on the Closing
Date to the Indenture Trustee to be held and applied by the Indenture Trustee
toward the payment of the Equipment Cost for the Units as provided in Section
2.3.
(b) Debt Participation. Subject to the terms and
conditions hereof and on the basis of the representations and warranties set
forth herein, on the Closing Date, the Loan Participant agrees to participate
in the payment of the Equipment Cost for the Units delivered on the Closing
Date by making a secured loan, to be evidenced by the Equipment Notes, to the
Owner Trustee in the amount equal to the product of the aggregate Equipment
Cost for the Units delivered on the Closing Date and the percentage set forth
opposite the Loan Participant's name in Schedule 2 (the Loan Participant's
"Commitment"). The aggregate
<PAGE> 8
4
amount of the Loan Participant's Commitment shall not exceed $_______________.
(c) Initial Lease Period Interest Payment. The Owner
Participant covenants and agrees solely for the benefit of the Lessee that it
will advance funds to the Owner Trustee sufficient to pay the interest (the
"Initial Lease Period Interest") on the Equipment Notes which accrues during
the period from the Closing Date to ________________, 1995. If the Refinancing
Date occurs prior to ________________, 1995, then the Owner Participant shall
advance such funds to the Owner Trustee in two installments, with the first
installment due on the Refinancing Date in order to pay the interest which has
accrued on the Equipment Notes from and including the Closing Date to but
excluding the Refinancing Date and with the second installment due on
________________, 1995 in order to pay the interest which has accrued on the
Equipment Notes from and including the Refinancing Date to but excluding
________________, 1995. If the Refinancing Date does not occur prior to
________________, 1995, then the Owner Participant shall advance funds to the
Owner Trustee in a single installment on ________________, 1995 in order to pay
the interest which has accrued on the Equipment Notes from and including the
Closing Date to but excluding ________________, 1995. The Lessee shall provide
the Owner Participant with at least three days advance notice of the date and
amount of any Initial Lease Period Interest which will be due and payable. The
Owner Trustee shall upon receipt of funds advanced by the Owner Participant
pursuant to this Section 2.2(b) make such funds available to the Indenture
Trustee in order to pay the Initial Lease Period Interest. The Owner
Participant hereby agrees to the terms and conditions set forth in Section 3.5
of the Lease
2.3 Closing Date; Procedure for Participation.
(a) Notice of Closing Date. Not later than 1:00 P.M.,
New York City time, on the third Business Day preceding the Closing Date, the
Lessee shall give the Owner Participant, the Indenture Trustee, the Owner
Trustee and the Interim Loan Participant notice (a "Notice of Delivery") by
facsimile or other form of telecommunication or telephone (to be promptly
confirmed in writing) of the Closing Date, which Notice of Delivery shall
specify in reasonable detail the number and type of Units to be delivered on
such date, the aggregate Equipment Cost of such Units, and the respective
amounts of the Owner Participant's Commitment and the Loan Participant's
Commitment required to be paid with respect to such Units provided if such
Units do not constitute all of the units of similar equipment contemplated by
the Term Sheet, there shall be no subsequent or additional closing without the
consent of all the parties hereto. Prior to 10:00 A.M., New York City time, on
the Closing Date, the Owner Participant shall make the amount of the Owner
Participant's Commitment required to be paid on the Closing Date available to
the Indenture Trustee, and immediately prior to the delivery and acceptance of
the Units specified in Section 2.3(b), the Loan
<PAGE> 9
5
Participant shall make the amount of the Loan Participant's Commitment for the
Equipment Cost required to be paid on the Closing Date available to the
Indenture Trustee, in either case, by transferring or delivering such amounts,
in funds immediately available on the Closing Date, to the Indenture Trustee,
either directly to, or for deposit in, the Indenture Trustee's account at
Shawmut Bank Connecticut, National Association (ABA No. _________________),
for credit to account number _____________. The making available by the Owner
Participant of the amount of its Commitment for the Equipment Cost shall be
deemed a waiver of the Notice of Delivery by the Owner Participant and the
Owner Trustee and the making available by the Loan Participant of the amount of
its Commitment for the Equipment Cost shall be deemed a waiver of the Notice of
Delivery by the Loan Participant and the Indenture Trustee.
(b) Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place beginning at 10:00 A.M.,
New York City time, on the Closing Date at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, 10017 or at such other
place or time as the parties hereto shall agree. Upon receipt by the Indenture
Trustee on the Closing Date of the full amount of the Owner Participant's
Commitment and Loan Participant's Commitment in respect of the Units delivered
on the Closing Date, the Indenture Trustee on behalf of the Owner Trustee
shall, subject to the conditions set forth in Sections 4.1 and 4.3 having been
fulfilled to the satisfaction of the Owner Participant and the Interim Loan
Participant or waived by the Owner Participant and the Interim Loan
Participant, pay to the Lessee from the funds then held by the Indenture
Trustee, in immediately available funds, an amount equal to the Equipment Cost
for the Units delivered on the Closing Date, and simultaneously therewith, (i)
the Lessee shall deliver the Units to the Owner Trustee, (ii) the Owner Trustee
shall have accepted the Units, such acceptance to be conclusively evidenced by
the execution and delivery by the Owner Trustee or its authorized
representative (as provided in Section 2 of the Lease) of a Certificate of
Acceptance with respect to the Units in the form attached hereto as Exhibit A
(a "Certificate of Acceptance"), (iii) the Owner Trustee shall, pursuant to the
Lease, lease and deliver the Equipment delivered on the Closing Date to the
Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of the
Units under the Lease (such lease, delivery and acceptance of the Units under
the Lease being conclusively evidenced by the execution and delivery by the
Lessee and Owner Trustee of a Lease Supplement to the Lease concerning such
Units of Equipment so delivered), and (iv) the Owner Trustee shall execute and
deliver the Equipment Notes to the Loan Participant. Each of the Lessee, the
Owner Participant, the Owner Trustee, the Loan Participant and the Indenture
Trustee hereby agree to take all actions required to be taken by it in
connection therewith and pursuant to this Section 2.3(b).
<PAGE> 10
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2.4 Owner Participant's Instructions to the Owner
Trustee; Satisfaction of Conditions.
(a) The Owner Participant agrees that the making
available to the Indenture Trustee of the amount of its Commitment for the
Units delivered on the Closing Date in accordance with the terms of this
Section 2 shall constitute, without further act, authorization and direction by
the Owner Participant to the Owner Trustee, subject, on the Closing Date, to
the conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the
satisfaction of the Owner Participant or waived by the Owner Participant, to
take the actions specified in Section 2.1 of the Trust Agreement with respect
to the Units on the Closing Date.
(b) The Owner Participant agrees, in the case of any
Replacement Unit substituted pursuant to Section 11 of the Lease, that the
Owner Trustee is authorized and directed to take the actions specified in such
Section 11 of the Lease with respect to such Replacement Unit upon due
compliance with the terms and conditions set forth in Section 11 of the Lease
with respect to such Replacement Unit.
(c) The Owner Participant agrees that the authorization by
the Owner Participant or its counsel to the Indenture Trustee to release to the
Lessee the Owner Participant's Commitment with respect to the Units delivered
on the Closing Date shall constitute, without further act, notice and
confirmation that all conditions to closing set forth in Sections 4.1 and 4.3
were either met to the satisfaction of the Owner Participant or, if not so met,
were waived by it with respect to such Units.
2.5 Expenses.
(a) If the Owner Participant shall have made its
investment provided for in Section 2.2 and the transactions contemplated by
this Agreement are consummated, either the Owner Participant will promptly pay,
or the Owner Trustee will promptly pay, with funds the Owner Participant hereby
agrees to pay to the Owner Trustee, the following (the "Transaction Costs") if
evidenced by an invoice in form reasonably satisfactory to the Owner
Participant delivered to the Owner Participant prior to the Basic Term
Commencement Date (it being understood and agreed that all Transaction Costs
will be incurred either in connection with the closing of the Overall
Transaction or with the refinancing of the Equipment Notes to occur on the
Refinancing Date):
(i) the cost of reproducing and printing the Operative
Agreements, the Equipment Notes, the Pass Through Certificates and the
offering materials relating to the Pass Through Certificates,
including all costs and fees in connection with the initial filing and
recording of the Lease, the Indenture and any other document required
to be
<PAGE> 11
7
filed or recorded pursuant to the provisions hereof or of any other
Operative Agreement and the fees and expenses of the rating agencies
in connection with rating the Pass Through Certificates;
(ii) the reasonable fees and expenses of Moore & Van
Allen,special counsel for the Owner Participant, and Bass, Berry &
Sims, counsel for the Owner Participant, for their services rendered
in connection with the Overall Transaction and the refinancing of the
Equipment Notes to occur on the Refinancing Date;
(iii) the fees, expenses and disbursements of the
Underwriters in connection with the offer and sale of the Pass Through
Certificates;
(iv) the fees, expenses and disbursements of Chemical
Securities, Inc., as equity placement agent for the Lessee, for their
services rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(v) the reasonable fees and expenses of Cravath, Swaine
& Moore, special counsel for the Interim Loan Participant and the
Underwriters, for their services rendered in connection with the
Overall Transaction and the refinancing of the Equipment Notes to
occur on the Refinancing Date;
(vi) the reasonable fees and expenses of Shipman &
Goodwin, special counsel for the Indenture Trustee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(vii) the reasonable fees and expenses of Potter Anderson
& Corroon, special counsel for the Owner Trustee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(viii) the reasonable fees and expenses of Shipman &
Goodwin, special counsel for the Pass Through Trustee, for their
services rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(ix) the reasonable fees and expenses of Simpson Thacher
& Bartlett, special counsel for the Lessee, for their services
rendered in connection with the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
<PAGE> 12
8
(x) the fees and expenses of the Owner Trustee incurred
in connection with the closing of the Overall Transaction and the
refinancing of the Equipment Notes to occur on the Refinancing Date;
(xi) the initial fees and expenses of the Indenture
Trustee incurred in connection with the closing of the Overall
Transaction and the refinancing of the Equipment Notes to occur on the
Refinancing Date;
(xii) the initial fees and expenses of the Pass Through
Trustee;
(xiii) the reasonable fees and expenses of Deloitte &
Touche Valuation Group, for their services rendered in connection with
delivering the Appraisal required by Section 4.3(a); and
(xiv) the costs incurred in connection with any
adjustment pursuant to Section 2.6(a), other than clause (C) thereof;
provided that the Lessee reserves the right (A) to pay directly all or a
portion of the Transaction Costs specified in clauses (iii), (iv) and (ix)
above and (B) to pay directly any other Transaction Costs in excess of ____% of
Total Equipment Cost, provided that the amount of Transaction Costs paid
directly by the Lessee pursuant to this clause (B) shall not exceed the excess,
if any, of (1) $__________ over (2) the amount of Transaction Costs paid
directly by the Lessee pursuant to clause (A), provided, further, that the
aggregate amount of Transaction Costs shall not exceed ____% of Total Equipment
Cost without the consent of the Owner Participant not to be unreasonably
withheld. Notwithstanding the foregoing, Transaction Costs shall not include
internal costs and expenses such as salaries and overhead of whatsoever kind or
nature nor costs incurred by parties to this Participation Agreement pursuant
to arrangements with third parties for services (other than those expressly
referred to above), such as computer time procurement, financial analysis and
consulting, advisory services, and costs of a similar nature.
(b) Upon the consummation of the transactions
contemplated by this Agreement, the Lessee agrees to pay, to the extent such
fees and expenses do not constitute Transaction Costs as specified in Section
2.5(a), when due: (i) the reasonable expenses (including legal fees and
expenses) of the Owner Trustee, the Indenture Trustee, the Pass Through Trustee
and the Participants incurred subsequent to the delivery of the Equipment on
the Closing Date, in connection with any supplements, amendments, modifications
or alterations of any of the Operative Agreements which are (A) requested by,
or necessitated by action on the part of, the Lessee or entered into in
connection with, or as a result of, a Lease Default or a Lease Event of Default
or (B) required or contemplated by any Operative Agreement
<PAGE> 13
9
(including costs incurred in connection with any adjustment pursuant to Section
2.6); (ii) the ongoing fees and expenses (including legal fees and expenses) of
the Owner Trustee under the Operative Agreements; (iii) the ongoing fees and
expenses of the Indenture Trustee under the Operative Agreements; and (iv) the
ongoing fees and expenses of the Pass Through Trustee under the Operative
Agreements; and (v) the reasonable fees and expenses of any separate owner
trustee or co-trustee appointed pursuant to the Trust Agreement as a result of
any requirement of law or if otherwise required by any Operative Agreement or
if requested or consented to by the Lessee. The Lessee also agrees to pay all
amounts constituting Transaction Costs which the Owner Participant is not
required to pay by reason of the second proviso of Section 2.5(a).
(c) Subject to the next sentence, if the transactions
contemplated hereby are not consummated for any reason, the Lessee shall pay
all Transaction Costs. Notwithstanding anything contained herein to the
contrary, if the transactions contemplated hereby are not consummated solely as
a result of (A) the Owner Participant's default in its obligations to
consummate the transactions hereunder or (B) the Owner Participant's failure to
make its equity investment as required by Section 2.2(a) after the conditions
specified in Section 4 have been satisfied or waived by it in writing (other
than conditions the satisfaction of which are solely in the control of the
Owner Participant), the Owner Participant shall pay its own fees and expenses
and the fees and expenses of its legal counsel.
(d) Notwithstanding the foregoing provisions of this
Section 2.5, except as specifically provided in Section 7.2 or in any other
Operative Agreement, the Lessee shall have no liability for any costs or
expenses relating to any voluntary transfer of the Owner Participant's interest
in the Equipment (other than in connection with the exercise of remedies as
provided in Section 15 of the Lease) and no such costs or expenses shall
constitute Transaction Costs and the Lessee will not have any obligation with
respect to the costs and expenses resulting from any such transfer of any
equity interest by any transferee of the Owner Participant, whenever occurring.
2.6 Calculation of Adjustments to Basic Rent, Stipulated
Loss Value and Termination Value; Confirmation and
Verification.
(a) Calculation of Adjustments. In the event that (A)
the Transaction Costs paid by the Owner Participant pursuant to Section 2.5 are
less or more than _____% of the Total Equipment Cost or (B) prior to the
acceptance of the Equipment on the Closing Date: (1) there shall have occurred
a Change in Tax Law and (2) after having been advised in writing by the Owner
Participant of such Change in Tax Law and the proposed adjustment to the
payments of Basic Rent resulting therefrom, the Lessee shall have waived its
right under Section 4.4(f) of this
<PAGE> 14
10
Agreement to decline to proceed with the transaction, or (C) a refinancing or
refunding as contemplated by Section 10.2 occurs, or (D) the Closing Date is
other than ________________, 1994, or (E) the Debt Rate applicable to the
Equipment Notes is other than ___ %, or (F) the percentage of Total Equipment
Cost financed by the issuance of Equipment Notes is other than
_______________%, (clauses (A)-(F), collectively, the "Pricing Assumptions"),
then, in each such case of a Pricing Assumption not being correct, the Owner
Participant shall recalculate the payments or amounts, as the case may be, of
Basic Rent, the Early Buy-Out Price, Stipulated Loss Values and Termination
Values in respect of the Units of each Class of Equipment, (i) to preserve the
Net Economic Return that the Owner Participant would have realized had such
Pricing Assumption been correct (or, if such adjustment results from the
Closing Date occurring after ________________, 1994, to increase the Net
Economic Return that the Owner Participant will realize by ___ basis points over
the Net Economic Return that the Owner Participant would have realized had the
Closing Date occurred on _______________, 1994) and (ii) to minimize to the
greatest extent possible, consistent with the foregoing clause (i), the present
value (discounted semiannually at an interest rate per annum equal to the Debt
Rate) of the payments of Basic Rent in respect of the Units of each Class of
Equipment, provided that any such adjustment will not cause the average life of
the Owner Participant's investment to increase by more than six months nor
cause the pay-back period for the Owner Participant's investment to increase by
more than three months provided, further, that any such adjustment shall not
cause a decrease in the Early Buy-Out Price except to the extent such decrease
is attributable to a reduction in the principal amount of the Equipment Notes
which will be outstanding on the Early Buy- Out Date. In performing any such
recalculation and in determining the Owner Participant's Net Economic Return,
the Owner Participant shall utilize the same methods and assumptions originally
used in making the computations of Basic Rent, the Early Buy- Out Price,
Stipulated Loss Values and Termination Values in respect of the Units of each
Class of Equipment with respect to the Basic Term for such Units initially set
forth in Schedules 3, 4, 5 and 6 to this Participation Agreement (other than
those assumptions changed as a result of any of the events described in clauses
(A) through (F) of the preceding sentence necessitating such recalculation; it
being agreed that such recalculation shall reflect solely any changes of
assumptions or facts resulting directly from the event or events necessitating
such recalculation). Such adjustments shall comply (to the extent the original
structure complied) with section 467 of the Code (or if section 467 is amended
subsequent to the Closing Date, to the extent the original structure would have
complied with section 467, as amended, the adjustment shall comply with section
467, as amended) and the requirements of Revenue Procedure 75-28, as amended.
(b) Confirmation and Verification. Upon completion of
any recalculation described above in this Section 2.6, a duly
<PAGE> 15
11
authorized officer of the Owner Participant shall provide a certificate to the
Lessee either (x) stating that the payments of Basic Rent, Early Buy-Out Price,
Stipulated Loss Values and Termination Values in respect of the Units of each
Class of Equipment with respect to the Basic Term for such Units as are then
set forth in Schedules 3, 4, 5 and 6 of this Participation Agreement do not
require change, or (y) setting forth such adjustments to the payments of Basic
Rent, Early Buy-Out Price, Stipulated Loss Values or Termination Values for
such Units with respect to the Basic Term for such Units as have been
calculated by the Owner Participant in accordance with Section 2.6(a) above.
Such certificate shall describe in reasonable detail the basis for any such
adjustments. If the Lessee shall so request, the recalculation of any such
adjustments described in this Section 2.6 shall be verified by a nationally
recognized firm of independent accountants selected by the Owner Participant
and reasonably acceptable to the Lessee, and any such recalculation of such
adjustment as so verified shall be binding on the Lessee and the Owner
Participant; provided the Owner Participant shall be afforded the opportunity
to review such calculations and discuss any objections it may have with respect
thereto with such accountants, and errors, if any, shall be corrected by the
firm of accountants. Such accounting firm shall be requested to make its
determination within 30 days. The Owner Participant shall provide to a
representative of such accounting firm, on a confidential basis, such
information as it may reasonably require, including the original assumptions
used by the Owner Participant and the methods used by the Owner Participant in
the original calculation of, and any recalculation of, Basic Rent, Early
Buy-Out Price, Stipulated Loss Values and Termination Values and such other
information as is necessary to determine whether the computation is accurate
and in conformity with the provisions of this Agreement. The costs of such
verification shall be borne by the Lessee. If such accounting firm's
verification shall result in a decrease in the net present value of the Basic
Rent in respect of the Units of any Class of Equipment under this Lease by more
than ___ basis points, as compared to the net present value of Basic Rent
proposed by the Owner Participant, or shall result in a reduction in any
Stipulated Loss Value, Termination Value or the Early Buy-Out Price in respect
of any such Units by more than ___ basis points, as compared to the value
proposed by the Owner Participant, then the Owner Participant agrees to
reimburse the Lessee for any amounts paid for such verification.
(c) Notwithstanding the foregoing, any adjustment made to
the payments of Basic Rent, Early Buy-Out Price, Stipulated Loss Values or
Termination Values with respect to the Basic Term, pursuant to the foregoing,
shall comply with the following requirements: (i) adjustments of payments of
Basic Rent shall be subject to Section 6.8, and (ii) adjustments of the Early
Buy-Out Price, Stipulated Loss Values and Termination Values for any Unit shall
be subject to Section 6.8.
<PAGE> 16
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(d) Invoices. All invoices in respect of Transaction
Costs shall be directed to the Owner Participant at the address set forth in
Schedule 7.
2.7 Postponement of Closing Date. (a) The scheduled
Closing Date specified in the Notice of Delivery (or subsequently specified in
a notice of postponement pursuant to this Section 2.7) may be postponed for any
reason (but to no later than _______________, 1994) if the Lessee gives the
Owner Participant, the Indenture Trustee, the Interim Loan Participant and the
Owner Trustee facsimile or telephonic (confirmed in writing) notice of the
postponement and notice of the date to which such Closing Date has been
postponed, the notice of postponement to be received by each party no later
than 5:30 P.M., New York City time, on the scheduled Closing Date specified in
the Notice of Delivery (or subsequently specified in a notice of postponement
pursuant to this Section 2.7), and the term "Closing Date" as used in this
Agreement shall mean the postponed "Closing Date".
(b) In the event of any postponement of a scheduled
Closing Date pursuant to this Section 2.7 (any such scheduled Closing Date
being referred to as a "Scheduled Closing Date" for the purposes of this
Section 2.7): (i) the Lessee will reimburse the Owner Participant and the
Interim Loan Participant for the loss of the use of their respective funds
deposited with the Indenture Trustee pursuant to Section 2.3(a) with respect to
each such Unit occasioned by such postponement or failure to deliver or accept
(unless, in the case of the Owner Participant's funds, such failure to accept
is caused by a default by the Owner Participant hereunder or by the Owner
Trustee (acting pursuant to instructions from the Owner Participant) under the
Trust Agreement, the Lease or the Indenture) by paying to the Owner Participant
and the Interim Loan Participant, respectively, on demand interest at the Prime
Rate, for the period from and including such Scheduled Closing Date to but
excluding the earlier of the date upon which such funds are returned (unless
such funds are returned after 10:00 A.M., New York City time, in which case
such date of return shall be included) or the actual date of delivery, and (ii)
the Indenture Trustee will return not later than 10:00 A.M. New York City time,
on the first Business Day following such Scheduled Closing Date, any funds
which it shall have received from the Owner Participant and the Interim Loan
Participant, respectively, as its Commitment for such Units, absent joint
instruction from Lessee, the Owner Participant and the Interim Loan Participant
to retain such funds until the specified date of postponement established under
Section 2.7(a).
(c) The Indenture Trustee agrees that, in the event it
has received telephonic notice (to be confirmed promptly in writing) from the
Lessee on a Scheduled Closing Date that such Scheduled Closing Date is to be
postponed, it will if instructed in the aforementioned notice from the Lessee
(which notice shall specify the securities to be purchased) use reasonable best
efforts to invest, at the risk of the Lessee (except as provided
<PAGE> 17
13
below with respect to the Indenture Trustee's gross negligence or willful
misconduct), the funds received by it from the Owner Participant and the
Interim Loan Participant with respect to their respective Commitments in
Permitted Investments in accordance with Lessee's instructions. Any such
Permitted Investments purchased by the Indenture Trustee upon instructions from
the Lessee shall be held in trust by the Indenture Trustee (but not as part of
the Indenture Estate under the Indenture) for the benefit of the Owner
Participant and the Interim Loan Participant, respectively, whose funds are
invested in Permitted Investments upon instructions from the Lessee and any net
profits on the investment of such funds (including interest), if any, shall be
for the account of and shall on the Closing Date, or on the date such funds are
returned to the Owner Participant and the Interim Loan Participant,
respectively, be paid over to, the Lessee. The Lessee shall pay to the
Indenture Trustee on the Closing Date (if such Unit or Units are delivered and
accepted pursuant hereto) the amount of any net loss on the investment of such
funds invested at the instruction of the Lessee. If the funds furnished by the
Owner Participant and the Interim Loan Participant, respectively, with respect
to such Unit or Units are required to be returned to the Owner Participant and
the Interim Loan Participant, respectively, the Lessee shall, on the date on
which such funds are so required to be returned, reimburse the Indenture
Trustee, for the benefit of the Owner Participant and the Interim Loan
Participant, respectively, for any net losses incurred on such investments
regardless of the cause of, or responsibility for, such loss. The Indenture
Trustee 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 gross
negligence. In order to obtain funds for the payment of Equipment Cost for
such Unit or Units or to return funds furnished by the Owner Participant and
the Interim Loan Participant, respectively, to the Indenture Trustee for the
benefit of the Owner Participant and the Interim Loan Participant respectively,
with respect to such Unit or Units, the Indenture Trustee is authorized to sell
any Permitted Investments purchased as aforesaid with the funds received by it
from the Owner Participant and the Interim Loan Participant, respectively, in
connection with such Unit or Units.
(d) Notwithstanding the provisions of Section 2.7(a), the
Owner Participant and the Interim Loan Participant, respectively shall not be
under any obligation to make its Commitment available beyond 1:00 P.M. New York
City time, on _______________, 1994.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Owner Trustee.
The Owner Trustee, both in its individual capacity and as Owner Trustee,
represents and warrants to the Owner Participant, the Interim Loan Participant,
each of the other Trustees and the Lessee, notwithstanding the provisions of
<PAGE> 18
14
Section 10.13 or any similar provision in any other Operative Agreement, that,
as of the date hereof:
(a) the Owner Trustee, in its individual capacity, is a
banking corporation duly organized and validly existing in good
standing under the laws of Delaware, has full corporate power and
authority to carry on its business as now conducted and to enter into
and perform its obligations hereunder and under the Trust Agreement
and (assuming due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has full power and authority, as
Owner Trustee and/or, to the extent expressly provided herein or
therein, in its individual capacity, to enter into and perform its
obligations under each of the Owner Trustee Agreements;
(b) the Owner Trustee, in its individual capacity, has
duly authorized, executed and delivered the Trust Agreement and
(assuming the due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) the Owner Trustee in its trust
capacity and, to the extent expressly provided therein, in its
individual capacity, has duly authorized, executed and delivered each
of the other Owner Trustee Agreements and, as of the Closing Date, the
Equipment Notes, the Lease Supplement and the Indenture Supplement to
be delivered on the Closing Date; and the Trust Agreement constitutes
a legal, valid and binding obligation of the Owner Trustee, in its
individual capacity, enforceable against it in its individual capacity
in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity;
(c) assuming the due authorization, execution and
delivery of the Trust Agreement by the Owner Participant, each of the
Owner Trustee Agreements (other than the Trust Agreement) to which it
is a party constitutes, or when entered into will constitute, a legal,
valid and binding obligation of the Owner Trustee in its individual
capacity to the extent such agreements relate to the Owner Trustee in
its individual capacity, enforceable against it in its individual
capacity, in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by
general principles of equity;
(d) neither the execution and delivery by the Owner
Trustee, in its individual capacity or as Owner Trustee, as the case
may be, of the Owner Trustee Agreements to be delivered on the Closing
Date, nor the consummation by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, of any of the
transactions
<PAGE> 19
15
contemplated hereby or thereby, nor the compliance by the Owner
Trustee, in its individual capacity, or as Owner Trustee, as the case
may be, with any of the terms and provisions hereof and thereof, (i)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of it in its individual capacity, or (ii) violates or will
violate its certificate of incorporation or by-laws, or contravenes or
will contravene any provision of, or constitutes or will constitute a
default under, or results or will result in any breach of, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sale
contract, bank loan or credit agreement, license or other agreement or
instrument to which the Owner Trustee in its individual capacity is a
party or by which it is bound, or contravenes or will contravene any
law, governmental rule or regulation of the state of Delaware or of
the United States of America governing the banking or trust powers of
the Owner Trustee, or any judgment or order applicable to or binding
on it;
(e) there are no Taxes payable by the Owner Trustee,
either in its individual capacity or as Owner Trustee, imposed by the
State of Delaware or any political subdivision thereof in connection
with the execution and delivery by the Owner Trustee in its individual
capacity of the Trust Agreement, and, in its individual capacity or as
Owner Trustee, as the case may be, of this Agreement, the other Owner
Trustee Agreements to be delivered on the Closing Date solely because
the Owner Trustee in its individual capacity is a corporation with its
principal place of business in Wilmington, Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware; and
there are no Taxes payable by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, imposed by the State
of Delaware or any political subdivision thereof in connection with
the acquisition of its interest in the Equipment (other than franchise
or other taxes based on or measured by any fees or compensation
received by the Owner Trustee for services rendered in connection with
the transactions contemplated hereby) solely because the Owner Trustee
in its individual capacity is a corporation with its principal place
of business in Wilmington, Delaware and performs certain of its duties
as Owner Trustee in the State of Delaware;
(f) there are no pending or, to its knowledge, threatened
actions or proceedings against the Owner Trustee, either in its
individual capacity or as Owner Trustee, 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 Owner Trustee, in its individual capacity or as Owner
Trustee, as the case may be, to perform its obligations under the
Trust
<PAGE> 20
16
Agreement or the other Owner Trustee Agreements to be delivered on the
Closing Date;
(g) both its chief executive office, and the place where
its records concerning the Equipment and all its interest in, to and
under all documents relating to the Trust Estate, are located at
Wilmington, Delaware 19890, and the Owner Trustee, in its individual
capacity, agrees to give the Owner Participant, the Indenture Trustee
and the Lessee at least 30 days prior written notice of any relocation
of said chief executive office or said place from its present
location;
(h) no consent, approval, order or authorization of,
giving of notice to, or registration with, or taking of any other
action in respect of, any Delaware or local governmental authority or
agency or any United States federal governmental authority or agency
regulating the banking or trust powers of the Owner Trustee, in its
individual capacity, is required for the execution and delivery of, or
the carrying out by, the Owner Trustee in its individual capacity or
as Owner Trustee, as the case may be, of any of the transactions
contemplated hereby or by the Trust Agreement or of any of the
transactions contemplated by any of the other Owner Trustee
Agreements, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken;
(i) on the Closing Date, the Owner Trustee's right, title
and interest in and to the Equipment delivered on the Closing Date
shall be free of any Lessor's Liens attributable to the Owner Trustee
in its individual capacity;
(j) the proceeds received by the Owner Trustee from the
Owner Participant pursuant to the Trust Agreement will be administered
by it in accordance with Article IV of the Trust Agreement; and
(k) the Owner Trustee shall receive from the Lessee such
title as is conveyed to it by the Lessee, subject to the rights of the
Owner Trustee and the Lessee under the Lease and the security interest
created pursuant to the Indenture and the Indenture Supplement in
respect of the Units delivered on the Closing Date.
3.2 Representations and Warranties of the Lessee. The
Lessee represents and warrants to the Interim Loan Participant, the Trustees
and the Owner Participant that, as of the date hereof:
(a) the Lessee is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, has the corporate power and authority to
<PAGE> 21
17
carry on its business as now conducted, and has the requisite power
and authority to execute, deliver and perform its obligations under
the Lessee Agreements;
(b) the Lessee Agreements have been duly authorized by
all necessary corporate action (no shareholder approval being
required), executed and delivered (or in the case of the Lease
Supplement in respect of the Units delivered on the Closing Date will
on the Closing Date have been duly executed and delivered) by the
Lessee, and constitute (or in the case of the Lease Supplement in
respect of the Units delivered on the Closing Date will on the Closing
Date constitute) the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity;
(c) the execution, delivery and performance by the Lessee
of each Lessee Agreement and compliance by the Lessee with all of the
provisions thereof do not and will not contravene any law or
regulation, or any order of any court or governmental authority or
agency applicable to or binding on the Lessee or any of its
properties, or contravene the provisions of, or constitute a default
by the Lessee under, or result in the creation of any Lien (except for
Permitted Liens) upon the property of the Lessee under its certificate
of incorporation or by-laws or any indenture, mortgage, contract or
other agreement or instrument to which the Lessee is a party or by
which the Lessee or any of its property is bound or affected;
(d) there are no proceedings pending or, to the knowledge
of the Lessee, threatened against the Lessee in any court or before
any governmental authority or arbitration board or tribunal (i) in
which it is probable that an adverse decision will be rendered in a
matter for which no adequate provision has been made which could
reasonably be expected to materially adversely affect the business,
consolidated financial position or consolidated results of operations
and cash flows of the Lessee or (ii) which in any manner draws into
question the validity of, or seeks to restrain the transactions
contemplated by the Lessee Agreements or (iii) which affects its
ability to perform its obligations under the Lessee Agreements;
(e) the consolidated balance sheet of the Lessee and its
consolidated subsidiaries as of December 31, 1993, and the related
consolidated statements of income, cash flow and changes in common
stockholders' equity for the fiscal year ended on such date reported
on by Ernst & Young and set forth in the Lessee's 1993 Form 10-K, as
filed with the Securities Exchange Commission, fairly present, in
<PAGE> 22
18
conformity with generally accepted accounting principles, the
consolidated financial position of the Lessee and its consolidated
subsidiaries as of such date and the results of operations of and
cashflows for the Lessee and its consolidated subsidiaries for such
period. The unaudited consolidated balance sheet of the Lessee and
its consolidated subsidiaries as of __________, 1994, and the related
unaudited consolidated statements of income, cash flow and changes in
common stockholders' equity for the six-month period ended
_____________, 1994, fairly present, in conformity with generally
accepted accounting principles (except for the absence of footnotes)
the financial position of the Lessee and its consolidated subsidiaries
as of such date and the results of their operations for the period
then ended, subject to normal year-end adjustments. Since June 30,
1994, there has been no material adverse change in the financial
position of the Lessee and its consolidated subsidiaries taken as a
whole;
(f) no consent, approval or authorization of, or filing,
registration or qualification with, or the giving of notice to, any
governmental authority or other Person (including, without limitation,
any holder of indebtedness or obligations of the Lessee) is required
on the part of the Lessee in connection with the execution and
delivery by the Lessee of the Lessee Agreements;
(g) all filings and other actions necessary or reasonably
required to establish and perfect the right, title and interest of the
Owner Trustee under the Lease in and to the Equipment and the
remainder of the Trust Estate and to perfect the security interest of
the Indenture Trustee under the Indenture in the Indenture Estate will
have been made on or prior to the Closing Date (except for Uniform
Commercial Code financing statements in the process of being filed and
except for certificates of title to the Units in the process of being
obtained in the name of the Owner Trustee) and, except as aforesaid,
the Indenture will on the Closing Date create a valid and perfected
Lien on the Indenture Estate, subject to any Lessor's Liens and
Permitted Liens;
(h) no Lease Default or Lease Event of Default has
occurred and is continuing and to the knowledge of Lessee, no Event of
Loss has occurred;
(i) the execution and delivery of this Agreement and the
other Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not involve any non-exempt
prohibited transaction within the meaning of Section 406(a) of ERISA
or Section 4975(c)(1)(A) through (D) of the Code (such representation
being made in reliance on the accuracy of the representation of the
Owner Participant in Section 3.6(h) of this Agreement and on the
<PAGE> 23
19
accuracy of the representation of the Interim Loan Participant in
Section 3.5(c) of this Agreement;
(j) on the Closing Date, Lessee shall have, and the Bills
of Sale to be delivered on the Closing Date shall convey, to the Owner
Trustee title to the Units being delivered on the Closing Date, free
and clear of all Liens except Liens described in clauses (i), (ii) and
(v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not
due and payable;
(k) on the Closing Date, the Registration Statement does
not contain any untrue statement of a material fact or omit a material
fact which would make the statements contained therein misleading;
(l) on the Closing Date all sales, use or transfer taxes
due and payable upon the purchase of the Equipment by the Lessor and
on the lease thereof to the Lessee will have been paid or the Lessee
shall be liable for the payment thereof. No fees or other charges in
connection with the execution and delivery of the Operative Agreements
or the issuance and sale of the Equipment Notes to be delivered on the
Closing Date are payable for which the Lessee is not liable;
(m) no broker's or finder's or placement fee or
commission will be payable with respect to the transactions
contemplated by the Operative Agreements as a result of any action by
Lessee, except for the fees of Chemical Securities, Inc., which Lessee
agrees will be included in Transaction Costs (unless Lessee elects to
pay such fees directly pursuant to Section 2.5) and Lessee agrees that
it will hold the Owner Participant, the Lessor and the Indenture
Trustee harmless from any claim, demand or liability for any other
broker's or finder's or placement fees or commission alleged to have
been incurred as a result of any action by Lessee in connection with
this transaction;
(n) none of the proceeds from the issuance of the
Equipment Notes or from the acquisition by the Owner Participant of
its beneficial interest in the Trust Estate will be used directly or
indirectly by Lessee so as to result in a violation of Regulation G or
U of the Board of Governors of the Federal Reserve System;
(o) no governmental approval of any kind is required by
the Owner Participant or the Owner Trustee in connection with its
execution, delivery and performance of this Agreement or any Operative
Agreement, solely by reason of any fact or circumstance peculiar to
the Lessee or the Lessee's proposed operations or use of the Units of
Equipment, specifically excluding, however, any consents or
<PAGE> 24
20
approvals required by any statute or regulation governing banks and
their operations;
(p) the Units of Equipment are fully equipped to operate
in commercial service and comply with all material governmental
requirements governing the service in which such Units are being, and
are anticipated to be, used by Lessee; the Units are in the same
condition as when delivered to Lessee by the manufacturer or vendor,
ordinary wear and tear excepted, and the Lessee is unaware of any
material structural defects in or damage to the Units;
(q) the conveyance of the Units of Equipment effected by
the Bills of Sale are not void or voidable under any applicable state
or federal law (such representation being made in reliance on the
accuracy of the representations of the Participants and Trustees
contained in this Section 3);
(r) it is in compliance with all applicable Environmental
Laws relating to the ownership, use, transport, storage, condition,
maintenance and operation of the Equipment unless the failure to
comply with such Environmental Laws would not materially adversely
affect the operations of the Lessee or rights or interests of Lessor
in or the Lien of the Indenture on the Equipment or otherwise expose
Lessor or the Owner Participant to criminal sanctions or material
civil liabilities; and
(s) there are no writs, injunctions, decrees, orders or
judgements outstanding against the Lessee relating to the ownership,
use, transport, storage, condition, maintenance or operation of the
Equipment resulting from a violation of any applicable Environmental
Law, and there are no lawsuits, proceedings or investigations under
any applicable Environmental Law pending or, to the Lessee's
knowledge, threatened against Lessee relating to the ownership, use,
maintenance or operation of the Equipment.
3.3 Representations and Warranties of the Indenture
Trustee. The Indenture Trustee represents and warrants to the Interim Loan
Participant, the Owner Participant, the Owner Trustee and the Lessee that, as
of the date hereof:
(a) the Indenture Trustee is a national banking
association, duly organized and 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
United States of America pertaining to its banking, trust and
fiduciary powers to execute, deliver and carry out the terms of each
of the Indenture Trustee Agreements;
(b) the execution, delivery and performance by the
Indenture Trustee of each of the Indenture Trustee
<PAGE> 25
21
Agreements have been duly authorized by the Indenture Trustee and will
not violate its articles of association or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it is bound;
(c) the Indenture Trustee Agreements, when executed and
delivered, will constitute its legal, valid and binding obligation
enforceable against it in accordance with its terms;
(d) there are no proceedings pending or, to the knowledge
of the Indenture Trustee, threatened, and to the knowledge of the
Indenture Trustee there is no existing basis for any such proceedings,
against or affecting the Indenture Trustee in or before any court or
before any governmental authority or arbitration board or tribunal
which, individually or in the aggregate, if adversely determined,
might impair the ability of the Indenture Trustee to perform its
obligations under the Indenture Trustee Agreements;
(e) no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body of the United States of America, governing the Indenture Trustee
in its trust capacity, is required for the due execution, delivery and
performance by the Indenture Trustee of the Indenture Trustee
Agreements, except as have been previously obtained, given or taken;
(f) the Indenture Trustee is not in default under any of
the Indenture Trustee Agreements;
(g) neither the Indenture Trustee, nor any Person
authorized to act on behalf of the Indenture Trustee, has directly or
indirectly offered any interest in the Trust Estate or the Equipment
Notes or any security similar to either thereof for sale to, or
solicited offers to buy any of the same from, or otherwise approached
or negotiated with respect to any of the same with, any Person; and
(h) there are no Taxes which may be imposed on or
asserted against the Indenture Estate or any part thereof or any
interest therein, the Owner Trustee, both in its individual capacity
and as Owner Trustee, or the Owner Participant by any state or local
government or taxing authority (except Taxes imposed on the fees
payable to the Indenture Trustee) required to be paid under the laws
of the State of Connecticut in connection with the execution, delivery
or performance by the Indenture Trustee of the Indenture Trustee
Agreements or the authentication of the Equipment Notes, which Taxes
result solely from the participation therein by a national banking
association located in the State of Connecticut as Indenture Trustee.
<PAGE> 26
22
3.4 Representations, Warranties and Covenants Regarding
Beneficial Interest.
(a) The Owner Trustee represents and warrants to the
Lessee, each of the other Trustees and the Owner Participant that, as
of the date hereof and as of the Closing Date, neither the Owner
Trustee nor any Person authorized or employed by the Owner Trustee as
agent or otherwise in connection with the placement of the Beneficial
Interest or any similar interest has offered any of the Beneficial
Interest or any similar interest for sale to, or solicited offers to
buy any thereof from, or otherwise approached or negotiated with
respect thereto with, any prospective purchaser.
(b) The Lessee represents and warrants to the Trustees
and the Owner Participant that, as of the date hereof and as of the
Closing Date, neither the Lessee nor any Person authorized or employed
by the Lessee as agent or otherwise in connection with the placement
of the Beneficial Interest or any similar interest has offered any of
the Beneficial Interest or similar interest for sale to, or solicited
offers to buy any thereof from, or otherwise approached or negotiated
with respect thereto with, any Person other than the Owner Participant
and not more than (50) other institutional investors.
(c) Each of the Owner Trustee, the Owner Participant and
the Lessee agree severally but not jointly and with respect to itself
only that neither the Owner Trustee, the Owner Participant nor the
Lessee nor anyone acting on behalf of the Owner Trustee, the Owner
Participant or the Lessee will offer the Beneficial Interest, or any
part thereof or any similar interest for issue or sale to any
prospective purchaser, or solicit any offer to acquire any of the
Beneficial Interest, or any part thereof so as to bring the issuance
and sale of the Beneficial Interest within the provisions of Section 5
of the Securities Act of 1933, as amended.
3.5 Representations and Warranties of the Interim Loan
Participant. The Interim Loan Participant represents and warrants to the Owner
Participant, the Trustees, and the Lessee that, as of the date hereof:
(a) this Agreement has been duly authorized, executed and
delivered by the Interim Loan Participant; this Agreement constitutes
the legal, valid and binding obligation of the Interim Loan
Participant enforceable against it in accordance with its terms except
as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and by general principles of equity; and
<PAGE> 27
23
(b) the Interim Loan Participant is advancing the loan
contemplated to be made by it hereunder in the ordinary course of its
business, and no part of such amount constitutes or could be deemed to
constitute the assets of any employee benefit plan under 29 CFR
Section 2510.3-101.
3.6 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to the Trustees, the
Interim Loan Participant and the Lessee that, as of the date hereof:
(a) the Owner Participant is a national banking
association duly organized, validly existing and in good standing
under the laws of the United States and has the corporate power and
authority to carry on its business as now conducted;
(b) the Owner Participant has the corporate power and
authority to enter into the Owner Participant Agreements and to
perform its obligations thereunder, and such execution, delivery and
performance do not and will not contravene any law or any order of any
court or governmental authority or agency applicable to or binding on
the Owner Participant, or contravene the provisions of, or constitute
a default under, or result in the creation of any Lessor's Lien
attributable to the Owner Participant (other than the leasehold
interest of the Lessee under the Lease and the security interest of
the Indenture Trustee under the Indenture) upon the Equipment under,
its organization document or by-laws or any indenture, mortgage,
contract or other agreement or instrument to which the Owner
Participant is a party or by which it or any of its property is bound;
(c) the Owner Participant Agreements 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 indebtedness or
obligations of the Owner Participant, have been duly executed and
delivered by the Owner Participant and (assuming the due
authorization, execution and delivery by each other party thereto)
constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance
with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity;
(d) no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery or performance by the
Owner Participant of the
<PAGE> 28
24
Trust Agreement, the Tax Indemnity Agreement and this Agreement;
(e) the Trust Estate is free of any Lessor's Liens
attributable to the Owner Participant;
(f) there are no pending or, to the Owner Participant's
knowledge, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which would
materially adversely affect the Owner Participant's financial
condition or its ability to perform its obligations under the Trust
Agreement, the Tax Indemnity Agreement or this Agreement;
(g) as of the Closing Date the Owner Participant is
purchasing the Beneficial Interest to be acquired by it for its
account with no present intention of distributing such Beneficial
Interest or any part thereof in any manner which would violate the
Securities Act of 1933, as amended, but without prejudice, however, to
the right of the Owner Participant at all times to sell or otherwise
dispose of all or any part of such Beneficial Interest in compliance
with the Securities Act of 1933, as amended; provided, however, that
subject to the provisions of Section 6.1, the disposition of the
Beneficial Interest shall at all times be within the Owner
Participant's control. The Owner Participant acknowledges that its
Beneficial Interest has not been registered under the Securities Act
of 1933, as amended, and that neither the Owner Trustee nor the Lessee
contemplates filing, or is legally required to file, any such
registration statement;
(h) with respect to the source of an amount to be
advanced by the Owner Participant pursuant to Section 2.1, no part of
such amount constitutes or could be deemed to constitute the assets of
any employee benefit plan under 29 CFR Section 2510.3-101 (other than
a government plan exempt from the coverage of ERISA);
(i) no broker's or finder's or placement fee or
commission will be payable with respect to the transactions
contemplated by the Operative Agreements as a result of any action by
the Owner Participant except for the fees of _________
____________________ which have been paid by the Owner Participant,
and the Owner Participant agrees that it will hold Lessee, the
Indenture Trustee and Lessor harmless from any claim, demand or
liability for broker's or finder's or placement fees or commission
alleged to have been incurred as a result of any action by the Owner
Participant in connection with this transaction; and
(j) the Owner Participant has a combined capital and
surplus of at least $_________.
<PAGE> 29
25
3.7 Opinion Acknowledgment. Each of the parties hereto,
with respect to such party, expressly consents to the rendering by its counsel
of the opinion referred to in Section 4.1(e) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the instructions of such
party, each of whom has consulted with and has been advised by its counsel as
to the consequences of such request, instructions and consent.
SECTION 4. CLOSING CONDITIONS
4.1 Conditions Precedent to Investment by Each
Participant. The obligation of each Participant to make its investment or loan,
as applicable, specified with respect to such Participant in Section 2 on the
Closing Date shall be subject to the following conditions (except that
paragraph (k) and clause (i) of paragraph (p) shall not be conditions precedent
to the Owner Participant's obligations hereunder and paragraph (t) clause (ii)
of paragraph (p) shall not be conditions precedent to the Loan Participant's
obligations hereunder):
(a) Execution of Operative Agreements. On or before the
Closing Date, this Agreement, the Trust Agreement, the Lease, the
Lease Supplement in respect of the Units delivered on the Closing
Date, the Interim Lease Supplement, the Indenture, the Indenture
Supplement in respect of the Units delivered on the Closing Date, the
Interim Indenture Supplement and the Equipment Notes shall each be
satisfactory in form and substance to such Participant, shall have
been duly authorized, executed and delivered by the parties thereto
(except that the authorization, execution and delivery of this
Agreement and the other documents referred to above by a party hereto
or thereto shall not be a condition precedent to such party's
obligations hereunder), shall each be in full force and effect and
executed counterparts of each shall have been delivered to such
Participant or its counsel on or before the Closing Date (except that
executed Equipment Notes shall be delivered only to the Interim Loan
Participant); and no event shall have occurred and be continuing that
constitutes a Lease Default, a Lease Event of Default, an Indenture
Default or an Indenture Event of Default.
(b) Recordation Filing, Registration and Certification.
On or before the Closing Date (i) each Unit shall be covered by a
validly issued certificate of title endorsed to reflect the Owner
Trustee as owner and the Indenture Trustee as lienholder, and (ii)
Uniform Commercial Code financing statements shall have been filed in
such places within the United States as the Owner Trustee, the
Indenture Trustee and any Participant may reasonably request for the
protection of the Owner Trustee's title to the Equipment and interest
in the Lease, or the security
<PAGE> 30
26
interest of the Indenture Trustee in the Equipment and the Lease.
(c) Closing Certificate of Lessee. On the Closing Date,
the Owner Trustee, the Indenture Trustee and each Participant shall
have received an Officer's Certificate dated such date of the Lessee,
to the effect that the representations and warranties of the Lessee
contained in Section 3.2 and Section 3.4(b) are true and correct in
all respects on the Closing Date with the same effect as though made
on and as of said date, except to the extent that such representations
and warranties relate solely to an earlier date (in which case such
representations and warranties were true and correct on and as of such
earlier date), and that the Lessee has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Lessee on or before said date.
(d) Closing Certificate of Owner Trustee. On the Closing
Date, the Lessee, the Indenture Trustee, the Pass Through Trustee and
each Participant shall have received an Officer's Certificate dated
such date from the Owner Trustee, to the effect that the
representations and warranties of the Owner Trustee contained in
Section 3.1 and Section 3.4(a) are true and correct in all respects on
the Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations
and warranties were true and correct on and as of such earlier date),
and that the Owner Trustee has performed and complied with all
agreements and conditions herein contained which are required to be
performed or complied with by the Owner Trustee on or before said
date.
(e) Opinions of Counsel. On the Closing Date, the Owner
Trustee, the Indenture Trustee and each Participant shall have
received the favorable written opinion of each of (i) the Lessee's
special counsel and counsel for the Lessee, (ii) counsel to the Owner
Trustee, (iii) counsel and special counsel to the Owner Participant,
(iv) special counsel to the Indenture Trustee.
(f) Title. On the Closing Date, after giving effect to
the transactions contemplated hereby, the Owner Trustee shall have
legal and beneficial title to each Unit of Equipment to be delivered
on the Closing Date, free and clear of all Liens, except Liens
described in clauses (i), (ii) and (v) of the definition of "Permitted
Liens" and Liens described in clauses (iii) and (iv) of such
definition for amounts which are not due and payable.
<PAGE> 31
27
(g) Bills of Sale. On the Closing Date the Lessee shall
have delivered to the Owner Trustee (with copies to the Indenture
Trustee and each Participant) the Bill of Sale dated such date
covering the Units to be settled for on such date, transferring to the
Owner Trustee legal and beneficial title to such Units free of all
liens except Liens described in clauses (i), (ii) and (v) of the
definition of "Permitted Liens" and Liens described in clauses (iii)
and (iv) of such definition for amounts which are not due and payable,
and warranting to the Owner Trustee that at the time of delivery of
each such Unit, the Lessee had legal and beneficial title thereto and
good and lawful right to sell the same, and title thereto was free of
all Liens, except Liens described in clauses (i), (ii) and (v) of the
definition of "Permitted Liens" and Liens described in clauses (iii)
and (iv) of such definition for amounts which are not due and payable.
(h) Insurance Certificate and Opinion. On or before the
Closing Date, the Indenture Trustee and each Participant shall have
received a certificate in form acceptable to the Owner Participant in
its reasonable discretion signed by the insurer or by an independent
insurance broker evidencing insurance coverages required pursuant to
Section 12 of the Lease.
(i) Corporate Documents. Each of the Participants shall
have received such documents and evidence with respect to the Lessee,
the Owner Participant, the Owner Trustee, the Pass Through Trustee and
the Indenture Trustee as the Participants may reasonably request in
order to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate and other proceedings
in connection therewith and compliance with the conditions herein or
therein set forth.
(j) No Threatened Proceedings. No action or proceeding
shall have been instituted nor shall 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 Closing Date, to set aside,
restrain, enjoin or prevent the completion and consummation of this
Agreement or the Overall Transactions.
(k) Closing Certificate of Owner Participant. On the
Closing Date, the Lessee, the Interim Loan Participant, the Indenture
Trustee and the Pass Through Trustee shall have received an Officer's
Certificate dated such date from the Owner Participant, to the effect
that the representations and warranties of the Owner Participant
contained in Section 3.6 are true and correct in all respects on the
Closing Date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case
<PAGE> 32
28
such representations and warranties were true and correct on and as of
such earlier date), and that the Owner Participant has performed and
complied with all agreements and conditions herein contained which are
required to be performed or complied with by the Owner Participant on
or before said date.
(l) Closing Notice. The Indenture Trustee and the
Participants shall have received the Notice of Delivery required
pursuant to Section 2.3.
(m) Closing Certificate of Indenture Trustee. On the
Closing Date, the Lessee, the Owner Trustee and each Participant shall
have received an Officer's Certificate dated such date from the
Indenture Trustee, to the effect that the representations and
warranties of the Indenture Trustee contained in Section 3.3 are true
and correct in all respects on the Closing Date with the same effect
as though made on and as of said date, except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties were true and correct
on and as of such earlier date), and that the Indenture Trustee has
performed and complied with all agreements and conditions herein
contained which are required to be performed or complied with by the
Indenture Trustee on or before said date.
(n) (Intentionally Omitted.)
(o) No Illegality. 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 regulatory
authorities that, in the opinion of such Participant or its counsel,
would make it illegal for such Participant to enter into any
transaction contemplated by the Operative Agreements.
(p) Participants' Investments. (i) The Owner
Participant shall have made available its Commitment in the amount
specified in, and otherwise in accordance with, Sections 2.2(a) and
2.3 and (ii) the Loan Participant shall have made available its
Commitment in the amount specified in, and otherwise in accordance
with, Sections 2.2(b) and 2.3.
(q) Consents. All approvals and consents of any trustees
or holders of any indebtedness or obligations of Lessee which are
required in connection with the transactions contemplated by this
Agreement, shall have been duly obtained and be in full force and
effect.
(r) Governmental Actions. All actions, if any, required
to have been taken on or prior to the Closing Date in connection with
the transactions contemplated by this
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29
Agreement on the Closing Date shall have been taken by any
governmental or political agency, subdivision or instrumentality of
the United States and all orders, permits, waivers, exemptions,
authorizations and approvals of such entities required to be in effect
on the Closing Date in connection with the transactions contemplated
by this Agreement on the Closing Date shall have been issued, and all
such orders, permits, waivers, exemptions, authorizations and
approvals shall be in full force and effect, on the Closing Date.
(s) Certificate of Acceptance. On or before the Closing
Date a Certificate of Acceptance with respect to the Units delivered
by the Lessee to the Lessor on the Closing Date shall have been duly
executed and delivered by the Lessee, as the authorized representative
of the Lessor.
(t) Tax Indemnity Agreement. On or before the Closing
Date, the Tax Indemnity Agreement shall be satisfactory in form and
substance to the Owner Participant, shall have been duly executed and
delivered by the Lessee and, assuming due authorization, execution and
delivery by the Owner Participant, shall be in full force and effect.
(u) Vehicle Subleases. On the Closing Date, the Owner
Participant shall have received an Officer's Certificate of the Lessee
attaching the form of sublease currently utilized for the Units of
Equipment and certifying that all subleases of Units currently in
effect are in substantial conformity to such form of sublease.
4.2 (Intentionally Omitted).
4.3 Additional Conditions Precedent to Investment by Owner
Participant. The obligation of the Owner Participant to provide the funds
specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date
with respect to any Unit to be delivered on the Closing Date shall be subject
to the following additional conditions:
(a) Appraisal. On or before the Closing Date, the Owner
Participant shall have received an opinion (the "Appraisal") of
Deloitte & Touche-Valuation Group, satisfactory in form and substance
to the Owner Participant, concluding that: (i) the fair market value
of the Units of each Class of Equipment being delivered on the Closing
Date is equal to the Total Equipment Cost with respect to such Units;
(ii) (A) the expected economic useful life of the Units of each Class
of Equipment will be at least equal to 134% of the aggregate length of
the Interim Term and the Basic Term for such Units and (B) at the
expiration of the Basic Term for the Units of each Class of
Equipment,without taking into account inflation or deflation from and
after the Closing Date or the existence of any purchase option, it
<PAGE> 34
30
is reasonable to expect that such Units will have a fair market value
of at least 20% of the Equipment Cost for such Units; (iii) taking
into account a reasonable estimate for inflation or deflation, the
estimated fair market value on the Early Buyout Date for the Units of
each Class of Equipment is less than or equal to the Early Buyout
Price for such Units; (iv) Basic Rent payable under the Lease with
respect to the Units of each Class of Equipment shall be equal to the
fair market rental value for such Units and (v) the Equipment being
delivered on the Closing Date is not "limited use property" within the
meaning of Rev. Proc. 76-30, 1976-2 C.B. 647;provided, however, that
the Lessee makes no representation as to the fair market value, useful
life or estimated residual value of any of the Equipment, and the
Lessee shall not be responsible for, or incur any liabilities as a
result of, the contents of such Appraisal or report to which it
relates or, except to the extent provided in the Tax Indemnity
Agreement, any information supplied by Lessee in connection therewith.
The Appraisal shall further set forth the estimated fair market value
of the Units of each Class of the Equipment at the end of the Basic
Term taking into account inflation or deflation.
(b) Opinion with Respect to Certain Aspects. On the
Closing Date, the Owner Participant shall have received the opinion of
Moore & Van Allen addressed to the Owner Participant, in form and
substance reasonably satisfactory to the Owner Participant, containing
such counsel's favorable opinion with respect to such tax matters as
the Owner Participant may reasonably request.
(c) No Tax Law Change. No Change in Tax Law shall have
occurred nor shall a judicial opinion on a tax issue have been
rendered prior to the acceptance and delivery of the Equipment on the
Closing Date which, if enacted, adopted or made effective, in the same
or substantially similar form, would, in the reasonable opinion of the
Owner Participant, render it disadvantageous or inadvisable for the
Owner Participant to enter into the transactions contemplated by the
Operative Agreements.
4.4 Conditions Precedent to the Obligation of the Lessee.
The obligation of the Lessee with respect to the sale of the Units to the Owner
Trustee and acceptance of the Units under the Lease is subject to the following
conditions as of the Closing Date:
(a) Corporate Documents. On or before the Closing Date,
the Lessee shall have received such documents and evidence with
respect to the Owner Participant, the Owner Trustee and the Indenture
Trustee as the Lessee may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the
taking of all corporate and other proceedings in connection
<PAGE> 35
31
therewith and compliance with the conditions herein or therein set
forth.
(b) Operative Agreements. On or before the Closing Date,
the Operative Agreements shall have been duly authorized, executed and
delivered by the respective party or parties thereto (other than the
Lessee), and an executed counterpart of each thereof shall have been
delivered to the Lessee or its special counsel.
(c) Representations and Warranties True. On the Closing
Date, the representations and warranties of the Owner Trustee, the
Indenture Trustee and the Owner Participant contained in Section 3
hereof shall be true and correct in all material respects as of the
Closing Date as though made on and as of such date, and the Lessee
shall have received an Officer's Certificate dated such date from each
of the Owner Trustee as described in Section 4.1(d), the Owner
Participant as described in Section 4.1(k) and the Indenture Trustee
as described in Section 4.1(m), addressed to the Lessee and certifying
as to the foregoing matters insofar as they relate to the Owner
Trustee, the Owner Participant and the Indenture Trustee, as the case
may be.
(d) Opinions of Counsel. On the Closing Date, the Lessee
shall have received the opinions of counsel referred to in Section
4.1(e) (other than that set forth in clause (i) therein), addressed to
the Lessee.
(e) No Threatened Proceedings. No action or proceeding
shall have been instituted nor shall 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 Closing Date, to set aside,
restrain, enjoin or prevent the completion and consummation of this
Agreement or the transactions contemplated hereby.
(f) No Tax Law Change. No Change in Tax Law shall have
occurred nor shall a judicial opinion on a tax issue have been
rendered prior to the acceptance and delivery of the Equipment on the
Closing Date, which, if enacted, adopted or made effective, in the
same or substantially similar form, would, in the reasonable opinion
of the Lessee, render it disadvantageous or inadvisable for the Lessee
to enter into the transactions contemplated by the Operative
Agreements.
(g) Participants' Investments. (i) There shall have
been duly issued and delivered by the Owner Trustee to the Interim
Loan Participant, against payment therefor, Equipment Notes dated the
Closing Date.
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32
(ii) The Owner Participant shall have made available its
Commitment in the amount specified in, and otherwise in accordance
with, Sections 2.2(a) and 2.3.
(iii) The Loan Participant shall have made its Commitment
in the amount specified in, and otherwise in accordance with, Sections
2.2(b) and 2.3.
(h) Rent Adjustment. If an adjustment to the payments of
Basic Rent in respect of a Unit of Equipment occurs pursuant to
Section 2.6, such adjustment shall not result in an increase in the
present value (discounted semiannually at an interest rate per annum
equal to the Debt Rate) of such amounts of Basic Rent in excess of ___
basis points as compared to the present value of the amounts of Basic
Rent for such Unit of Equipment set forth in the applicable exhibit to
the Term Sheet. It being understood and agreed that if the Closing
Date occurs after ___________, 1994, such Closing Date shall require
an adjustment to the payments of Basic Rent in respect of all Units of
Equipment, which adjustment shall cause the present value of such
amounts of Basic Rent to be increased in excess of said __ basis
points, and in which case the Lessee shall be under no obligation to
consummate the transactions contemplated to occur on the Closing Date.
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE
The Lessee agrees that it will furnish directly to each
Participant the following:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Lessee, an audited
consolidated balance sheet of the Lessee and its consolidated
subsidiaries as of the end of such fiscal year and the related audited
consolidated statements of income, cash flows and changes in common
stockholders' equity for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Ernst & Young or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal year
of the Lessee, a consolidated balance sheet of the Lessee and its
consolidated subsidiaries, as of the end of such quarter and the
related (i) consolidated statement of income for such quarter and for
the portion of the Lessee's fiscal year ended at the end of such
quarter, and (ii) consolidated statement of cash flows for the portion
of the Lessee's fiscal year ended at the end of such quarter, setting
forth in each case in comparative form (A) for the consolidated
balance sheet, the figures as of the
<PAGE> 37
33
end of the Lessee's previous fiscal year, (B) for the consolidated
statement of income, the figures for the corresponding quarter and the
corresponding portion of the Lessee's previous fiscal year and (C) for
the consolidated statement of cash flows, the figures for the
corresponding portion of the Lessee's previous fiscal year, all
prepared in accordance with generally accepted accounting principles
(subject to normal year-end adjustments);
(c) promptly upon the mailing thereof, all registration
statements and reports filed with the Securities and Exchange
Commission;
(d) promptly upon any officer of the Lessee obtaining
knowledge of any condition or event which constitutes a Lease Event of
Default, an officer's certificate specifying the nature and period of
existence thereof and what action the Lessee has taken or is taking or
proposes to take with respect thereto;
(e) within the time period prescribed in subparagraph (a)
above, an officer's certificate, to the effect that the signer has
reviewed the activities of the Lessee during the immediately preceding
fiscal year and that he is not aware of any Lease Default or, if a
Lease Default shall exist, specifying such Lease Default and what
action the Lessee has taken or is taking or proposes to take with
respect thereto; and
(f) such additional information with respect to the
financial condition or the business of the Lessee or the Equipment as
the Owner Participant may reasonably request.
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE
6.1 Restrictions on Transfer of Beneficial Interest. The
Owner Participant agrees that it shall not, directly or indirectly, sell,
convey, assign, pledge, mortgage or otherwise transfer any of its Beneficial
Interest (whether by merger, consolidation, sale of assets or otherwise) prior
to the expiration or earlier termination of the Lease Term, without the prior
written consent of the Lessee and (so long as any Equipment Notes are
outstanding) the Indenture Trustee not to be unreasonably withheld, provided
that the Owner Participant may transfer the entire Beneficial Interest to an
Affiliate without the consent of the Lessee and the Indenture Trustee so long
as the Owner Participant remains primarily liable under all Owner Participant
Documents, provided, further, that the Owner Participant may transfer (whether
by merger, consolidation, sale of assets or otherwise) the entire Beneficial
Interest without the consent of the Lessee and the Indenture Trustee subject to
the following conditions:
<PAGE> 38
34
(a) the Owner Participant shall have delivered to the
Lessee a certificate of a Responsible Officer of the Owner Participant
setting forth in reasonable detail that (i) such transfer is
necessitated because of a change in law or regulation after the
Closing Date which makes it prohibitive or uneconomic for the Owner
Participant to continue to own the Beneficial Interest, (ii) such
transfer is due to a change in the Owner Participant's tax
circumstances its continued ownership of the Beneficial Interest has
become uneconomic or (iii) such transfer is pursuant to a
consolidation, merger, sale of all or substantially all of its assets
or a sale of all or substantially all of its lease portfolio (and in
which case clause (c) below shall not be applicable);
(b) the Person to whom such transfer is to be made (a
"Transferee") is (i) an institutional or corporate investor with
tangible net worth or, in the case of a bank or lending institution,
combined capital and surplus, at the time of such transfer of at least
$__________, all of the foregoing determined in accordance with
generally accepted accounting principles or (ii) any subsidiary or
Affiliate of any such institutional or corporate investor if such
investor guarantees the obligations so assumed by such subsidiary or
Affiliate pursuant to a guarantee substantially in the form of Exhibit
C;
(c) the Transferee is not involved and has not been
involved in any litigation adverse to the Lessee; no Affiliates of the
Transferee are involved or have been involved in any litigation
adverse to the Lessee where the amount in controversy is or was at
least $__________; and neither the Transferee nor any of its
Affiliates is a direct or indirect competitor of the Lessee or
otherwise is in the same industry as the Lessee (including, without
limitation, the industries of (i) petroleum exploration, production,
refining and marketing, (ii) natural gas gathering and processing and
(iii) chemical production or distribution);
(d) the Indenture Trustee and the Lessee shall have
received 30 days' prior written notice of such transfer specifying the
name and address of any proposed transferee and such additional
information as shall be necessary to determine whether the proposed
transfer satisfies the requirements of this Section 6.1;
(e) such Transferee enters into an assumption agreement
substantially in the form of Exhibit D;
(f) such transfer complies with and does not violate any
applicable Federal securities law and the securities law of any
applicable state;
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35
(g) the Lessee and the Indenture Trustee shall have
received an opinion of counsel of the Transferee (which counsel may be
Transferee's in-house counsel) substantially in the form of Exhibit
E-1, and, if a guarantee is delivered pursuant to Section 6.1(b), an
opinion of counsel of the guarantor of the Transferee (which may be
the guarantor's in-house counsel) substantially in the form of Exhibit
E-2;
(h) except as specifically consented to in writing by the
Lessee and the Indenture Trustee, the terms of the Operative
Agreements shall not be altered;
(i) such transfer shall transfer all of the Beneficial
Interest;
(j) all fees, expenses and charges of the parties hereto
(including, without limitation, reasonable legal fees and expenses of
special counsel) incurred in connection with each transfer of such
Beneficial Interest shall be paid by the Owner Participant or
Transferee;
(k) the Transferee delivers to the Lessee, the Owner
Trustee and the Indenture Trustee an Officer's Certificate of the
Transferee to the effect that such transfer (i) does not involve the
use of any assets that are or could be deemed to be plan assets under
29 C.F.R. Section 2510.3-101 of an employee benefit plan (other than a
government plan exempt from the coverage of ERISA) or (ii) if the
assets of an employee benefit plan are so used, will not constitute a
prohibited transaction which is not subject to an exemption contained
in ERISA or the Code or adopted thereunder.
(l) as a result of such transfer, no Indenture Default
attributable to the Owner Participant or the Owner Trustee shall have
occurred and be continuing;
(m) either (x) the transfer does not involve the sale of
the stock of any Owner Participant the sole asset of which is the
Beneficial Interest, or (y) if such a sale of stock is involved, the
transferee meets the requirements of clauses (a), (b), (c), (d), (f),
(g), (h), (i), (j) (but with reference to the stock), (k), (l) and
(n); and
(n) the Owner Participant and/or the Transferee shall
deliver an Officer's Certificate certifying as to compliance with the
transfer requirements contained herein.
Upon any such transfer, (i) except as the context otherwise requires, such
Transferee shall be deemed the "Owner Participant" for all purposes, and shall
enjoy the rights and privileges and perform the obligations of the Owner
Participant to the extent of the interest transferred hereunder and under each
other Operative Agreement to which the Owner Participant is a party, and,
except as the context otherwise requires, each reference in this
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36
Agreement and each other Operative Agreement to the "Owner Participant" shall
thereafter be deemed to include such Transferee for all purposes to the extent
of the interest transferred, (ii) the transferor shall continue to be entitled
to all the benefits and rights, including the right to indemnification,
hereunder and under each other Operative Agreement to which such transferor was
a party or by which it was bound except to the extent otherwise agreed in
writing and (iii) the transferor shall be released from all obligations
hereunder and under each other Operative Agreement to which such transferor is
a party or by which such transferor is bound to the extent such obligations are
expressly assumed by a Transferee; and provided, further, that in no event
shall any such transfer or assignment waive or release the transferor from any
liability on account of any breach existing immediately prior to such transfer
of any of its representations, warranties, covenants or obligations set forth
in the Operative Agreements or for any fraudulent or willful misconduct. Any
transfer or assignment of the Beneficial Interest in violation of this Section
6.1 shall be voidable at the direction of the Lessee or Indenture Trustee,
provided that the Lessee and the Indenture Trustee agree to respond promptly
and in any event within 60 days to a written request of the Owner Participant
to proceed with a transfer which fails to meet all of the requirements of this
Section 6.1. Any party's failure to respond within such 60 day period shall be
deemed to be consent by such party to the transaction pursuant to which such
transfer occurred. The restrictions set forth in this Section 6.1 shall not
apply to a contract between the Owner Participant and third parties with
respect to the sale or other transfer of the Equipment which is to be
consummated on or after the expiration or termination of the Lease when the
Equipment is owned by the Owner Trustee free and clear of any rights of the
Lessee therein and the lien of the Indenture (or of any indenture or security
agreement entered into pursuant to Section 10.2 or 10.3), provided that the
rights and interests granted thereunder shall be expressly stated to be in all
respects subject and subordinate to the rights of the parties under the
Operative Agreements. Notwithstanding anything herein to the contrary other
than as specifically set forth in Section 6.1(m), this Section 6.1 shall not be
construed to prohibit, limit or require that any consent be obtained in
connection with the sale of all or any portion of the capital stock of the
Owner Participant or the merger, consolidation, corporate restructuring or sale
of stock or assets by the parent company of the Owner Participant or any other
Affiliate of the Owner Participant.
6.2 Lessor's Liens Attributable to the Owner Participant.
(a) The Owner Participant hereby covenants and agrees with and for the benefit
of the other parties to this Agreement that the Owner Participant will not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Liens on or against any part of the Trust Estate or the Equipment attributable
to it (whether or not through its act or failure to act) or Lessor's Liens
arising as a result of taxes described in
<PAGE> 41
37
clause (iii) of the definition of Lessor's Liens which are imposed against the
Owner Trustee (not in its individual capacity but solely as Owner Trustee), and
the Owner Participant agrees that it will, at its own cost and expense, take
such action as may be necessary to duly discharge and satisfy in full any such
Lessor's Lien described above (by bonding or otherwise, so long as Lessee's
operation and use of the Equipment and the Lien of the Indenture are not
impaired); provided that the Owner Participant may contest any such Lessor's
Lien in good faith by appropriate proceedings so long as such proceedings do
not involve any material danger of the sale, forfeiture or loss of the
Equipment or any interest therein and do not interfere with the use, operation,
or possession of the Equipment by the Lessee under the Lease or the rights of
the Indenture Trustee under the Indenture.
(b) The Owner Participant agrees to indemnify and hold
harmless the Lessee, the Interim Loan Participant, the Indenture Trustee, the
Pass Through Trustee and the Holders from time to time from and against any
loss, cost, expense or damage which may be suffered by such party as a result
of the failure of the Owner Participant to discharge and satisfy in full any
Lessor's Lien of the type identified in and when required to be discharged and
satisfied by it under Section 6.2(a).
6.3 Lessor's Liens Attributable to the Owner Trustee. (a)
The Owner Trustee, in its individual capacity and trust capacity, hereby
unconditionally agrees with and for the benefit of the other parties to this
Agreement that the Owner Trustee in its individual capacity will not directly
or indirectly create, incur, assume or suffer to exist any Lessor's Liens on or
against any part of the Trust Estate or the Equipment arising out of any act or
omission of or claim against the Owner Trustee in its individual capacity, and
the Owner Trustee in its individual capacity agrees that it will, at its own
cost and expense, take such action as may be necessary to duly discharge and
satisfy in full any such Lessor's Lien attributable to the Owner Trustee in its
individual capacity (by bonding or otherwise, so long as Lessee's operation and
use of the Equipment and the Lien of the Indenture are not impaired); provided
that the Owner Trustee may contest any such Lessor's Lien in good faith by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture or loss of the Equipment or any interest therein
and do not interfere with the use, operation, or possession of the Equipment by
the Lessee under the Lease or the rights of the Indenture Trustee under the
Indenture.
(b) Indemnity for Lessor's Liens. The Owner Trustee, in
its individual capacity, agrees to indemnify and hold harmless the Lessee, the
Indenture Trustee, the Owner Participant, the Pass Through Trustee, the Owner
Trustee and the Holders from and against any loss, cost, expense or damage
which may be suffered by such party as a result of the failure of the Owner
Trustee to
<PAGE> 42
38
discharge and satisfy any Lessor's Liens attributable to it in its individual
capacity, as described in Section 6.3(a).
6.4 Liens Created by the Indenture Trustee, the Loan
Participants and the Pass Through Trustee. (a) The Indenture Trustee, in its
individual capacity, covenants and agrees with the Lessee, the Owner Trustee,
the Owner Participant and the Loan Participant that it shall not cause or
permit to exist any Lien on the Equipment or all or any portion of any Trust
Estate or the Indenture Estate arising as a result of (i) claims against the
Indenture Trustee in its individual capacity not related to its interest in the
Equipment and any Trust Estate, or to the administration of the Indenture
Estate pursuant to the Indenture, (ii) acts of the Indenture Trustee in its
individual capacity not contemplated by, or failure of the Indenture Trustee to
take any action it is expressly required to perform by, the Operative
Agreements, (iii) claims against the Indenture Trustee in its individual
capacity relating to Taxes or expenses that are not indemnified against by the
Lessee pursuant to Section 7 attributable to the actions of the Indenture
Trustee, solely in its individual capacity, 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 Equipment, the Indenture Estate or the
Operative Agreements, other than a transfer permitted by the Operative
Agreements and that the Indenture Trustee will, at its own cost and expense
(and without any right of reimbursement from any other party hereto), promptly
take such action as may be necessary duly to discharge any such Lien.
(b) The Indenture Trustee agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Pass Through Trustee and the
Loan Participant from time to time from and against any loss, cost, expense or
damage which may be suffered by such party as a result of the failure of the
Indenture Trustee to discharge and satisfy in full any Lien of the type
identified in and when required to be discharged and satisfied by it under
Section 6.4(a).
(c) The Pass Through Trustee covenants and agrees with
the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee
that it shall not cause or permit to exist any Lien on the Equipment or all or
any portion of any Trust Estate or the Indenture Estate arising as a result of
(i) claims against the Pass Through Trustee not related to its interest in the
Equipment and any Trust Estate, (ii) acts of the Pass Through Trustee not
contemplated by, or failure of such Loan Participant to take any action it is
expressly required to perform by, the Operative Agreements, (iii) claims
against the Pass Through Trustee relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7 or (iv) claims against
the Pass Through Trustee arising out of the transfer by such Loan Participant
of all or any portion of its interest in the Equipment, the Indenture Estate or
the Operative Agreements,
<PAGE> 43
39
other than a transfer permitted by the Operative Agreements and that such Loan
Participant will, at its own cost and expense (and without any right of
reimbursement from the Lessee), promptly take such action as may be necessary
duly to discharge any such Lien.
(d) The Pass Through Trustee agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Owner Trustee and the Indenture
Trustee from time to time from and against any loss, cost, expense or damage
which may be suffered by such party as a result of the failure of the Pass
Through Trustee to discharge and satisfy in full any Lien of the type
identified in and when required to be discharged and satisfied by it under
Section 6.4(c).
6.5 Covenants of Owner Trustee, Owner Participant and
Indenture Trustee. (a) The Owner Participant and the Owner Trustee in its
individual and trust capacity, hereby agree, severally and not jointly, with
the Lessee, the Loan Participant and the Indenture Trustee (i) not to amend,
supplement, or otherwise modify any provision of the Trust Agreement in such a
manner as to adversely affect the rights of the Lessee, the Pass Through
Trustee or the Indenture Trustee without the prior written consent of such
party and (ii) not to terminate or revoke the Trust Agreement, or the trusts
created by the Trust Agreement and such trusts shall not be subject to
revocation or termination by the Owner Participant prior to the payment in full
and discharge of the Equipment Notes and all other indebtedness secured by the
Indenture and the final discharge thereof pursuant to Section 10.01 thereof or
prior to the expiration or early termination of the Lease. Each of the Owner
Trustee and the Indenture Trustee agrees, for the benefit of the Lessee and the
Owner Participant, to comply with the provisions of the Indenture and not to
amend, supplement, or otherwise modify any provision of the Indenture in such a
manner as to adversely affect the rights of any such party without the prior
written consent of such party. Notwithstanding any provision herein or in any
of the Operative Agreements to the contrary, the Indenture Trustee's obligation
to take or refrain from taking any actions, or to use its discretion
(including, but not limited to, the giving or withholding of consent or
approval and the exercise of any rights or remedies under such Operative
Agreements), and any liability therefor, shall, in addition to any other
limitations provided herein or in the other Operative Agreements, be limited by
the provisions of the Indenture.
(b) Owner Trustee Activities Limited. So long as the
Indenture is in effect, the Owner Trustee, not in its individual capacity, but
solely as trustee under the Trust Agreement, shall not incur any indebtedness
for borrowed money except as expressly contemplated herein or in any other
Operative Agreement and shall not engage in any business or other activity
other than the transactions contemplated herein or in any other Operative
<PAGE> 44
40
Agreement and all necessary or appropriate activity related thereto.
6.6 Amendments to Operative Agreements. The Trustees and
Participants will not terminate the Operative Agreements to which the Lessee is
not or will not be a party, except in accordance with the Operative Agreements
in effect on the Closing Date (as amended, modified or supplemented from time
to time in accordance with the terms hereof and of the Operative Agreements),
or amend, supplement, waive or modify such Operative Agreements in any manner
that increases the obligations or liabilities, or decreases the rights, of, or
is adverse to, the Lessee under the Operative Agreements, without, in each such
case, the prior written consent of the Lessee. The Owner Participant and the
Trustees (as applicable) agree that, in any event, they will not amend Section
2.10 or Section 9.05 of the Indenture or Section 9.01 or Section 11.01 of the
Trust Agreement without the prior written consent of the Lessee.
6.7 Merger Covenant. Notwithstanding anything in any
Operative Agreement to the contrary, the Lessee shall not consolidate with or
merge into any other Person, or permit any other Person to merge into it, or,
directly or indirectly, sell, convey, transfer or lease all or a substantial
part of its assets as an entirety to any Person unless (i) the Person formed by
such consolidation or surviving such merger (if other than the Lessee) or the
Person which acquires by sale, conveyance, transfer or lease all or a
substantial part of the assets of the Lessee shall execute and deliver to the
Owner Trustee, the Owner Participant and the Indenture Trustee an agreement in
form reasonably acceptable to such parties containing the assumption by such
successor corporation of the due and punctual performance and observance of
each covenant and condition of this Agreement and each of the other Lessee
Agreements to be performed or observed by the Lessee (and in the case of any
such sale, conveyance or lease, the Lessee shall not be released from its
obligations under the Lessee Agreements), and (ii) immediately after giving
effect to such transaction, no Lease Default or Lease Event of Default shall
have occurred and be continuing, whether as a result of such consolidation or
merger or such sale, conveyance, transfer or lease or otherwise. Upon such
consolidation or merger, or any sale, conveyance, transfer or lease of all or a
substantial part of the assets of the Lessee as an entirety in accordance with
this Section 6.7, the successor corporation formed by such consolidation or
into which the Lessee is merged or to which such sale, conveyance, transfer or
lease is made shall succeed to, and be substituted for (except as limited
above), and may exercise every right and power of, the Lessee under this
Agreement and the other Operative Agreements with the same effect as if such
successor corporation had been named as the Lessee herein. If the Lessee shall
have consolidated with or merged into any other Person or sold, conveyed,
transferred or leased all or a substantial part of its assets, such assets to
include the Lessee's leasehold interest in the Lease, the Person
<PAGE> 45
41
owning such leasehold interest after such event shall deliver to the Owner
Participant and the Indenture Trustee (a) an Officer's Certificate certifying
as to the compliance with the requirements of this Section 6.7 and (b) an
opinion of counsel (which counsel may be such Person's in-house counsel)
confirming that the assumption agreement pursuant to which such Person assumed
the obligations of the Lessee shall have been duly authorized, executed and
delivered by such Person and that such agreement is the legal, valid and
binding obligation of such Person, enforceable against such Person in
accordance with its terms and that such assumption does not violate securities
laws and does not cause the Owner Participant to suffer any unindemnified tax
risk arising from assumption. In connection with such assumption, the Lessee
shall, at the direction of Lessor, take such action as is reasonably necessary
to protect the Lessor's interest in the Equipment. All reasonable fees,
expenses and charges of the parties hereto (including the costs of such parties
in ensuring the compliance by the Lessee with this Section 6.7) incurred in
connection with such sale, conveyance, transfer or lease shall be paid by the
Lessee. Except as specifically consented to in writing by the Owner Trustee
and the Indenture Trustee, the terms of the Operative Agreements shall not be
amended in connection with a sale, conveyance, transfer or lease permitted by
this Section 6.7. The Lessee shall provide the Lessor, the Indenture Trustee
and the Owner Participant with 30 days' prior written notice of a transaction
subject to the provisions of this Section 6.7, provided that if the Lessee is
unable to provide 30 days' advance notice by reason of its legal or contractual
restrictions, the Lessee shall provide such notice as soon as possible,
consistent with its legal and contractual restrictions.
6.8 Rent Sufficiency. Anything contained herein, the
Lease or any other Operative Agreement or other agreement to the contrary
notwithstanding, the aggregate amount of Basic Rent payable on any Payment Date
under the Lease (as any such amount may be adjusted pursuant to Section 2.6
hereof or Section 3.4 of the Lease), together with any amounts paid by Owner
Trustee pursuant to Section 2.2(c) and amounts paid by the Lessee pursuant to
Section 3.5 of the Lease, shall be, under any circumstances and in any event,
at least equal to the aggregate amount of the scheduled installments of
principal of and interest on the Equipment Notes due on such Payment Date.
Anything contained herein, the Lease or any other Operative Agreement or other
agreement to the contrary notwithstanding, the amount of the Termination Value,
Stipulated Loss Value and Early Buy-Out Price payable on any date on account of
any Unit of Equipment, together with any other amounts payable pursuant to
Section 10.2, 11.2 or 22.6 of the Lease, as the case may be, shall be, under
any circumstance and in any event, at least equal to the amount of any payments
then required to be made on account of the outstanding principal of and
premium, if any, and interest on the Equipment Notes pursuant to Section 2.10
of the Indenture.
<PAGE> 46
42
6.9 Pass Through Certificates. If at any time the Lessee
shall own any Pass Through Certificates, the Lessee shall not vote such Pass
Through Certificates or otherwise participate in the giving of any direction,
consent or waiver to be taken pursuant to the Pass Through Trust Agreement.
The Lessee agrees not to amend Section 1.04(c) of the Pass Through Trust
Agreement.
6.10 Environmental Matters. Lessee covenants, at its own
cost and expense, to remove or take remedial action with respect to any
Hazardous Material released into the environment from the Units before or after
the Closing Date to the extent that such removal or remedial action is required
by any applicable Environmental Law; provided that (i) Lessee shall notify
Lessor of such removal or remedial action as soon as practicable and (ii) such
removal or remedial action shall be undertaken in a manner consistent with
Environmental Laws and with Lessee's customary policies and practices;
provided, further, that Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any
such Environmental Law in any reasonable manner which does not materially
adversely affect the rights or interests of Lessor in the Equipment or impair
the Lien of the Indenture or otherwise expose Lessor or the Owner Participant
to criminal sanctions or release Lessee from its obligation with respect to
returning the Equipment as described herein.
SECTION 7. LESSEE'S INDEMNITIES
7.1 General Tax Indemnity.
(a) Tax Indemnitee Defined. For purposes of this Section
7.1, "Tax Indemnitee" means the Owner Participant, its Affiliates, the Owner
Trustee both in its individual capacity and as trustee, the Trust Estate, the
Interim Loan Participant, the Indenture Trustee both in its individual capacity
and as trustee, and each of their respective successors or assigns permitted
under the terms of the Operative Agreements.
(b) Taxes Indemnified. Subject to the exclusions stated
in subsection (c) below, the Lessee agrees to indemnify and hold harmless each
Tax Indemnitee, taking into account the income tax consequences to the Tax
Indemnitee of the accrual or receipt of an indemnity payment, against all fees,
taxes (including, without limitation, sales, use, excise and property), levies,
assessments, duties, charges or withholdings, together with any and all
penalties, additions to tax, fines or interest thereon ("Taxes") imposed upon
any Tax Indemnitee, the Lessee or all or any part of the Equipment by any
federal, state or local government, political subdivision, or taxing authority
in the United States, upon, with respect to or in connection with:
(i) the Equipment or any part of any of the Equipment
or interest therein;
<PAGE> 47
43
(ii) the purchase, acquisition, ownership, delivery,
transport, location, leasing, subleasing, possession, registration,
use, operation, condition, maintenance, repair, return, abandonment,
storage, sale or other application or disposition of or with respect
to the Equipment or any part thereof or interest therein; and
(iii) the rental payments, receipts of earnings arising
from any Unit of Equipment or payable pursuant to the Lease.
(c) Taxes Excluded. The indemnity provided for in
paragraph (b) above shall not apply to any of the following:
(i) As to any Tax Indemnitee, taxes on, based on or
measured by the gross or net income or receipts of such Tax Indemnitee
(including any capital gains, excess profits or alternative minimum
Taxes, and any Taxes on or measured by any items of tax preference),
and any accumulated earnings, personal holding company, succession,
estate, capital, net worth, value added (except to the extent any such
tax is in place or clearly in lieu of a sales, use, license, excise or
property tax), franchise, or conduct of or doing business Taxes
imposed upon such Tax Indemnitee;provided, however, sales, use,
license, excise or property taxes shall not be excluded under this
subparagraph; provided, further, that, notwithstanding the foregoing
proviso, sales or use taxes imposed by any state or local taxing
jurisdiction in the United States in connection with the transactions
contemplated by the Operative Agreements shall be excluded under this
subparagraph if (x) not later than the Closing Date the Lessee shall
have given written notice to the Owner Participant identifying such
jurisdiction and requesting that the Owner Participant provide (at
Lessee's cost and expense) a sales tax certificate that will enable
the Owner Participant or Lessor to receive an exemption from or
reduction in sales tax, (y) such sales tax certificate is reasonably
available to or obtainable by the Owner Participant, and (z) such
sales tax certificate is not provided to the Lessee on the Closing
Date or as soon as practicable thereafter;
(ii) Taxes imposed or accrued on any Equipment with
respect to any period after the earliest of (x) the return of
possession of the Equipment to the Owner Participant or the placement
of the Equipment in storage at the request of the Owner Participant,
in either case pursuant to and in accordance with Section 6 of the
Lease, (y) the termination of the Lease Term with respect to such
Equipment pursuant to Section 10.1 of the Lease, or (z) the discharge
in full of the Lessee's obligation to pay the Termination Value or the
Stipulated Loss Value and all other amounts due, if any, under Section
10 or 11.2 of the Lease, as the case may be, with respect to the
Equipment;
<PAGE> 48
44
(iii) As to any Tax Indemnitee, (y) Taxes which arise out
of or are caused by any breach by such Tax Indemnitee of any of its
representations, warranties or covenants in any of the Operative
Agreements, or the gross negligence or willful misconduct of such Tax
Indemnitee, or (z) Taxes arising from a Lessor Lien with respect to
such Tax Indemnitee;
(iv) As to any Tax Indemnitee, Taxes which become
payable as a result of a sale, assignment, transfer or other
disposition (whether voluntary or involuntary) by such Tax Indemnitee
of all or any portion of its interest in the Equipment or any part
thereof, the Trust Estate, any Indebtedness or any of the Operative
Agreements or rights created thereunder or any transfer of any
interest in such Tax Indemnitee other than a disposition which occurs
as the result of the exercise of remedies for a Lease Event of
Default;
(v) As to any Tax Indemnitee, Taxes imposed by a taxing
authority in a jurisdiction if any to the extent that such Taxes would
in any event have been imposed on such Tax Indemnitee if no Units of
Equipment had been located, operated, used leased or rented to or in
such jurisdiction;
(vi) Taxes which result from the Owner Trustee's
engaging on behalf of the Trust Estate in transactions other than
those permitted or contemplated by the Operative Agreements unless
attributable to the exercise of default remedies pursuant to Article V
of the Trust Indenture;
(vii) As to any Tax Indemnitee, Taxes to the extent they
exceed the Taxes that would have been imposed had the initial Tax
Indemnitee not transferred, sold or otherwise disposed of any interest
held by such Tax Indemnitee;
(viii) As to any Tax Indemnitee, Taxes imposed on any Tax
Indemnitee or any other person who, together with such Tax Indemnitee,
is treated as one employer for employee benefit plan purposes, as a
result of, or in connection with, any "prohibited transaction," within
the meaning or the provisions of the Code or regulations thereunder or
as set forth in Section 406 of ERISA or the regulations implementing
ERISA, engaged in by any Tax Indemnitee other than, with respect to
Owner Participant, Taxes for such prohibited transaction that results
from any misrepresentation made, or other breach committed, by Lessee
or any holder of indebtedness under any documents delivered in
connection with the transactions contemplated hereunder;
(ix) As to the Owner Participant, Taxes described in
clause (i) above imposed by any taxing authority that is not the
United States federal government, any agency or subdivision thereof,
any state, any agency of any state or
<PAGE> 49
45
any political subdivision thereof ("Foreign Taxing Jurisdiction") as a
direct result of the operation or location of one or more Units of
Equipment in such Foreign Taxing Jurisdiction; provided, however, that
this exclusion will not apply if such Taxes would not have been
imposed if the Owner Participant had not (1) been engaged in business
in such Foreign Taxing Jurisdiction (other than as a result of its
ownership and lease of such Units of Equipment therein) or (2)
maintained a permanent establishment (as that term is defined in the
Income Tax Treaties of the United States) therein (other than a
permanent establishment that the Owner Participant is treated as
having as a result of its ownership and lease of such Units of
Equipment therein); and
(x) As to any Tax Indemnitee, Taxes for so long as such
Taxes are being contested in accordance with the provisions of Section
7(g) hereof provided the Lessee is in compliance with its obligations
under Section 7(g) hereof.
(d) (Intentionally Omitted.)
(e) Payments to Lessee.
(i) If any Tax Indemnitee shall realize a Tax benefit
as a result of any Taxes paid or indemnified against by the Lessee
under this Section 7.1 (whether by way of deduction, credit,
allocation or apportionment or otherwise), such Tax Indemnitee shall
pay to the Lessee, an amount equal to the amount of such Tax benefit,
increased by the Tax Indemnitee's additional saved Taxes attributable
to the payment being made to the Lessee hereunder; provided, however,
that if a Payment Event of Default exists and is continuing, such
payment shall be held by Owner Participant until such Payment Event of
Default is cured, provided, further, that when such Payment Event of
Default is cured payment shall be made to the Lessee.
(ii) Upon receipt by a Tax Indemnitee of a refund or
credit of all or part of any Taxes paid or indemnified against by the
Lessee, such Tax Indemnitee shall pay to the Lessee, an amount equal
to the amount of such refund plus any interest received by or credited
to such Tax Indemnitee with respect to such refund increased or
decreased, as the case may be, by the Tax Indemnitee's net additional
or saved taxes attributable to the receipt of such amounts from the
taxing authority and the payment being made to the Lessee hereunder
provided, however, that if a Payment Event of Default exists and is
continuing, such payment shall be held by Owner Participant until such
Payment Event of Default is cured,provided, furthe, that when such
Payment Event of Default is cured payment shall be made to the Lessee.
<PAGE> 50
46
(iii) Payments made to the Lessee under subparagraphs (i)
or (ii) of this subsection 7.1(e) shall be subject to the limitation
that the amount paid to the Lessee by any Tax Indemnitee, after
subtracting the actual reduction in income taxes realized by such Tax
Indemnitee with respect to the payment thereof, shall not exceed the
amount of the indemnity payment previously made by the Lessee after
subtracting the actual increase in income taxes previously incurred by
such Tax Indemnitee with respect to the receipt thereof. Any such
excess shall not be paid but shall instead be carried forward and
shall reduce the Lessee's obligations to make subsequent payments
under subparagraph (b) to the Tax Indemnitee. The Tax Indemnitee
shall in good faith use diligence in filing its Tax returns and in
dealing with taxing authorities to seek and claim any such tax
benefits or refunds and to minimize the Taxes indemnifiable by the
Lessee under paragraph (b).
(f) Procedures and Verification. Any amount payable to a
Tax Indemnitee pursuant to paragraph (b) shall be paid within 30 days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the basis for such indemnity
and the computation of the amount so payable, provided that such amount need
not be paid prior to the later of (i) the date on which such Taxes are paid or
(ii) in the case of amounts which are being contested pursuant to paragraph (g)
hereof, the time such contest (including all appeals) is finally resolved.
Each Tax Indemnitee shall promptly forward to the Lessee any notice, bill or
advice received by it from the relevant taxing authority concerning any Tax
against which the Lessee may be required to indemnify hereunder. Any amount
payable to the Lessee pursuant to paragraph (e) shall be paid within 15 days
after the Tax Indemnitee realizes a tax benefit or receives a refund giving
rise to a payment under paragraph (e), and shall be accompanied by a written
statement by the Tax Indemnitee setting forth in reasonable detail the basis
for computing the amount of such payment. Within 30 days following the
Lessee's receipt of any computation from the Tax Indemnitee, the Lessee may
request that an independent, nationally recognized, accounting firm selected by
Lessee and reasonably acceptable to Owner Participant determine whether such
computations of the Tax Indemnitee are correct. Such accounting firm shall be
requested to make the determination contemplated by this paragraph (f) within
30 days of its selection. In the event such accounting firm shall determine
that such computations are incorrect, such firm then shall notify the parties
of the incorrect computations and discuss with them the manner in which the
computations should be recomputed. The Tax Indemnitee shall cooperate with
such accounting firm and supply it with all information necessary to permit it
to accomplish such determination. Information supplied by the Tax Indemnitee
shall be kept confidential by such accounting firm. In the absence of manifest
error the computations of such accounting firm shall be final, binding and
<PAGE> 51
47
conclusive upon the parties. All fees and expenses of the accounting firm
payable under this Section 7.1(f) shall be borne by the Lessee unless such
verification shall disclose an error in such Tax Indemnitee's favor of the
greater of __% of the amount of such payment determined by such Tax Indemnitee,
or $______, in which case such cost shall be borne by such Tax Indemnitee.
(g) Contest. If a written claim is made against any Tax
Indemnitee for any such Tax referred to in this Section 7.1, the Tax Indemnitee
shall promptly (and in no event later than 30 days after the Tax Indemnitee's
receipt of such claim) notify Lessee of such claim provided, however, that the
failure of the Indemnitee to so notify Lessee shall not preclude any indemnity
hereunder unless such failure adversely affects the Lessee's ability to require
such Indemnitee to contest the Tax or to contest the Tax itself.
If (i) a written claim shall be made for any Tax for which Lessee is
obligated pursuant to this Section 7.1, and (ii) either (y) under applicable
law of the Tax Authority Lessee is allowed to directly contest such Tax in its
own name and such contest does not involve an unindemnified Tax of the Tax
Indemnitee, or (z) the contest involves solely a claim for indemnified Taxes
or, in a contest involving indemnified and unindemnified Taxes the claim for
indemnified Taxes can be severed, then Lessee shall be permitted to contest the
imposition of such Tax (including in its own name in the case of Taxes
described in clause (y) of this paragraph) ("Lessee Controlled Contest");
provided, however, that Lessee shall be permitted to contest the imposition of
such Tax only if Lessee agrees to pay, and shall timely pay, all reasonable
costs and expenses (including without limitation, all reasonable costs,
expenses, losses, legal and accountant's fees and disbursements, penalties and
interest) incurred in contesting such claim. Lessee shall control the contest
of Taxes governed by this paragraph and shall consult in good faith with the
Tax Indemnitee regarding such contest.
In the case of Taxes not governed by the previous paragraph
(Indemnitee Controlled Contest"), such Tax Indemnitee will contest such claim
in good faith provided that (i) Lessee requests in writing that the Tax
Indemnitee contest such claim within 30 days after the Tax Indemnitee has
notified Lessee of the existence of the claim, (ii) prior to the first to occur
of (x) any administrative proceedings beyond the audit stage of the contest, or
(y) any court proceedings, Lessee has furnished the Tax Indemnitee, at Lessee's
expense, with a written opinion of Simpson Thacher & Bartlett, or other
independent counsel selected by Lessee and reasonably acceptable to such Tax
Indemnitee, that there is a reasonable basis to contest such claim, (iii)
Lessee agrees to pay, and shall timely pay, all reasonable costs and expenses
(including, without limitation, all reasonable costs, expenses, losses, legal
and accountant's fees and disbursements, penalties and interest) which such Tax
Indemnitee may incur in contesting such claim, (iv) no Lease Event of Default
shall have
<PAGE> 52
48
occurred and be continuing, unless Lessee shall have posted a satisfactory bond
or other security with respect to the costs of such contest and the loss, and
(v) the amount of the required indemnity payments with respect to such Taxes
(together with any recurring or related actual or potential claims in other
taxable periods relating to the same Taxes) would be $______ or more.
At its sole discretion, the Tax Indemnitee may elect to conduct the
contest or authorize Lessee to conduct the contest of any Tax under an
Indemnitee Controlled Contest. The Tax Indemnitee shall consult in good faith
with Lessee concerning the method of any contest controlled by the Tax
Indemnitee hereunder. If a Tax Indemnitee (or Lessee, in the case of a Lessee
Controlled Contest) contests a Tax by making a payment thereof, then Lessee
shall advance to (or on behalf of, in the case of a Lessee Controlled Contest)
such Tax Indemnitee, an amount equal to the Taxes and any penalties, additions
to tax, fines and interest thereon that are paid by such Tax Indemnitee in
connection with such contest. If the contest of any Tax or the return on which
the Tax is reported also involves other Taxes which are not required to be
indemnified by Lessee pursuant to this Section 7.1 ("Non-Indemnified Items"),
then the Tax Indemnitee shall not discriminate against such Tax in favor of any
Non-Indemnified Items. Unless Lessee has failed to satisfy the requirements
for contesting, or continuing to contest, any indemnified Taxes, no Tax
Indemnitee shall settle the contest of such Tax without the consent of Lessee
(except with respect to Non-Indemnified Items), which consent shall not be
unreasonably withheld or delayed given all the facts and circumstances. All
reasonable costs and expenses of any contest by Lessee or by any Tax Indemnitee
shall be borne by Lessee (except with respect to Non-Indemnified Items) which
costs and expenses shall be paid promptly after receipt of notice.
Notwithstanding anything contained in this Section 7.1, a Tax
Indemnitee will not be required to contest, or to continue to contest and
Lessee shall not be permitted to contest or continue to contest, the validity,
applicability or amount of any tax (or portion thereof) (i) if such Tax
Indemnitee waives its right to indemnity hereunder with respect to such Tax (or
such portion thereof); (ii) if such contest would result in risk of an
imposition of criminal penalties, any material danger of sale, forfeiture or
loss (or loss of use) of the Equipment or any interest therein; and (iii) in
the case of a Indemnitee Controlled Contest, if an Event of Default has
occurred and is continuing, unless Lessee provides such Tax Indemnitee with
security in a manner reasonably satisfactory to such Tax Indemnitee.
(h) In the event any reports with respect to Taxes are
required to be made, the Lessee will either prepare and file such reports (and
in the case of reports which are required to be filed on the basis of
individual items of Equipment, such reports shall be prepared and filed in such
manner as to show as required
<PAGE> 53
49
the interests of each Tax Indemnitee in such item of Equipment) or, if it shall
not be permitted to file the same, it will notify each Tax Indemnitee of such
reporting requirements, prepare such reports in such manner as shall be
satisfactory to each Tax Indemnitee and deliver the same to each Tax Indemnitee
within a reasonable period prior to the date the same is to be filed. The
Lessee shall provide such information as the Owner Participant or the Lessor
may reasonably require from the Lessee to enable the Owner Participant and the
Lessor to fulfill their respective tax filing, tax audit, and tax litigation
obligations.
(i) The provisions of this Section 7.1 shall continue in
full force and effect, notwithstanding the expiration or termination of any
Operative Agreement, until all obligations hereunder have been met and all
liabilities hereunder paid in full.
7.2 General Indemnification and Waiver of Certain Claims.
(a) Claims Defined. For the purposes of this Section
7.2, "Claims" shall mean any and all costs, expenses, liabilities, obligations,
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort or otherwise) which may be imposed on, incurred by,
suffered by, or asserted against an Indemnified Person, as defined herein, or
any Unit and, except as otherwise expressly provided in this Section 7.2, shall
include, but not be limited to, all reasonable out-of-pocket costs,
disbursements and expenses (including legal fees and expenses) paid or incurred
by an Indemnified Person in connection therewith or related thereto.
(b) Indemnified Person Defined. For the purposes of this
Section 7.2, "Indemnified Person" means the Owner Participant and its
Affiliates, the Owner Trustee (both in its individual capacity and as Owner
Trustee), the Interim Loan Participant, the Indenture Trustee, and each of
their respective directors, officers, employees, successors and permitted
assigns, agents and servants, the Trust Estate, the Indenture Estate and the
Pass Through Trustee (the respective directors, officers, employees, successors
and permitted assigns, agents and servants of the Owner Participant and its
Affiliates, the Owner Trustee and the Indenture Trustee, as applicable,
together with the Owner Participant, the Owner Trustee and the Indenture
Trustee, as the case may be, being referred to herein collectively as the
"Related Indemnitee Group" of the Owner Participant, the Indenture Trustee and
the Owner Trustee, respectively).
(c) Claims Indemnified. Whether or not any Unit is
accepted under the Lease, or a closing occurs with respect thereto, and subject
to the exclusions stated in subsection (d) below, Lessee agrees to indemnify,
protect, defend and hold harmless each Indemnified Person on an after-tax basis
against
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50
Claims resulting from or arising out of (whether or not such Indemnified Person
shall be indemnified as to such Claim by any other Person):
(i) this Agreement or any other Operative Agreement or
any of the transactions contemplated hereby and thereby or the
ownership, lease, operation, possession, modification, improvement,
abandonment, use, non-use, maintenance, sublease, substitution,
control, repair, storage, transport, condition, titling, alteration,
transfer or other application or disposition, return, overhaul,
testing or registration of any Unit (including, without limitation,
injury, death or property damage of passengers, shippers or others,
the Environmental Laws and all Claims arising out of the release of
Hazardous Materials to the environment (including, without limitation,
clean-up costs, response costs, costs of corrective actions and
natural resource damages)) whether or not in compliance with the terms
of the Lease;
(ii) the construction, manufacture, financing,
refinancing, design, purchase, acceptance, rejection, delivery,
non-delivery or condition of any Unit (including, without limitation,
latent and other defects, whether or not discoverable, and any claim
for patent, trademark or copyright infringement); and
(iii) the initial offer, sale or delivery of (x) the
Equipment Notes and the Pass Through Certificates and (y) the
Beneficial Interest and (z) any refinancing with respect thereto
(including, without limitation, with regard to the matters identified
in Section 10.2(a)(iv)).
(d) Claims Excluded. The following are excluded from the
agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the extent
attributable to acts or omissions or events occurring entirely after
(A) in the case of the exercise and full and complete performance by
the Lessee of a purchase option with respect to such Unit under
Section 22.2 of the Lease, the exercise by the Lessee of an early
termination option with respect to such Unit under Section 10 of the
Lease (whether or not the Lessor exercises its rights under Section
10.3) or the occurrence of an Event of Loss with respect to such Unit
under Section 11 of the Lease, the last to occur of (x) the payment of
all amounts due from the Lessee in connection with any such event and
(y) the release of the Lien of the Indenture on such Unit or (B) in
all other cases, the last to occur of (x) the earlier to occur of the
termination of the Lease with respect to such Unit or the expiration
of the Lease Term, (y) the return of such Unit to the Lessor (it being
understood that, so long as any Unit is in storage as provided in
Section 6.3 or 15.4 of the Lease, the date of
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51
return thereof for the purpose of this clause (i) shall be the last
day of the Storage Period or the storage period provided in said
Section 15.4, as the case may be), and (z) the release of the Lien of
the Indenture on such Unit; and it being further understood that
during any such storage period the Lessee takes responsibility only
for its own acts, omissions, gross negligence or willful misconduct);
(ii) Claims which are Taxes, whether or not the Lessee
is required to indemnify therefor under Section 7.1 hereof or the Tax
Indemnity Agreement, the Lessee's entire obligation with respect to
Taxes and losses of tax benefits being fully set out in such Section
7.1 or the Tax Indemnity Agreement;
(iii) with respect to any particular Indemnified Person,
Claims to the extent attributable to the gross negligence or willful
misconduct of (other than gross negligence or willful misconduct
imputed as a matter of law to such Indemnified Person solely by reason
of its interest in the Equipment) such Indemnified Person;
(iv) with respect to any particular Indemnified Person,
Claims to the extent attributable to the incorrectness in any material
respect of any representation or warranty by such Indemnified Person
in the Operative Agreements or any document or certificate executed in
connection therewith; or
(v) with respect to any particular Indemnified Person,
the failure by such Indemnified Person to perform or observe any
agreement, covenant or condition required to be performed or observed
by such Indemnified Person in any of the Operative Agreements
including, without limitation, the creation or existence of a Lessor
Lien or a Lien required to be discharged by the Indenture Trustee or
the Loan Participant under Section 6.4; or
(vi) Claims to the extent attributable to any offer,
sale or other disposition (voluntary or involuntary) by or on behalf
of or for the account of (x) the Lessor of all or any part of its
interest in the Equipment or (y) any other Indemnified Person of all
or any part of such Indemnified Person's interest in the Equipment,
the Trust Estate, the Indenture Estate, or in the Operative Agreements
except, in the case of both clauses (x) or (y), (i) in connection with
the exercise of remedies as a result, and during the continuance, of a
Lease Event of Default under a Lease or (ii) pursuant to the exercise
by the Lessee of its purchase options or other rights under the Lease
or (iii) in connection with a refinancing pursuant to Section 10.2
hereof or (iv) in connection with an assumption of the Equipment Notes
pursuant to Section 10.14 hereof; or
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52
(vii) Claims to the extent attributable to a failure on
the part of the Indenture Trustee or the Owner Trustee, as the case
may be, to distribute in accordance with the Trust Indenture or the
Trust Agreement, as the case may be, any amounts received and
distributable by it thereunder; or
(viii) Claims to the extent attributable to the
authorization or giving or withholding of any future amendments,
supplements, waivers or consents with respect to any of the Operative
Agreements other than as provided in Section 2.5(b) or as may be
required by any Operative Agreement; or
(ix) any Claim that is included in Transaction Expenses
and for which the Owner Participant is responsible pursuant to Section
2.5(a) hereof or that is incurred by any Indemnified Person to the
extent that such Indemnified Person shall have expressly agreed in any
Operative Agreements to bear such expense without right of
reimbursement under any Operative Agreement; or
(x) any Claim for any amount constituting an amount
payable by the Lessor under the Indenture or the Equipment Notes
resulting from an Indenture Event of Default that does not also
constitute a Lease Event of Default under the Lease; or
(xi) any Claim that would not have been incurred but for
the appointment of a successor Owner Trustee without the consent of
the Lessee except in connection with the exercise of remedies as a
result of and during the continuance of a Lease Event of Default under
the Lease.
(e) Insured Claims. In the case of any Claim indemnified
by the Lessee hereunder which is covered by a policy of insurance maintained by
the Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified
Person agrees, at the Lessee's expense, to provide reasonable cooperation to
the insurers in the exercise of their rights to investigate, defend or
compromise such Claim as may be required to retain the benefits of such
insurance with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall, after
obtaining knowledge thereof, promptly notify the Lessee of any Claim as to
which indemnification is sought; provided, however, that the failure to give
such notice shall not release the Lessee from any of its obligations under this
Section 7, except to the extent that failure to give notice of any action, suit
or proceeding against such Indemnified Person shall have a material adverse
affect on Lessee's ability to defend such Claim or recover proceeds under any
insurance policies maintained by Lessee hereunder. Subject to the provisions
of the following paragraph, the Lessee shall at its sole cost and expense be
entitled to control, and shall assume full responsibility for,
<PAGE> 57
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the defense of such claim or liability; provided that the Lessee shall keep the
Indemnified Person which is the subject of such proceeding fully apprised of
the status of such proceeding and shall provide such Indemnified Person with
all information with respect to such proceeding as such Indemnified Person
shall reasonably request.
Notwithstanding any of the foregoing to the contrary, the
Lessee shall not be entitled to control and assume responsibility for the
defense of such claim or liability if (1) a Lease Event of Default shall have
occurred and be continuing, (2) such proceeding will involve any material
danger of the sale, forfeiture or loss of, or the creation of any Lien (other
than any lien permitted under the Operative Agreements or a Lien which is
adequately bonded to the satisfaction of such Indemnified Person) on, any Unit
of Equipment, or any part of the Trust Estate or impairment of the Lien of the
Indenture thereon, (3) in the good faith opinion of such Indemnified Person,
there exists an actual or potential conflict of interest such that it is
advisable for such Indemnified Person to retain control of such proceeding or
(4) such claim or liability involves the possibility of criminal sanctions to
such Indemnified Person. In the circumstances described in clauses (1) through
(4) of the preceding sentence, the Indemnified Person shall be entitled to
control and assume responsibility for the defense of such claim or liability at
the expense of the Lessee. In addition, any Indemnified Person may participate
in any proceeding controlled by the Lessee pursuant to this Section 7.2, at its
own expense in respect of any such proceeding as to which the Lessee shall have
acknowledged in writing its obligation to indemnify the Indemnified Person
pursuant to this Section 7.2, and at the expense of Lessee in respect of any
such proceeding as to which the Lessee shall not have so acknowledged its
obligation to the Indemnified Person pursuant to this Section 7.2. Lessee may
in any event participate in all such proceedings at its own cost. Nothing
contained in this Section 7.2(f) shall be deemed to require an Indemnified
Person to contest any Claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
(g) Subrogation. If a Claim indemnified by the Lessee
under this Section 7.2 is paid in full by the Lessee and/or an insurer under a
policy of insurance maintained by the Lessee, the Lessee and/or such insurer,
as the case may be, shall be subrogated to the extent of such payment to the
rights and remedies of the Indemnified Person (other than under insurance
policies maintained by such Indemnified Person at its own expense) on whose
behalf such Claim was paid with respect to the transaction or event giving rise
to such Claim. So long as no Lease Event of Default shall have occurred and be
continuing, should an Indemnified Person receive any refund, in whole or in
part, with respect to any Claim paid by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not in excess of the amount the Lessee or any
of its insurers has paid in respect
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54
of such Claim paid or payable by such Indemnified Person on account of such
refund) to the Lessee.
(h) Waiver of Certain Claims. The Lessee hereby waives
and releases any Claim now or hereafter existing against any Indemnified Person
arising out of death or personal injury to personnel of the Lessee, loss or
damage to property of the Lessee, or the loss of use of any property of the
Lessee, which may result from or arise out of the condition, use or operation
of the Equipment during the Lease Term, including without limitation any latent
or patent defect whether or not discoverable.
(i) No Guaranty. The general indemnification provisions
of this Section 7.2 do not constitute a guaranty by the Lessee that the
principal of, interest on or any amounts payable with respect to the Equipment
Notes will be paid.
(j) Survival of Obligations. The indemnities and
agreements of the Lessee provided for in this Article 7 shall survive the
closing of this transaction and the expiration or other termination of this
Participation Agreement and the other Operative Agreements.
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease, and expressly agrees that
with respect to the Lease, so long as no Lease Event of Default has occurred
and is continuing thereunder, it or any Person acting on its authority, shall
not, through its or any such Person's actions or inactions, interfere with
Lessee's rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by Lessee or any permitted sublessee of the
Equipment leased thereunder.
SECTION 9. SUCCESSOR INDENTURE TRUSTEE
(a) In the event that the Indenture Trustee gives notice
of its resignation pursuant to Section 8.02 of the Trust Indenture, a successor
Indenture Trustee shall be appointed pursuant to said Section 8.02.
(b) In the event that either the Owner Trustee or the
Lessee obtains actual knowledge of the existence of any of the grounds for
removal of the Indenture Trustee set forth in Section 8.02 of the Indenture,
the Owner Trustee or the Lessee, as the case may be, shall promptly notify the
other by telephone, confirmed in writing and the parties entitled to act
promptly thereafter may remove the Indenture Trustee and appoint a successor
Indenture Trustee.
<PAGE> 59
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SECTION 10. MISCELLANEOUS
10.1 Consents. The Owner Participant covenants and agrees
that it shall not unreasonably withhold its consent to any consent requested of
the Owner Trustee under the terms of the Operative Agreements that by its terms
is not to be unreasonably withheld by the Owner Trustee.
10.2 Refinancing.
(a) Generally. So long as no Lease Default or Lease
Event of Default shall be in existence and subject to the satisfaction of the
terms and conditions set forth in this Section 10.2, the Lessee shall have the
right, on not more than two occasions during the Lease Term (excluding any
refinancing pursuant to Section 10.2(e)), to require the Owner Participant and
the Owner Trustee to effect an optional prepayment of any or all of the
Equipment Notes pursuant to Section 2.10(c) of the Indenture as part of a
refunding or refinancing operation, upon the following terms and conditions:
(i) the Owner Participant, the Indenture Trustee, the
Owner Trustee, and any other appropriate parties agree to enter into a
financing or loan agreement (which may involve an underwriting
agreement in connection with a public offering) proposed by the Lessee
which is in form and substance reasonably satisfactory to the Owner
Participant, providing for (x) the issuance and sale by the Owner
Trustee or such other party as may be appropriate on the date
specified in such agreement (for the purposes of this Section 10.2,
the Refunding Date") of debt securities in an aggregate principal
amount (in the lawful currency of the United States) equal to the
principal amount of the Equipment Notes to be refunded or refinanced
on the Refunding Date;
(ii) the Lessee and the Owner Trustee will amend the
Lease such that (w) if the Refunding Date is not a Rent Payment Date,
the Lessee shall on the Refunding Date prepay that portion of the next
succeeding installment of Basic Rent as shall equal the aggregate
interest accrued on the Equipment Notes outstanding to the Refunding
Date, (x) Basic Rent payable under the Lease in respect of the period
from and after the Refunding Date shall be recalculated to preserve
the Net Economic Return which the Owner Participant would have
realized had such refunding not occurred, provided that the net
present value of Basic Rent shall be minimized to the extent
consistent therewith, and (y) amounts payable under the Lease in
respect of the Early Buyout Price, Stipulated Loss Value and
Termination Value from and after the Refunding Date shall be
appropriately recalculated to preserve the Net Economic Return which
the Owner Participant would have realized had such refunding or
refinancing not occurred (it being agreed that any
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56
recalculations pursuant to subclauses (x) and (y) of this clause (ii)
shall be performed in accordance with the requirements of Section 2.6
hereof);
(iii) the Owner Trustee will enter into an agreement to
provide for the securing thereunder of the debt securities issued by
the Owner Trustee pursuant to clause (a) of this Section 10.2 in like
manner as the Equipment Notes and/or will enter into such amendments
and supplements to the Indenture proposed by the Lessee as being
necessary to effect such refunding or refinancing, which agreements,
amendments and/or supplements shall be reasonably satisfactory in form
and substance to the Owner Participant;provided that, notwithstanding
the foregoing (but subject to the provisions of clause (i) above), the
Lessee reserves the right to set the economic terms and other terms
not customarily negotiated between an owner participant and a lender
of the refunding or refinancing transaction to be so offered;
provided, further, that no such amendment or supplement will increase
the obligations or impair the rights of the Owner Participant under
the Operative Agreements without the consent of the Owner Participant;
and
(iv) in the case of a refunding or refinancing involving
a public offering of debt securities, neither the Owner Trustee nor
the Owner Participant shall be the "issuer", "obligor" or
"underwriter" for securities law purposes, and the offering materials
(including any registration statement) for the refunding or
refinancing transaction shall be reasonably satisfactory to the Owner
Participant (and shall not in any event identify the Owner Participant
unless required by law);
(v) unless otherwise agreed by the Owner Participant,
the Lessee shall pay to the Owner Trustee or to the Person entitled
thereto as Supplemental Rent an amount equal to the Make-Whole Amount,
if any, payable on the Refunding Date;
(vi) the Owner Participant, the Owner Trustee, the
Indenture Trustee and the Pass Through Trustee shall have received (1)
such opinions of counsel as they may reasonably request concerning
compliance with the Securities Act of 1933, as amended, and any other
applicable law relating to the sale of securities and (2) such other
opinions of counsel and such certificates and other documents, each in
form and substance satisfactory to them, as they may reasonably
request in connection with compliance with the terms and conditions of
thisSection 10.2;
(vii) all necessary authorizations, approvals and
consents shall have been obtained;
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(viii) the Owner Participant shall not be required to
undertake due diligence in order to avoid transactions that could be
deemed prohibited transactions within the meaning of Section
4975(c)(1)(A) through (D) of the Code;
provided, however, that (x) no refunding or refinancing of the Equipment Notes
will be permitted if within 30 days after receipt of a request from the Lessee
to effect a refunding or refinancing pursuant to this Section 10.2(a) and of
information regarding the terms of such refunding or refinancing necessary to
render the opinion referred to below, the Owner Participant determines in good
faith that the Owner Participant or the Owner Trustee will bear any loss or
expense or adverse tax or other consequence as a result of such refunding or
refinancing (including, without limitation, with respect to matters arising
under ERISA and any adverse tax consequences resulting from the application of
Revenue Procedure 75-21 or 75-28 or Section 467 of the Code) and gives notice
of such determination in reasonable detail to Lessee, unless Lessee shall have
agreed to indemnify the Owner Participant for such loss or expense or such
adverse tax or other consequences in a manner reasonably satisfactory to the
Owner Participant, as the case may be; (y) the Lessee shall pay to or reimburse
the Participants, the Owner Trustee and the Indenture Trustee for all
reasonable costs and expenses (including reasonable attorneys fees) paid or
incurred by them in connection with such refunding or refinancing and (z) no
refunding or refinancing shall result in the reasonable opinion of the Owner
Participant in a material risk of a change in accounting treatment of the
Lease. Subject to the terms and conditions set forth in this Section 10.2,
each party hereto agrees to cooperate in good faith with the Lessee in
effecting any such refunding or refinancing, including entering into such
further agreements, certificates, documents and doing such further things as
may be reasonably requested by Lessee to effect such refunding or refinancing.
(b) Other Prepayments, Redemptions, etc. No prepayment
or redemption and cancellation by the Owner Trustee or the Owner Participant of
any Equipment Note (other than pursuant to Section 2.10(a) and (b) of the
Indenture and this Section 10.2) shall be made without the prior written
consent of the Lessee.
(c) Notice. The Lessee will promptly provide to the
Owner Participant, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee notice of the final terms and conditions of any such refunding
or refinancing (other than pricing terms) within ten Business Days prior to the
execution and delivery of the documents contemplated hereunder in connection
therewith.
(d) No Obligation of Owner Participant. Notwithstanding
anything to the contrary contained in this Section 10.2, in no event shall the
Owner Participant have any obligation to initiate or structure any refinancing
or refunding
<PAGE> 62
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of Equipment Notes or to take, or to cause the Owner Trustee to take, any
action in connection therewith other than such as is required by this Section
10.2.
(e) Interim Debt Refinancing. In addition to the
refunding and refinancing rights under Section 10.2(a), Lessee shall have the
right to require the Owner Participant and the Owner Trustee to effect an
optional prepayment on the Refinancing Date of all of the Equipment Notes
issued on the Closing Date pursuant to Section 2.10(c) of the Indenture with
the proceeds of the Equipment Notes to be sold to the Pass Through Trustee on
the Refinancing Date (such refinancing, the "Interim Debt Refinancing"), upon
the following terms and conditions:
(i) the Pass Through Trustee shall execute and deliver
the Participation Agreement Supplement substantially in the form of
Exhibit F;
(ii) the conditions precedent set forth in the
Participation Agreement Supplement shall have been satisfied;
(iii) the Lessee and the Underwriter shall execute and
deliver the Underwriting Agreement substantially in the form of
Exhibit G;
(iv) the Lessee and the Pass Through Trustee shall
execute and deliver one or more Pass Through Trust Agreements, each
substantially in the form of Exhibit H;
(v) the provisions of clauses (ii) (subject to Section
2.2(c) hereof and Section 3.3 of the Lease), (iii), (iv), (vi), (vii)
and (viii) of Section 10.2(a) shall be applicable to the Interim Debt
Refinancing; and
(vi) in connection with the Interim Debt Refinancing,
adjustments to Basic Rent, Stipulated Loss Values and Termination
Values shall be performed pursuant to Section 2.6, and, after giving
effect to the Interim Debt Refinancing, the percentage of Total
Equipment Cost financed by the issuance of Equipment Notes may be
increased by not more than 5% of the amount of the Owner Participant's
Commitment (subject to the Owner Participant maintaining an equity
investment of not less than an amount equal to 20% of the Total
Equipment Cost) (the amount of such increase, if any, the "Increased
Debt Portio"), and proceeds of the Equipment Notes issued on the
Refinancing Date in an amount equal to the Increased Debt Portion, if
any, shall be payable to the Owner Trustee on the Refinancing Date for
purposes of distribution to the Owner Participant.
10.3 Lessee's Assumption of the Certificates. Subject to
compliance by the Lessee with all of its obligations under the Operative
Agreements, each of the Owner Participant,
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the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the
Lessee covenants and agrees that if the Lessee elects to terminate the Lease in
whole or part and to purchase some or all of the Units of the Equipment leased
thereunder pursuant to Section 22.6 of the Lease, then the Owner Trustee will
transfer to the Lessee, without recourse or warranty (except as to the absence
of Lessor's Liens) all of the Owner Trustee's right, title and interest in and
to the Equipment so purchased, and if the Lessee, in connection with such
purchase, elects to assume all or an appropriate portion of the related
obligations of the Owner Trustee under the Equipment Notes pursuant to Article
VII of the Indenture, each of the parties shall, at Lessee's sole cost and
expense execute and deliver appropriate documentation permitting the Lessee to
assume, in the manner provided in Article VII of the Indenture Equipment Notes
in a principal amount determined as provided in Article VII of the Indenture on
the basis of full recourse to the Lessee, maintaining the security interest in
such Equipment created by the Indenture, releasing the Owner Participant and
the Owner Trustee from all obligations in respect of the Equipment Notes so
assumed (except any obligations which shall have occurred prior to such
assumption) and all such other actions as are reasonably necessary to permit
such assumption by the Lessee. If, in connection with such assumption, the
Lessee elects to pay the purchase price for such Equipment in installments in
accordance with Section 22.6 of the Lease, then any security interest retained
by the Owner Trustee in and to such Units shall be subject and subordinate in
all respects to the Lien of the Indenture, but the Owner Trustee shall have
such cure rights and other rights specified in the Indenture with respect to
the remedies available to the Indenture Trustee against the Lessee and such
Equipment as it shall have enjoyed as obligor under the Indenture and lessor
under the Lease. The Lessee shall pay all reasonable expenses of the Indenture
Trustee in connection with any assumption of the obligations in respect of the
Equipment Notes.
10.4 Amendments and Waivers. Except as otherwise provided
in the Indenture, no term, covenant, agreement or condition of this Agreement
may be terminated, amended or compliance therewith waived (either generally or
in a particular instance, retroactively or prospectively) except by an
instrument or instruments in writing executed by each party against which
enforcement of the termination, amendment or waiver is sought.
10.5 Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by express mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by
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such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by any of the methods set forth in clauses
(a) or (b) above or this clause (c), in each case addressed to each party
hereto at its address set forth below or, in the case of any such party hereto,
at such other address as such party may from time to time designate by written
notice to the other parties hereto:
If to the Lessee: Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma
Attention: Assistant Treasurer
Telephone:
Facsimile:
Confirmation No:
If to the Owner
Trustee: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Telephone:
Facsimile:
Confirmation No:
with a copy to: the Owner Participant at the address set
forth below
If to the Owner
Participant:
Attention:
Telephone:
Facsimile:
If to the Indenture
Trustee or the Pass
Through Trustee: Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
(Philips Trust No. 94-_)
Telephone:
Facsimile:
Confirmation No:
If to the Interim
Loan Participant:
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Attention:
Telecopier:
Telephone:
, provided that in the case of any notice delivered pursuant to Section 6.1,
the Owner Participant shall also send notice to the attention of the Treasurer
of the Lessee.
10.6 No Guarantee of Debt. Nothing contained herein or in
the Lease, the Trust Indenture, the Trust Agreement, the Pass Through Trust
Agreement or the Tax Indemnify Agreement or in any certificate or other
statement delivered by the Lessee in connection with the transactions
contemplated hereby shall be deemed to be (a) a guarantee by the Lessee to the
Owner Trustee, the Owner Participant, the Indenture Trustee or the Loan
Participant that the Equipment will have any residual value or useful life, or
(b) a guarantee by the Indenture Trustee or the Lessee of payment of the
principal of, premium, if any, or interest on the Equipment Notes.
10.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by,
the parties hereto and their respective successors and assigns as permitted by
and in accordance with the terms hereof, including each successive holder of
the Beneficial Interest permitted under Section 6.1 hereof and each successive
holder of any Equipment Note issued and delivered pursuant to this Agreement or
the Indenture. Except as expressly provided herein or in the other Operative
Agreements, no party hereto may assign its interests herein without the consent
of the parties hereto.
10.8 Business Day. Notwithstanding anything herein or in
any other Operative Agreement (other than the Interim Indenture Supplement) to
the contrary, if the date on which any payment is to be made pursuant to this
Agreement or any other Operative Agreement is not a Business Day, the payment
otherwise payable on such date shall be payable on the next succeeding Business
Day with the same force and effect as if made on such succeeding Business Day
and (provided such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date
to the time of such payment on such next succeeding Business Day.
10.9 GOVERNING LAW. THIS AGREEMENT AND THE BILL OF SALE
SHALL BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE; PROVIDED, HOWEVER, THAT THE PARTIES HERETO SHALL BE ENTITLED TO
ALL RIGHTS CONFERRED BY ANY APPLICABLE FEDERAL STATUTE, RULE OR REGULATION.
10.10 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
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62
effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under the laws of any applicable
jurisdiction, such provision, as to such jurisdiction, shall be, to the extent
permitted by law, ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement in such jurisdiction or in any other jurisdiction.
10.11 Counterparts. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
10.12 Headings and Table of Contents. The headings of the
Sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
10.13 Limitations of Liability.
(a) Liabilities of Participants. Neither the Indenture
Trustee, the Owner Trustee nor any 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
Agreements, and neither the Indenture Trustee, the Pass Through Trustee nor any
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 the
Indenture Trustee, the Pass Through Trustee or any Participant be liable to the
Lessee for any action or inaction on the part of the Owner Trustee in
connection with the transactions contemplated herein, whether or not such
action or inaction is caused by willful misconduct or gross negligence of the
Owner Trustee unless such action or inaction is at the direction of the
Indenture Trustee, the Pass Through Trustee or any Participant, as the case may
be, or such direction is expressly permitted hereby or by any other Operative
Agreement.
(b) No Recourse to the Owner Trustee. It is expressly
understood and agreed by and between the Owner Trustee, the Lessee, the Owner
Participant, the Indenture Trustee, the Pass Through Trustee and the Loan
Participant, and their respective successors and permitted assigns that,
subject to the proviso contained in this Section 10.13(b), all representations,
warranties and undertakings of the Owner Trustee hereunder shall be binding
upon the Owner Trustee, only in its capacity as Owner Trustee under the Trust
Agreement, and (except as expressly provided herein) the Owner Trustee shall
not be liable in its individual capacity for any breach thereof, except for its
gross negligence or willful misconduct, or for breach of its covenants,
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representations and warranties contained herein, except to the extent
covenanted or made in its individual capacity; provided, however, that nothing
in this Section 10.13(b) shall be construed to limit in scope or substance
those representations and warranties of the Owner Trustee made expressly in its
individual capacity set forth herein. The term "Owner Trustee" as used in this
Agreement shall include any successor trustee under the Trust Agreement, or the
Owner Participant if the trust created thereby is revoked.
10.14 Confidentiality. (a) The Owner Participant, the Owner
Trustee, the Indenture Trustee and the Pass Through Trustee shall maintain in
confidence and not disclose to any Person any non-public information furnished
to it pursuant to any of the Operative Agreements ("Confidential Information")
without the prior consent of the Lessee, except (a) as required by law, rule,
regulation or any governmental agency, (b) to the extent that such Confidential
Information is publicly available, (c) where such Confidential Information was
previously known to the Owner Participant, the Owner Trustee, the Indenture
Trustee or the Pass Through Trustee, as the case may be, free of any obligation
to keep such information confidential, or such Confidential Information is or
becomes available to the Owner Participant, the Owner Trustee, the Indenture
Trustee or the Pass Through Trustee, as the case may be, on a non-confidential
basis from a source other than the Lessee or its agents or advisors, (d) as
disclosure to third parties (including courts of competent jurisdiction) in
connection with or in response to any order, decree, judgement, subpoena,
notice of discovery or similar ruling or pleading, (e) as part of its normal
reporting or review procedure to its auditors, regulators, parent company or
affiliates, (f) to the extent necessary to obtain appropriate insurance, to its
insurance agent, provided, that prior to such disclosure, such agent shall sign
a confidentiality agreement binding the agent to provisions substantially the
same as the provisions of this Section 10.15, (g) in the case of the Indenture
Trustee and the Pass Through Trustee, to the extent required by the terms of
the Pass Through Trust Agreement and to the extent required to avoid subjecting
either the Indenture Trustee or the Pass Through Trustee to the risk of civil
liability or breach of fiduciary duty as evidenced by an opinion of counsel to
such person to such effect (a copy of which opinion, addressed only to the
Indenture Trustee and/or the Pass Through Trustee, as applicable, shall be
delivered to the Lessee), or (h) in order to enforce its rights and perform its
obligations pursuant to the Operative Agreements. The obligations of the Owner
Participant, the Owner Trustee, the Indenture Trustee or the Pass Through
Trustee under this Section 10.15 shall survive the termination of the Operative
Agreements and the payment of the Equipment Notes and all other amounts payable
hereunder.
(b) The Interim Loan Participant shall maintain in
confidence and not disclose to any Person any Confidential
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64
Information without the prior consent of the Lessee, subject to the Interim
Loan Participant's (a) obligation to disclose any Confidential Information
pursuant to a request or order under applicable laws and regulations or
pursuant to a subpoena or other legal process, (b) right to disclose any
Confidential Information to bank examiners, to its affiliates, auditors and
counsel, and to any prospective purchasing bank approved by the Lessee, (c)
right to disclose any Confidential Information in connection with any
litigation or dispute or the exercise of any remedy hereunder; provided,
however, that Confidential Information disclosed pursuant to clause (b) or (c)
of this sentence shall be so disclosed subject to such procedures as are
reasonably calculated to maintain the confidentiality thereof. Notwithstanding
the foregoing provisions of this section 10.14(b), (a) the foregoing obligation
of confidentiality shall not apply to any Confidential Information that was
known to the Interim Loan Participant or any of their respective affiliates
prior to the time it received such Confidential Information from the Lessee
pursuant to this Agreement, other than as a result of the disclosure thereof by
a Person who, to the knowledge or reasonable belief of the Interim Loan
Participant, was prohibited from disclosing it by any duty of confidentiality
arising (under this Agreement or otherwise) by contract or law, and (b) the
foregoing obligation of confidentiality shall not apply to any Confidential
Information that becomes part of the public domain independently of any act of
the Interim Loan Participant not permitted hereunder or when identical or
substantially similar information is received by the Interim Loan Participant,
without restriction as to its disclosure or use, from a Person who was not
prohibited from disclosing it by any duty of confidentiality arising (under
this Agreement or otherwise) by contract or law. The obligations of the
Interim Loan Participant under this section 10.14(a) shall survive the
termination of the Operative Agreements and the payment of the Equipment Notes
and all other amounts payable hereunder.
10.15 Survival of Indemnities. Notwithstanding anything in
this Agreement or in any other document or agreement to the contrary, any
indemnity provided by any Person hereunder or in any other Operative Agreement
shall survive the termination of this Agreement, the Lease and any other
Operative Agreement on the terms and conditions, and subject to the exclusions,
provided therein.
<PAGE> 69
65
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered, all as of the date first
above written.
Lessee: PHILLIPS PETROLEUM COMPANY
By:________________________________
Owner Trustee: WILMINGTON TRUST COMPANY, not in its
individual capacity except as
otherwise expressly provided herein
but solely as Owner Trustee
By:________________________________
Owner Participant: ___________________________________
By:________________________________
Indenture Trustee: SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By:________________________________
Interim Loan Participant: ___________________________________
By:________________________________
<PAGE> 70
EXHIBIT A
PARTICIPATION AGREEMENT
CERTIFICATE OF ACCEPTANCE
I, a duly appointed and authorized representative of the
Lessor and PHILLIPS PETROLEUM COMPANY (the "Lessee") under the Lease (as
defined in that certain Participation Agreement (Phillips Trust 94-__) dated as
of ________________, 1994, among the Lessor, the Lessee and the Trustees
identified therein), do hereby certify that I have received and accepted
delivery, on behalf of the Lessor, and have delivered to, and on behalf of the
Lessee hereby accept delivery of, under the Lease, the Units listed on Schedule
A attached hereto:
PLACE ACCEPTED:
DATE ACCEPTED:
Dated: __________________, 1994
______________________________
Authorized Representative of
the Lessor and the Lessee
(Phillips Trust No. 94-__)
<PAGE> 71
EXHIBIT B
PARTICIPATION AGREEMENT
FORM OF
BILL OF SALE
PHILLIPS PETROLEUM COMPANY, a Delaware corporation (the
"Seller"), in consideration of the sum of One Dollar ($1) and other good and
valuable consideration paid by Wilmington Trust Company not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (Phillips Trust No. 94-__), dated as of ________________, 1994, by
and between the Owner Trustee (in its individual capacity) and First American
National Bank (the "Owner Participant"), at or before the execution and
delivery of these presents, the receipt of which is hereby acknowledged, does
hereby grant, bargain, sell, transfer, assign and set over unto the Owner
Trustee and its successors and assigns all right, title and interest of the
Seller, in and to the units of equipment (the "Equipment") set forth on
Schedule A hereto which have been delivered by the Seller pursuant to the
Participation Agreement (Phillips Trust No. 94-__), dated as of
________________, 1994, among the Seller, Phillips Petroleum Company, as
Lessee, the Owner Participant, the Owner Trustee, Shawmut Bank Connecticut,
National Association, as Indenture Trustee and _______________, as Interim Loan
Participant.
And the Seller hereby warrants to the Owner Trustee and its
successors and assigns that at the time of delivery of the Equipment the Seller
had title thereto and good and lawful right to sell the Equipment and the
Equipment was free and clear of all liens, security interests and other
encumbrances of any nature except (as defined in Appendix A to the Lease
referred to in the Participation Agreement) Liens described in clauses (i),
(ii) and (v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not due and
payable, and the Seller covenants that it will defend such title to the
Equipment against the demands of all persons whomsoever based on claims
originating prior to the delivery of the Equipment by the Seller.
<PAGE> 72
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IN WITNESS WHEREOF, the Seller has caused this instrument to
be executed in its name by a duly authorized officer on the _____ day of
__________________, 1994.
PHILLIPS PETROLEUM COMPANY
By ___________________________________
Name:
Title:
<PAGE> 73
EXHIBIT C
TRANSFEREE'S PARENT GUARANTY
(Phillips Trust No. 94-__)
TRANSFEREE'S PARENT GUARANTY (Phillips Trust No.
94-___), dated as of ___________ __, ____, by _________________, a ____________
corporation (the "Guarantor"), to the Owner Trustee (in its individual capacity
and as Owner Trustee), the Indenture Trustee, the Lessee and each other
Participant (collectively, together with their successors and assigns and the
holders from time to time of the Equipment Notes, the "Beneficiaries" and,
individually, a "Beneficiary").
W I T N E S S E T H :
WHEREAS, ____________________, a ____________ corporation (the
"Transferor"), is party to the Participation Agreement (Phillips Trust No.
94-__), dated as of ________________, 1994 (as amended, modified or
supplemented from time to time, the "Participation Agreement"), among Phillips
Petroleum Company, the Transferor, Shawmut Bank Connecticut, National
Association, as Pass Through Trustee and as Indenture Trustee, Wilmington Trust
Company, as Owner Trustee, and each other Participant; and
WHEREAS, the Transferor wishes to transfer, inter alia, all of
its right, title and interest in and to the Participation Agreement, the Trust
Estate, the Trust Agreement, the Tax Indemnity Agreement (as such terms are
defined in the Participation Agreement), the Assignment and Assumption
Agreement (Phillips Trust No. 94-__) dated as of ________________, 1994
between the Assignor thereunder and the Transferee and each other Operative
Agreement (as defined in the Participation Agreement) to which the Transferor
is a party or by which it is bound (collectively, the "Relevant Documents"),
and all proceeds therefrom (if relevant) to, _________________, a _____________
corporation (together with its successors and assigns (other than a
"Transferee" by transfer made in accordance with and pursuant to Section 6.1 of
the Participation Agreement), in the capacity of Owner Participant under the
Participation Agreement and the other Operative Agreements, the "Transferee"),
an affiliate of the Guarantor, pursuant to the Assignment and Assumption
Agreement (Phillips Trust No. 94-__), dated as of the date hereof, between the
Transferor and the Transferee; and
WHEREAS, the terms of the Participation Agreement provide that
the aforementioned transfer is conditioned upon the execution and delivery of
this Guarantee by the Guarantor;
<PAGE> 74
2
NOW, THEREFORE, in order that the Transferor may make the
aforementioned transfer to the Transferee, the Guarantor hereby agrees with and
for the benefit of the Beneficiaries as follows:
(a) Definitions. As used in this Guarantee, terms defined in
the Participation Agreement are used herein as therein defined, unless
otherwise defined herein.
(b) Guarantee. The Guarantor hereby unconditionally and
irrevocably guarantees to the Beneficiaries and their respective successors,
indorsees and permitted transferees and assigns, the prompt and complete
payment by the Transferee when due (whether at the stated maturity, by
acceleration or otherwise) of, and the faithful performance of, and compliance
with, all payment obligations of the Transferee under the Relevant Documents
owed to such Beneficiary, in accordance with the terms thereof and the timely
performance of all other obligations of the Transferee owed to such Beneficiary
thereunder in accordance with the terms thereof (such payment and other
obligations, the "Obligations"), and the Guarantor further agrees to pay any
and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel) that may be paid or incurred by the Beneficiaries in
enforcing any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
No payment or payments made by the Transferee, the
Guarantor, any other guarantor or any other Person or received or collected by
any Beneficiary from the Transferee, the Guarantor, any other guarantor or any
other person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder until the Obligations
are paid and performed in full.
If for any reason any Obligation to be performed or observed
by the Transferee (whether affirmative or negative in character) shall not be
observed or performed in accordance with the terms thereof, or if any amount
payable by the Transferee referred to in Section 2(a) hereof shall not be paid
promptly when due and payable, the Guarantor shall promptly perform or observe
or cause to be performed or observed each such Obligation or undertaking and
shall pay such amount at the place and to the person or entity entitled thereto
pursuant to the Relevant Documents regardless of whether or not any Beneficiary
or anyone on behalf of any Beneficiary shall have instituted any suit, action
or proceeding or exhausted its remedies or taken any steps to enforce any
rights against the Transferee or any other person or entity to compel any such
performance or to collect all or any part of such amount pursuant to the
provisions of the Relevant
<PAGE> 75
3
Documents or at law or in equity, or otherwise, and regardless of any other
condition or contingency.
(c) No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Guarantee, the Guarantor
hereby irrevocably waives any rights of subrogation, reimbursement,
contribution, exoneration or indemnity that it may acquire against the
Transferee due to any payment or performance made hereunder until all of the
Obligations shall have been indefeasibly paid and performed in full; provided
that, without exercising any rights of subrogation, the Guarantor may exercise
any rights that it may have at law against the Transferee.
(d) Amendments, Etc. with Respect to the Obligations; Waiver
of Rights. The Guarantor shall remain fully obligated hereunder
notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for
payment or performance of any of the Obligations made by any Beneficiary may be
rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by any Beneficiary and any Relevant Document and/or any collateral
security document or other guarantee or document in connection therewith, may
be amended, modified, supplemented or terminated, in whole or in part, in
accordance with the provisions thereof from time to time, and any collateral
security, guarantee or right of offset at any time held by any Beneficiary for
the payment or performance of the Obligations may be sold, exchanged, waived,
surrendered or released. No Beneficiary shall have any obligation to protect,
secure, perfect or ensure any lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against the Guarantor, a Beneficiary may, but shall be
under no obligation to, make a similar demand on the Transferee or any other
guarantor, and any failure by a Beneficiary to make any such demand or to
collect any payments from the Transferee or any such other guarantor or any
release of the Transferee or such other guarantor shall not relieve the
Guarantor of its obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
any Beneficiary against the Guarantor. For the purposes hereof, "demand" shall
include the commencement and continuance of any legal proceedings. The
Guarantor represents and warrants that it owns, directly or indirectly, 100% of
the capital stock of the Transferee or is otherwise an Affiliate of the
Transferee and that its obligations hereunder shall continue unimpaired, even
if the Guarantor no longer owns or is affiliated with the Transferee.
<PAGE> 76
4
(e) Guarantee Absolute and Unconditional. The Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any Beneficiary upon
this Guarantee or acceptance of this Guarantee; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Transferee or the Guarantor and any
Beneficiary shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. The Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Transferee or the Guarantor with respect to the Obligations. The
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Guarantor)
that constitutes, or might be construed to constitute, an equitable or legal
discharge of the Transferee for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance. When pursuing its rights
and remedies hereunder against the Guarantor, any Beneficiary may, but shall be
under no obligation to, pursue such rights and remedies as it may have against
the Transferee or any other person or entity or against any collateral security
or guarantee for the Obligations or any right of offset with respect thereto,
and any failure by any Beneficiary to pursue such other rights or remedies or
to collect any payments from the Transferee or any such other person or entity
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Transferee or any such other person
or entity or any such collateral security, guarantee or right of offset, shall
not relieve the Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Guarantor. This Guarantee shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Guarantor and the successors and assigns thereof,
and shall inure to the benefit of the Beneficiaries, and their respective
successors, indorsees and permitted transferees and assigns, until the earlier
of (x) all of the Obligations and the obligations of the Guarantor under this
Agreement shall have been satisfied by payment and performance in full (subject
to paragraph (vi) below) or (y) except to the extent not assumed by a
Transferee (as defined in Section 6.1 of the Participation Agreement) or
<PAGE> 77
5
guaranteed as provided therein, the right, title and interest of the Transferee
shall have been transferred to a Person meeting the requirement of Section 6.1
of the Participation Agreement. The Guarantor further agrees that, without
limiting the generality of this Guarantee, if any Beneficiary (or any permitted
assignee thereof) shall be prevented by applicable law from exercising its
remedies (or any of them) against the Transferee under any Operative Agreement,
such Beneficiary (or any assignee thereof) shall be entitled to receive
hereunder from the Guarantor, upon demand therefor, the sums that would have
otherwise been due from the Transferee had such remedies been able to be
exercised.
(f) Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Guarantor,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Transferee or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made. The Guarantor shall not commence any "case"
(as defined in Title 11 of the United States Code) against the Transferee.
(g) Payments. The Guarantor hereby guarantees that payments
hereunder shall be paid without set-off, counterclaim, deduction or
withholding, and shall be made in U.S. Dollars.
(h) Representations and Warranties. The Guarantor hereby
represents and warrants that:
the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal
right to own and operate its property, to lease the property it operates
and to conduct the business in which it is currently engaged;
the Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize
its execution, delivery and performance of this Guarantee;
this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally;
the execution, delivery and performance of this Guarantee
will not violate any provision of any requirement of
<PAGE> 78
6
law or contractual obligation of the Guarantor and will not result in or
require the creation or imposition of any lien on any of the properties or
revenues of the Guarantor pursuant to any requirement of law or
contractual obligation of the Guarantor;
no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or governmental authority and no consent
of any other person (including, without limitation, any stockholder or
creditor of the Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee;
no litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of
the Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or any of
the transactions contemplated hereby or (ii) that could have a material
adverse effect on the financial condition of the Guarantor or its ability
to perform its obligations hereunder;
the balance sheet of the Guarantor as at ____________ and
the related statement of income and retained earnings for the fiscal year
then ended (copies of which have heretofore been furnished to each
Beneficiary) (U.S. Guarantor only) (have been prepared in accordance with
generally accepted accounting principles applied consistently throughout
the period involved,) (other guarantors have been prepaid in accordance
with applicable accounting principles and standards) are complete and
correct and present fairly the financial condition of the Guarantor as at
such date and the results of its operations for such fiscal year; and
the Guarantor is a (bank or other financial institution with
a combined capital, surplus and undivided profits of at least $___________)
(corporation whose tangible net worth is at least $___________), exclusive
of goodwill, as of the proposed date of transfer, as determined in
accordance with generally accepted accounting principles.
(i) Severability. Any provision of this Guarantee that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(j) Section Headings. The Section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
<PAGE> 79
7
(k) No Waiver; Cumulative Remedies. No Beneficiary shall by
any act (except by a written instrument pursuant to paragraph xiii hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of any Beneficiary, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by a Beneficiary of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that such Beneficiary would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
(l) Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter hereof and there
are no promises or representations by any Beneficiary relative to the subject
matter hereof not reflected herein.
(m) Amendments and Waivers. None of the terms or provisions
of this Guarantee may be waived, amended or supplemented or otherwise modified
except by a written instrument executed by the Guarantor and each Beneficiary.
(n) Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Beneficiaries and their respective successors and (permitted) assigns.
(o) GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND
BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK.
(p) Notices. All notices, requests and demands to or upon
the Guarantor or any Beneficiary to be effective shall be in writing or by
telegraph, facsimile or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, five days after deposit in the postal system, certified mail
pre- paid, or, in the case of telegraphic notice, when sent, answerback
received, addressed to (a) in the case of the Guarantor (address, telex and fax
information to be provided) and (b) in the case of any Beneficiary, the
address, telex or telecopy number provided for such party in the Participation
Agreement.
<PAGE> 80
8
IN WITNESS WHEREOF, the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
(NAME OF GUARANTOR)
______________________________
Title:
<PAGE> 81
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Phillips Trust No. 94-__)
ASSIGNMENT AND ASSUMPTION AGREEMENT (Phillips Trust No.
94-__), dated as of_________, ___, between ____________________, a
_____________ corporation (the "Assignor"), and ____________, a ____________
corporation (the "Assignee").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to effect (a) the transfer
by the Assignor to the Assignee of all of the right, title and interest of the
Assignor (except as reserved below) in, under and with respect to, among other
things, (i) the Participation Agreement (Phillips Trust No. 94-__), dated as of
________________, 1994 among Phillips Petroleum Company, the Assignor, Shawmut
Bank Connecticut, National Association, as Indenture Trustee, Wilmington Trust
Company, as Owner Trustee and each other Participant (as amended, modified or
supplemented from time to time, the "Participation Agreement"), including,
without limitation, any indemnity payments payable to Assignor directly or
indirectly thereunder, (ii) the Trust Agreement identified in the Participation
Agreement (the "Trust Agreement"), (iii) the Trust Estate (as defined in the
Trust Agreement), (iv) the Tax Indemnity Agreement identified in the
Participation Agreement (the "Tax Indemnity Agreement") and (v) the proceeds
therefrom and (b) the assumption by the Assignee of the obligations of the
Assignor accruing thereunder; and
WHEREAS, such documents permit such transfer upon satisfaction
of certain conditions heretofore or concurrently herewith being complied with;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto do hereby
agree as follows (capitalized terms used herein without definition having the
meaning ascribed thereto in the Participation Agreement):
1. Assignment. The Assignor has sold, assigned,
conveyed, transferred and set over, and does hereby sell, assign, convey,
transfer and set over, unto the Assignee as of the date hereof all of its
present and future right, title and interest in, under and with respect to the
Trust Estate, the Participation Agreement, the Trust Agreement, the Tax
Indemnity Agreement and all other Operative Agreements to which the Assignor is
a party or any other contract, agreement, document or instrument relating to
the Trust Estate by which the Assignor is bound, and any
<PAGE> 82
2
proceeds therefrom, together with all other documents and instruments
evidencing any of such right, title and interest, except such rights of the
Assignor as have accrued to the Assignor prior to the date hereof (including
specifically, but without limitation, the right to receive any amounts due or
accrued to the Assignor under the Trust Agreement as of a date prior to such
date and the right to receive any indemnity payment pursuant to the
Participation Agreement or the Tax Indemnity Agreement with respect to events
occurring or circumstances existing prior to such date).
2. Assumption. The Assignee hereby undertakes all of
the duties and obligations of the "Owner Participant" whenever accrued (other
than duties and obligations of the Assignor attributable to acts or events
occurring on or prior to the date hereof under the Participation Agreement, the
Trust Agreement, any of the other Operative Agreements to which the Assignor is
a party or by which it is bound or any other contract, agreement, document or
other instrument relating to the Trust Estate to which the Assignor is a party
or by which it is bound), pursuant to the Participation Agreement, the Trust
Agreement, and each other Operative Agreement to which the Assignor is a party,
each of the contract, agreement, document or instrument hereby assigned and
each other contract, agreement, document or instrument relating to the Trust
Estate by which the Assignor is bound, and hereby confirms that it shall be
deemed a party to the Participation Agreement, the Trust Agreement and each
other Operative Agreement to which the Assignor is a party or by which it is
bound and each such other contract, agreement, document and instrument, and
shall be bound by all the terms thereof (including the agreements and
obligations of the Assignor set forth therein) as if therein named as the Owner
Participant. The assignment and assumption contemplated hereby shall not
release the Assignor from its obligations under the Participation Agreement or
the Trust Agreement except to the extent expressly assumed by the Assignee
pursuant to this Section 2.
3. Payments. The Assignor hereby covenants and agrees
to pay over to the Assignee, if and when received following the date hereof,
any amounts (including any sums payable as interest in respect thereof) paid to
or for the benefit of the Assignor that, under Section 1 hereof, belong to the
Assignee, and the Assignee hereby covenants and agrees to pay over to the
Assignor, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of the Assignee that, under Section 1 hereof, belong to the Assignor.
4. Further Assurances. The Assignor shall, at any time
and from time to time, upon the request of the Assignee, promptly and duly
execute and deliver any and all such further instruments and documents and take
such further action as the Assignee may reasonably request to obtain the full
benefits of this Assignment and of the right and powers herein granted.
<PAGE> 83
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5. Investment Purpose. The Assignee hereby represents
that it is acquiring the trust and other interests hereby assigned to it for
its own account for the purpose of investment and not with a view to the
distribution or resale of either thereof.
6. Representations and Warranties. The Assignee
represents and warrants that:
(a) it has all requisite power and authority and legal
right to enter into and carry out the transactions contemplated hereby
and to carry out and perform the obligations of the Owner Participant
under the Operative Agreements except for obligations not assumed by
the Assignee pursuant to Section 2 hereof;
(b) on and as of the date hereof, the representations and
warranties of the Owner Participant set forth in Section 3.6 of the
Participation Agreement are true and correct as to the Assignee;
(c) the transfer to it of all of the Assignor's right,
title and interest as Owner Participant will not violate any
provisions of the Securities Act of 1933, as amended, or any other
applicable Federal or state laws or regulations;
(d) the transfer (i) does not involve the use of any
assets that are or could be deemed to be plan assets under 29 C.F.R.
Section 2510.3-101 of an employee benefit plan (other than a
government plan exempt from the coverage of ERISA) or (ii) if the
assets of an employee benefit plan are so used, will not constitute a
prohibited transaction which is not subject to an exemption contained
in ERISA or the Code or adopted thereunder;
((e) neither it nor any of its Affiliates is involved or
has been involved in any litigation adverse to the Lessee or is a
direct or indirect competitor of the Lessee or otherwise is in the
same industry as the Lessee (including, without limitation, (i) the
industries of petroleum exploration, production, refining and
marketing, (ii) natural gas gathering and processing and (iii)
chemical production or distribution); and
(f) it is a "Transferee" satisfying the conditions set
forth in clause (b) of Section 6.1 of the Participation Agreement.
7. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8. Counterparts. This Assignment may be executed in any
number of counterparts, all of which together shall
<PAGE> 84
4
constitute a single instrument. It shall not be necessary that any counterpart
be signed by both parties so long as each party shall sign at least one
counterpart.
9. Third Party Beneficiaries. The Assignee hereby
agrees, for the benefit of the Owner Trustee (in its individual capacity and as
Owner Trustee), the Indenture Trustee, the Lessee and each other Participant
(collectively, the "Beneficiaries"), that its representations, warranties and
covenants contained herein are also intended to be for the benefit of each
Beneficiary, and each Beneficiary shall be deemed to be an express third party
beneficiary with respect thereto, entitled to enforce directly and in its own
name any rights or claims it may have against such party as such beneficiary.
IN WITNESS WHEREOF, the parties hereto, through their
respective officers thereunto duly authorized, have duly executed this
Assignment as of the day and year first above written.
(ASSIGNOR)
By:_____________________
Title:
(ASSIGNEE)
By:_____________________
Title:
<PAGE> 85
EXHIBIT E-1
_______________
To Each of the Persons Named
on the Attached Schedule I:
Re: Equipment Leased to Phillips Petroleum
Company (Phillips Trust No. 94- )
Ladies and Gentlemen:
As counsel to _________, a ( ) corporation
("Assignee"), I advise you as follows in connection with the Assignment and
Assumption Agreement (Phillips Trust No. 94-__) dated as of ____________ (the
"Assignment Agreement") between Assignee and ________________, a _________
corporation ("Assignor"), and the transactions contemplated thereby.
Capitalized terms used herein and not defined herein shall have the respective
meanings attributed thereto in the Assignment Agreement. This opinion is being
furnished to you pursuant to the request of Assignee.
I have, or an attorney under my supervision has, examined the
Assignment Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Assignee) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. I have also
assumed that the parties (or assignees of their interests therein) to the
operative Documents (other than the Assignee) are in compliance with their
respective representations, warranties and covenants set forth in the Operative
Agreements as to the assignment or transfer of their rights or obligations
thereunder or any offer with respect thereto. As to all matters of fact
material to my opinions, I have, when relevant facts were not independently
established, relied upon statements, representations and warranties contained
in the Assignment Agreement and upon the statements and certificates furnished
to me.
In addition, in rendering the opinions expressed herein I have
assumed that (i) the Assignment Agreement has been duly authorized, executed,
authenticated and delivered by Assignor and constitutes the legal, valid and
binding obligation of Assignor,
<PAGE> 86
2
enforceable against Assignor in accordance with its terms, and (ii) Assignor
has the requisite power, authority and legal right to enter into and perform
its respective obligations under the Assignment Agreement.
A. Based upon the foregoing and subject to the
limitations expressed in paragraph B below, I am of the opinion that:
1. Assignee is a corporation duly organized, validly
existing and in good standing under the laws of the State of ( )
and has full corporate power and authority to execute, deliver and
perform the Assignment Agreement and to perform its obligations under
the Operative Agreements to which it is a party.
2. The Assignment Agreement does not require any
approval not already obtained of stockholders of the Assignee or any
approval or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Assignee, and has been duly
authorized, executed and delivered by Assignee.
3. Neither the execution and delivery of the Assignment
Agreement by Assignee, nor the consummation by Assignee of the
transactions contemplated thereby and performance of the obligations
of the "Owner Participant" under the Operative Agreements which have
been assumed by the Assignee under the Assignment Agreement, conflicts
with, results in a breach of or violates any of the terms, conditions
or provisions of (i) the (Certificate) (Articles) of Incorporation or
By-laws of Assignee or (ii) to the best of my knowledge, any order,
writ, injunction or decree of any court or governmental authority
against the Assignee or by which the Assignee or any of its properties
is bound.
4. Each of the Assignment Agreement and the Operative
Agreements to which the Assignee is a party constitutes a legal, valid
and binding obligation of Assignee enforceable against Assignee in
accordance with the terms thereof, except as the enforceability
thereof may be limited by (a) general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity
or at law), (b) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and (c) public policy considerations (in the case of any indemnity
provisions contained therein or in the Operative Agreements).
5. Neither the execution and delivery by Assignee of the
Assignment Agreement, nor the consummation by Assignee of any of the
transactions contemplated thereby or performance of the obligations of
the "Owner Participant" under the Operative Agreements which have been
assumed by
<PAGE> 87
3
the Assignee under the Assignment Agreement, violates any law,
governmental rule or regulation of the United States or the State of
( ) or any governmental subdivision thereof applicable in
each case to the Assignee 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 in the Operative Agreements) upon, any
property of the Assignee or 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 Assignee is a party or by which it or its properties may
be bound or affected.
6. The purchase by Assignee of the interests assigned
pursuant to the Assignment Agreement and the assumption by the
Assignee of the obligations of the "Owner Participant" under the
Operative Agreements to which the Owner Participant is a party and
which have been assumed by the Assignee pursuant to the Assignment
Agreement, do not require registration under the Securities Act of
1933, as amended.
7. To the best of my knowledge, there are no pending or,
to the knowledge of the Assignee, threatened actions or proceedings
against the Assignee before any court or administrative agency which,
if determined adversely to the Assignee, would materially adversely
affect the ability of the Assignee to perform its obligations under
the Assignment Agreement or under any Operative Agreement to which it
is a party.
B. I am qualified to practice law in the State of
( ) and I express no opinion as to any laws other than the laws of
the State of ( ) and the federal laws of the United States of America.
Very truly yours,
<PAGE> 88
SCHEDULE I
Phillips Petroleum Company,
as Lessee
_____________________________
as Owner Participant
Wilmington Trust Company, as Owner
Trustee
Shawmut Bank Connecticut,
National Association, as Indenture Trustee
(Assignor)
Holders of Equipment Notes
from time to time
<PAGE> 89
EXHIBIT E-2
___________________
To Each of the Persons Named
on the Attached Schedule I:
Re: Equipment Leased to Phillips Petroleum
Company (Phillips Trust No. 94- )
Ladies and Gentlemen:
As counsel to ______________, a ( ) corporation
("Guarantor"), I advise you as follows in connection with the Guaranty
Agreement (Phillips Trust No. 94-__) dated as of ________ (the "Guaranty
Agreement") by Guarantor in favor of Phillips Petroleum Company, as Lessee
________________, as Owner Participant, each Lender named therein, Wilmington
Trust Company, as Owner Trustee and Shawmut Bank Connecticut, National
Association, as Indenture Trustee and the Holders from time to time of the
Equipment Notes and the transactions contemplated thereby. Capitalized terms
used herein and not defined herein shall have the respective meanings
attributed thereto in the Guaranty Agreement. This opinion is being furnished
to you pursuant to the request of Guarantor.
I have, or an attorney under my supervision has, examined the
Guaranty Agreement. I have, or an attorney under my supervision has, also
examined the originals, or certified, conformed, photocopied or telecopied
copies of such corporate records, certificates, instruments and other documents
as I have deemed necessary or appropriate to enable me to render the opinions
expressed herein. In all such examinations, I have assumed the genuineness of
signatures on original documents (other than those of Guarantor) and the
conformity to such original documents of all copies submitted to me as
certified, conformed, photocopied or telecopied copies, and as to certificates
and telegraphic and telephonic confirmations given by public officials, I have
assumed the same to have been properly given and to be accurate. As to all
matters of fact material to my opinions, I have, when relevant facts were not
independently established, relied upon statements, representations and
warranties contained in the Guaranty Agreement and upon the statements and
certificates furnished to me.
In addition, in rendering the opinions expressed herein, I
have assumed that (i) the Assignment Agreement has been duly authorized,
executed, authenticated and delivered by the parties thereto and constitutes
the legal, valid and binding obligation of the parties thereto, enforceable
against each such party in accordance with its terms and (ii) each of Assignor
and
<PAGE> 90
2
Assignee has the requisite power, authority and legal right to enter into and
perform its respective obligations under the Assignment Agreement.
A. Based upon the foregoing and subject to the
limitations expressed in paragraph B below, I am of the opinion that:
1. Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of ( )
and has full corporate power and authority to execute, deliver and
perform the Guaranty Agreement.
2. The Guaranty Agreement has been duly authorized,
executed and delivered by Guarantor.
3. Neither the execution and delivery of the Guaranty
Agreement by Guarantor, nor the consummation by Guarantor of the
transactions contemplated thereby, conflicts with, results in a breach
of or violates any of the terms, conditions or provisions of the
(Certificate) (Articles) of Incorporation or By-laws of Guarantor or
will violate any provision of any requirement of law or contractual
obligation of the Guarantor or will result in or require the creation
or imposition of any lien on any of the properties or revenues of the
Guarantor pursuant to any requirement of law or contractual obligation
of the Guarantor.
4. No consent or authorization of, filing with, or
other act by or in respect of, any arbitrator or governmental
authority and no consent of any other person (including, without
limitation, any stockholder or creditor of the Guarantor) is required
in connection with the execution, delivery, performance, validity or
enforceability of this Guaranty.
5. To the best of my knowledge, no litigation,
investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guaranty or any of
the transactions contemplated hereby or (ii) that could have a
material adverse effect on the financial condition of the Guarantor or
its ability to perform its obligations thereunder.
6. The Guaranty Agreement constitutes a legal, valid and
binding obligation of Guarantor enforceable against Guarantor in
accordance with the terms thereof, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally.
<PAGE> 91
3
B. I am qualified to practice law in the State of
( ) and I express no opinion as to any laws other than the laws of
the State of ( ) and the federal laws of the United States of America.
Very truly yours,
<PAGE> 92
4
SCHEDULE I
Phillips Petroleum Company,
as Lessee
_________________________________
as Owner Participant
Wilmington Trust Company, as Owner
Trustee
Shawmut Bank Connecticut,
National Association, as Indenture Trustee
(Assignor)
Holders of Equipment Notes
from time to time
<PAGE> 1
EXHIBIT 4(c)(4)
Exhibit F to
Participation Agreement
(Phillips Trust No. 94-__)
PARTICIPATION AGREEMENT SUPPLEMENT (Phillips Trust No. 94-__)
PARTICIPATION AGREEMENT SUPPLEMENT (Phillips Trust No.
94-__) dated ______ __, ____ (this "Supplement") to the Participation Agreement
(Phillips Trust No. 94-__) dated as of _________________, 1994, among Phillips
Petroleum Company, as Lessee, Wilmington Trust Company, as Owner Trustee,
Shawmut Bank Connecticut, National Association, as Indenture Trustee and the
Participants party thereto (such agreement, as supplemented hereby and as
otherwise amended, supplemented or modified from time to time, the
"Participation Agreement") executed by SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
except as otherwise provided in the Participation Agreement (the "Pass Through
Trustee").
W I T N E S S E T H:
Pursuant to Section 10.2(e) of the Participation Agreement,
the execution and delivery of this Supplement by the Pass Through Trustee is a
condition to the refinancing of the Equipment Notes issued on the Closing Date.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings specified in Participation Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Pass Through Trustee hereby agrees with the
parties to the Participation Agreement as follows:
1. The Pass Through Trustee hereby assumes all of the
rights and obligations applicable to the Pass Through Trustee under the
Operative Agreements and hereby acknowledges and consents to the provisions of
the Operative Agreements.
2. The Pass Through Trustee agrees to purchases and pay
for the Equipment Notes to be purchased by it on the Refinancing Date subject
to the conditions that the Equipment Notes to be delivered on the Refinancing
Date shall have been duly authorized, executed and delivered to the Pass
Through Trustee by a duly authorized officer of the Owner Trustee and duly
authenticated by the Indenture Trustee and that on the Refinancing Date the
Pass Through Trustee shall have received the proceeds from the sale of the Pass
Through Certificates. The Equipment Notes shall bear interest at the rates set
forth on Schedule I hereto.
3. On or before the date hereof, the Lessee and the Pass
Through Trustee shall enter into one or more Pass Through Trust Agreements, and
subject to the terms and conditions set
<PAGE> 2
2
forth therein, on the date hereof, the Pass Through Trustee shall deliver the
Pass Through Certificates to the Underwriter against receipt from the
underwriter of the total proceeds payable therefor pursuant to the Underwriting
Agreement.
4. The Pass Through Trustee represents and warrants as
of the Refinancing Date:
(a) the Pass Through Trustee is a national
banking association duly organized and validly existing in good
standing under the laws of the United States of America, and has the
full corporate power, authority and legal right under the laws of the
United States of America pertaining to its banking, trust and
fiduciary powers to execute, deliver and carry out the terms of the
Pass Through Trust Agreement and this Agreement;
(b) The Pass Through Trust Agreement and this
Supplement have been duly authorized, executed and delivered by the
Pass Through Trustee; the Pass Through Trust Agreement and this
Supplement constitute the legal, valid and binding obligation of the
Pass Through Trustee enforceable against it in accordance with its
terms;
(c) the execution, delivery and performance by
the Pass Through Trustee of the Pass Through Trust Agreement and this
Supplement, the purchase by the Pass Through Trustee of the Equipment
Notes pursuant to this Supplement, and the issuance of the Pass
Through Certificates pursuant to the Pass Through Trust Agreement, do
not contravene any law, rule or regulation of the United States of
America or any United States governmental authority or agency
regulating the Pass Through Trustee's banking, trust or fiduciary
powers or any judgement 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 articles of
association 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;
(d) neither the execution and delivery by the
Pass Through Trustee of the Pass Through Trust Agreement or this
Supplement 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, or the registration with, or
the taking of any other action with respect to, any United States
governmental authority or agency regulating the Pass Through Trustee's
banking, trust or fiduciary powers;
(e) There are no Taxes payable by the Pass
Through Trustee imposed by the State of Connecticut or any political
subdivision or taxing authority thereof or by the
<PAGE> 3
3
United States of America in connection with the execution, delivery and
performance by the Pass Through Trustee of this Agreement or the Pass
Through Trust Agreement, and there are no Taxes payable by the Pass
Through Trustee imposed by the State of Connecticut 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 Agreement) and, assuming that the trust created by the
Pass Through Trust Agreement will not be taxable as a corporation,
but, rather, will be characterized as a grantor trust under subpart E,
Part I of Subchapter J of the Code, such Pass Through Trust will not
be subject to any Taxes imposed by the State of Connecticut or any
political subdivision thereof;
(f) 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 materially adversely effect the
ability of the Pass Through Trustee to perform its obligations under
this Agreement or the Pass Through Trust Agreement;
(g) except for the issue and sale of the Pass
Through Certificates contemplated hereby, the Pass Through Trustee has
not directly or indirectly offered any Equipment Note or Pass Through
Certificate or any interest in or to the Trust Estate, the Trust
Agreement or any similar interest for sale to, or solicited any offer
to acquire any of the same from, anyone other than the Owner Trustee
and the Owner Participant, and the Pass Through Trustee has not
authorized anyone to act on its behalf to offer directly or indirectly
any Equipment Note, any Pass Through Certificate of any interest in
and to the Trust Estate, the Trust Agreement or any similar interest
for sale to, or to solicit any offer to acquire any of the same from,
any person other than each Owner Trustee and the Owner Participant,
and the Pass Through Trustee is not in default under the Pass Through
Trust Agreement;
(h) the Pass Through Trustee is not directly or
indirectly controlling, controlled by or under common control with the
Owner Participant, the Owner Trustee, the Underwriters or the Lessee;
and
(i) the Pass Through Trustee is purchasing the
Equipment Notes for the purposes contemplated by the Operative
Agreements and not with a view to the transfer or distribution of any
Equipment Note to any other Person, except as contemplated by the
Operative Agreements.
<PAGE> 4
4
5. On the Refinancing Date, the parties to the
Participation Agreement shall have received an officer's Certificate dated such
date from the Pass Through Trustee, to the effect that the representations and
warranties of the Pass Through Trustee contained herein are true and correct in
all respects on said date with the same effect as though made on and as of said
date, except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and warranties
were true and correct on and as of such earlier date), and that the Pass
Through Trustee has performed and compiled with all agreements and conditions
herein contained which are required to be performed or complied with by the
Pass Through Trustee on or before said date.
6. This Supplement shall be construed in connection with
and as part of the Participation Agreement, and all terms, conditions and
covenants contained in the Participation Agreement shall be and remain in full
force and effect.
7. This Supplement shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York, including
all matters of construction, validity and performance.
<PAGE> 5
5
IN WITNESS WHEREOF, the Pass Through Trustee caused this
Supplement to be duly executed and delivered on the day and year first above
written.
SHAWMUT BANK CONNECTICUT
NATIONAL ASSOCIATION, as Pass
Through Trustee
By: ____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4(d)
================================================================================
TRUST AGREEMENT (Phillips Trust No. 94-__)
Dated as of ______________, 1994
between
________________________
Owner Participant
and
WILMINGTON TRUST COMPANY
Owner Trustee
_____________________
(Equipment)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01. Authority to Execute Documents . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III. PURCHASE OF CERTAIN RIGHTS IN THE EQUIPMENT;
ISSUANCE OF EQUIPMENT NOTES . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.01. Purchase of Certain Rights in the Equipment . . . . . . . . . . . . . . 4
SECTION 3.02. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V. DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.01 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.02 Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.03 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.04 No Duties Except as Specified in Trust Agreement or Instructions . . . . 7
SECTION 5.05 No Action Except Under Specified Documents or Instruction . . . . . . . 8
SECTION 5.06 No Power to Reinvest . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI. THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.01. Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.02 Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.03 No Representations or Warranties as to Certain Matters . . . . . . . . . 9
SECTION 6.04 No Segregation of Monies; Interest . . . . . . . . . . . . . . . . . . . 10
SECTION 6.05 Reliance Upon Certificates, Counsel and Agents . . . . . . . . . . . . . 10
SECTION 6.06 Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . 11
SECTION 6.07 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.08 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII. INDEMNIFICATION OF WILMINGTON TRUST
COMPANY BY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 7.01. Owner Participant to Indemnify Wilmington Trust Company . . . . . . . . 12
ARTICLE VIII. TRANSFER OF THE OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . 13
SECTION 8.01 Transfer of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IX. SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . . . 14
SECTION 9.01. Resignation of Owner Trustee; Appointment of Successor . . . . . . . . 14
SECTION 9.02. Co-Trustees and Separate Trustees . . . . . . . . . . . . . . . . . . . 15
ARTICLE X. SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT AND OTHER DOCUMENTS . . . . . . 17
SECTION 10.01 Supplements and Amendments and Delivery Thereof . . . . . . . . . . . . 17
SECTION 10.02. Discretion as to Execution of Documents . . . . . . . . . . . . . . . . 17
SECTION 10.03. Distribution of Documents . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 11.01 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . 18
SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate . . . . . . . . . 18
SECTION 11.03. Assignment, Sale, Etc. of Equipment . . . . . . . . . . . . . . . . . 19
SECTION 11.04. Trust Agreement for Benefit of Certain Parties Only . . . . . . . . . 19
SECTION 11.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11.06. Waivers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11.07. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11.08. Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11.10. Performance by the Owner Participant . . . . . . . . . . . . . . . . . 20
</TABLE>
-ii-
<PAGE> 4
TRUST AGREEMENT (Phillips Trust No. 94-__)
THIS TRUST AGREEMENT (Phillips Trust No. 94-__) is entered
into as of __________ __, 1994 (the "Trust Agreement") between
_________________, a ( ) corporation (the "Owner Participant"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation (in its individual
capacity, "Wilmington Trust Company" and otherwise not in its individual
capacity but solely as trustee hereunder, with its permitted successors and
assigns, the "Owner Trustee").
W I T N E S S E T H :
WHEREAS, the Owner Participant desires to form the trust
created hereby for the purpose of purchasing the Equipment (as hereinafter
defined) from Lessee (as hereinafter defined) and carrying out certain
transactions contemplated by the Operative Agreements (as hereinafter defined);
and
WHEREAS, Wilmington Trust Company is willing to act as trustee
hereunder (in such capacity, with its permitted successors and assigns, the
"Owner Trustee") and to accept the trusts created hereby;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the agreements contained in the other
Operative Agreements and the acceptance by Wilmington Trust Company of the
trusts hereby created, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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 and not otherwise defined herein shall have the respective meanings
assigned thereto in the Lease (as hereinafter defined) for all purposes. 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:
"Corporate Trust Department" shall mean the Corporate Trust
Department of the Owner Trustee located at 1100 North Market Street,
Rodney Square North, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, or such other office at which the
Owner Trustee's corporate trust business shall be administered which
the Owner Trustee shall have specified by notice in writing to the
Lessee, the
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Indenture Trustee, the Pass Through Trustee, and the Owner Participant.
"Lease" means that certain Lease Agreement (Phillips Trust No.
94-__), dated as of ___________, 1994, and entered into by the Owner
Trustee and the 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 the
Indenture, the Participation Agreement and 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.
"Owner Participant" shall mean and include (a) ( ), a
( ) corporation and (b) the successors and assigns of
( ).
"Trust Estate" means all estate, right, title and interest of
Owner Trustee in and to the Equipment, the Lease, any Lease Supplement
and any other Operative Agreement, all amounts paid or payable by
Lessee to Owner Trustee (in its trust capacity) under the Lease and
the Participation Agreement and all rights of Owner Trustee (in its
trust capacity) to enforce payments of any such amounts thereunder,
any Lease Supplement, (any FAA Bill of Sale), and any other Operative
Agreement including any amounts of Basic Rent and Supplemental Rent
including insurance proceeds (other than any insurance proceeds
constituting Excepted Property (as defined in the Indenture) and
requisition, indemnity or other payments of any kind for or with
respect to the Equipment (except amounts owing to the Owner
Participant, to the Owner Trustee, in its individual capacity, to the
Indenture Trustee or to any other holder of an Equipment Note, or to
any of their respective directors, officers, employees, servants and
agents, pursuant to Section 7.1 or 7.2 of the Participation
Agreement). Notwithstanding the foregoing, "Trust Estate" shall not
include any Excepted Property but shall include all of the property,
rights and interests of the Owner Trustee subject to the Granting
Clause of the Indenture.
"Trust Supplement" means a supplement to the Trust Agreement
and Indenture in substantially the form of Exhibit A to the Indenture.
SECTION 1.02. Rules of Interpretation. The following rules
apply to this Agreement:
(a) the singular includes the plural and the plural includes
the singular;
(b) "or" is not exclusive and "include" and "including" are
not limiting;
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(c) "hereby," "herein," "hereof," "hereunder," "this
Agreement," or other like words refer to this Trust Agreement;
(d) a reference to any agreement or other contract includes
permitted supplements and amendments;
(e) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued
thereunder or any law enacted in substitution or replacement therefor;
(f) a reference to a Person includes its permitted successors
and assigns;
(g) a reference herein to an Article, Section, Exhibit,
Schedule or Appendix without further reference is to the relevant
Article, Section, Exhibit, Schedule or Appendix of this Agreement;
(h) any right may be exercised at any time and from time to
time;
(i) all obligations are continuing obligations; and
(j) the headings of the Articles, Sections and subsections
are for convenience only and shall not affect the meaning of this
Agreement.
ARTICLE II.
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, on or
before the Delivery Date, execute and deliver the Operative Agreements to which
it is a party, UCC financing statements and any other agreements, instruments
or documents to which the Owner Trustee is to be a party in the respective
forms thereof in which delivered from time to time by the Owner Participant to
the Owner Trustee for execution and delivery and, subject to the terms hereof,
to exercise its rights in accordance with directions received from the Owner
Participant and perform its duties under said Operative Agreements 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 Participant as sole beneficiary,
subject, however, to the provisions of, and the Lien created under, the
Indenture.
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ARTICLE III.
PURCHASE OF CERTAIN RIGHTS IN THE EQUIPMENT;
ISSUANCE OF EQUIPMENT NOTES
SECTION 3.01. Purchase of Certain Rights in the Equipment.
The Owner Participant hereby authorizes and directs the Owner Trustee to, and
the Owner Trustee agrees for the benefit of the Owner Participant that it will,
on the Delivery Date, subject to due compliance with the terms of Section 3.02:
(a) execute and deliver the Lease, a Lease Supplement, a
Trust Supplement, the Indenture, the Participation Agreement, and such
other Operative Agreements or other documents as are contemplated by
the Operative Agreements to be executed and delivered by the Owner
Trustee on or prior to the Closing Date;
(b) execute, issue and deliver to the Indenture Trustee the
Equipment Notes in the amounts and otherwise as provided in the
Participation Agreement;
(c) execute and deliver the financing statements referred to
in the Participation Agreement, together with all other agreements,
documents and instruments referred to in the Participation Agreement
to which the Owner Trustee is to be a party; and
(d) accept from the Lessee the Bill of Sale(s) with respect
to the Equipment furnished pursuant to paragraph (g) of Section 4.1 of
the Participation Agreement and the terms hereof (and make application
with the FAA for registration of the Equipment in the name of the
Owner Trustee) (and execute applications for certificates of title
with respect to the Equipment in the name of the Owner Trustee);
(e) make payment of Lessor's Cost for the Equipment from the
aggregate amount of the Commitments for the Equipment of the Owner
Participant and the Loan Participant, to the extent received by the
Owner Trustee, in the manner provided in the Participation Agreement;
and
(f) execute and deliver all such other instruments, documents
or certificates and take all such other action in accordance with the
directions of the Owner Participant as the Owner Participant may deem
necessary or advisable in connection with the transactions
contemplated hereby.
SECTION 3.02. Conditions Precedent. The rights and
obligations of the Owner Trustee to take the actions required by Section 3.01
with respect to the Equipment shall be subject to the following conditions
precedent: (a) the Owner Participant shall have made the full amount of its
Commitment set forth in the Participation Agreement available to the Owner
Trustee, in
<PAGE> 8
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immediately available funds, in accordance with the Participation Agreement and
(b) the 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 Owner Participant of its
obligations thereunder, shall have been either fulfilled to the satisfaction of
or waived by the Owner Participant. The Owner Participant shall, by
instructing the Owner Trustee to release the funds then held by the Owner
Trustee as provided in 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 the
Indenture Trustee. Until the Indenture shall have been discharged pursuant to
the terms thereof, all Basic Rent, Supplemental Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excepted Property and other than payments received from the Indenture
Trustee under the Indenture) payable to the Owner Trustee shall be payable
directly to the Indenture Trustee (and if any of the same are received by the
Owner Trustee shall upon receipt be paid over to the Indenture Trustee without
deduction, set-off or adjustment of any kind) for distribution in accordance
with the provisions of the Indenture; provided, however, that any payments
received by the Owner Trustee (i) with respect to the Owner Trustee's fees and
disbursements or (ii) from 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
Indenture shall have been discharged pursuant to the terms thereof, any payment
of the type referred to in Section 4.01(a) (other than Excepted Property)
received by the Owner Trustee, any payments received from the Indenture Trustee
other than as specified in Section 4.01(d) and any other amount received as
part of the Trust Estate and for the application or distribution of which no
other 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
Agreements shall be applied and distributed in accordance with the terms of the
Lease or such other Operative Agreement and third, the balance, if any, shall
be paid to the Owner Participant.
<PAGE> 9
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(c) Certain Distributions to the Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the Indenture shall, if paid to the Owner Trustee, be
distributed by the Owner Trustee to the Owner Participant in accordance with
the provisions of the Indenture.
(d) Excepted Property. Any Excepted Property received by the
Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excepted Property is payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
SECTION 4.02. Method of Payments. The Owner Trustee shall
make distributions or cause distributions to be made to the 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 so distributed shall not have been received by the Owner
Trustee by 2:00 p.m., New York City time or such later time as the Owner
Trustee may practically make such transfer), the amount to be distributed as
provided in the Participation Agreement or to such account or accounts of the
Owner Participant as the Owner Participant may designate from time to time 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 an Indenture Event
of Default (or an event which with the passage of time or the giving of notice
or both would constitute a Lease Event of Default or an Indenture Event of
Default), the Owner Trustee shall give telephonic or telex notice thereof
followed by confirmation thereof by overnight express courier service or
certified mail, postage prepaid, to the Owner Participant, the Indenture
Trustee, the Pass Through Trustee and the Lessee immediately upon first
knowledge thereof and in no event later than 3 Business Days after the Owner
Trustee shall have such knowledge. Subject to the terms of Section 5.03, the
Owner Trustee shall take such action or shall refrain from taking such action,
not inconsistent with the provisions of the 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 the Owner Participant. For all
purposes of this Trust Agreement, the Lease and the other Operative Agreements,
in the absence of actual knowledge by a Responsible Officer of the Corporate
Trust Department 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, the Owner Participant or
the Lessee.
<PAGE> 10
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SECTION 5.02. Action Upon Instructions. Subject to the terms
of Sections 5.01 and 5.03, upon the written instructions at any time and from
time to time of the Owner Participant, the Owner Trustee will take such of the
following actions, not inconsistent with the provisions of the Lease and the
Indenture, as may be specified in such instructions: (a) give such notice or
direction or exercise such right, remedy or power hereunder or take such other
actions under any of the Operative Agreements to which the Owner Trustee is a
party or in respect of all or any part of the Trust Estate as shall be
specified in such instructions, (b) take such action to preserve or protect the
Trust Estate (including the discharge of Liens) as may be specified in such
instructions, (c) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to the
Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it, (d) subject to the rights of Lessee, Indenture Trustee and
the Pass Through Trustee under the Operative Agreements, after the expiration
or earlier termination of the Lease, distribute all of the Owner Trustee's
right, title and interest in and to the Equipment to the Owner Participant,
convey all of the Owner Trustee's right, title and interest in and to the
Equipment for such amount, on such terms and to such purchaser or purchasers as
shall be designated in such instructions, or net lease the Equipment to such
lessee or lessees and on such terms as shall be designated in such instructions
and (e) take such other action as is requested by the Owner Participant which
action is not inconsistent with the terms of the Operative Agreements.
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 unless the Owner Trustee shall have been
indemnified by the Owner Participant, in manner and form satisfactory to the
Owner Trustee, against any liability, cost or expense (including reasonable
counsel fees and disbursements) which may be incurred in connection therewith;
and, if the Owner Participant shall have directed the Owner Trustee to take any
such action or refrain from taking any action, the Owner Participant agrees to
furnish such indemnity as shall be required by the Owner Trustee (provided,
however, that the Owner Trustee shall not require to be indemnified for its
gross negligence or willful misconduct with respect to the manner in which it
complies with any direction by the Owner Participant); and, in addition to the
extent not otherwise paid pursuant to the provisions of the Lease or of the
Participant Agreement, to pay the reasonable compensation of the Owner Trustee
for the services performed or to be performed by it pursuant to such direction.
The Owner Trustee shall not be required to take any action under Section 5.01
or 5.02 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 Agreements to which the Owner Trustee is a party, or is otherwise
contrary to law.
<PAGE> 11
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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
Equipment 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 Agreements to which the Owner Trustee is a party, except as expressly
required by the terms of any of the Operative Agreements to which the Owner
Trustee is a party, or (to the extent not inconsistent with the provisions of
the Indenture) as expressly provided by the terms hereof or in a written
instruction from the Owner Participant 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. Wilmington Trust Company
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), promptly take such action as may be necessary duly to
discharge and satisfy in full all Lessor Liens attributable to it in its
individual capacity which it is required to discharge pursuant to the
Participation Agreement and otherwise comply with the terms thereof binding
upon it.
SECTION 5.05. No Action Except Under Specified Documents or
Instruction. The Owner Trustee shall have no power, right or authority to, and
the Owner Trustee agrees that it will not manage, control, use, sell, dispose
of or otherwise deal with the Equipment or any other part of the Trust Estate
except (a) as expressly required by the terms of any of the Operative
Agreements to which the Owner Trustee is a party, (b) as expressly provided by
the terms hereof or (c) as expressly provided in written instructions from the
Owner Participant pursuant to Section 5.01 or 5.02.
SECTION 5.06. No Power to Reinvest. Notwithstanding anything
contained herein to the contrary the Owner Trustee shall not be authorized and
shall have no power to reinvest the proceeds of the Trust Estate or to
otherwise "vary the investment" of the Owner Participant within the meaning of
Treasury Regulations Section 301.7701-4(c)(i).
ARTICLE VI.
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. Wilmington
Trust Company accepts the trusts hereby created and agrees to perform the same
as Owner Trustee 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. Wilmington Trust
Company shall not be answerable or accountable under any circumstances, except
(a) for its own willful misconduct or gross negligence, (b) for its failure (in
its individual capacity) to perform its obligations under the last sentence of
Section 5.04 and the first sentence of
<PAGE> 12
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Section 5.01, (c) for its or the Owner Trustee's failure to use ordinary care
in handling and 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
Agreements and (e) for liabilities that may result from the inaccuracy of any
representation or warranty of it, whether in its individual capacity or
otherwise (or from the failure by it in its individual capacity to perform any
covenant) in the Indenture, the Lease, the Participation Agreement or elsewhere
in any of the other Operative Agreements.
SECTION 6.02. Absence of Certain Duties.. Except in
accordance with written instructions furnished pursuant to Section 5.01 or
Section 5.02 and except as provided in Sections 3.01, 5.04 and 5.05 and the
last sentence of Section 9.01(b), neither the Owner Trustee nor Wilmington
Trust Company shall have any duty (a) to see to any recording or filing of any
Operative Agreement 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
governmental agencies, (except that Wilmington Trust Company in its individual
capacity agrees to comply with the FAA reporting requirements set forth in 14
CFR Section 47.45 and 14 CFR Section 47.51, and) except the Owner Trustee
shall, to the extent that information for that purpose is timely supplied by
the Lessee pursuant to any of the Operative Agreements, complete and timely
submit (and furnish the Owner Participant with a copy of) any and all reports
relating to the Equipment which may from time to time be required by (the FAA
or) any government or governmental authority having jurisdiction, (b) to see to
any insurance on the Equipment or to effect or maintain any such insurance,
whether or not the Lessee shall be in default with respect thereto, other than
to forward to the Owner Participant copies of all reports and other written
information which the Owner Trustee receives from the Lessee pursuant to the
Lease, (c) to see to the payment or discharge of any tax, assessment or other
governmental charge or any Lien or encumbrance of any kind owing with respect
to, assessed or levied against any part of the Indenture Estate or the Trust
Estate, except as provided in the Participation Agreement or Section 5.04
hereof or (d) to inspect the Lessee's books and records with respect to the
Equipment at any time permitted pursuant to the Lease. Notwithstanding the
foregoing, the Owner Trustee will furnish to the Indenture Trustee and the
Owner Participant, 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 Agreement to the extent that any of the same shall not state on its
face or otherwise that it has been so distributed.
SECTION 6.03. No Representations or Warranties as to Certain
Matters. NEITHER THE OWNER TRUSTEE NOR WILMINGTON TRUST COMPANY MAKES OR SHALL
BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AS TO THE TITLE,
<PAGE> 13
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AIRWORTHINESS, ROADWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE EQUIPMENT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT OR ANY PART THEREOF WHATSOEVER, except that Wilmington
Trust Company in its individual capacity warrants that on the Closing Date the
Owner Trustee received whatever title was conveyed to it by the Lessee and that
the Equipment shall during the Term be free of Lessor Liens attributable to
Wilmington Trust Company in its individual capacity or (b) any representation
or warranty as to the validity, legality or enforceability of this Trust
Agreement or any Operative Agreement to which the Owner Trustee is a party, or
any other document or instrument, or as to the correctness of any statement
contained in any thereof except to the extent that any such statement is
expressly made herein or therein by such party as a representation by the Owner
Trustee or by Wilmington Trust Company in its individual capacity, as the case
may be, and except that Wilmington Trust Company in its individual capacity
hereby represents and warrants that this Trust Agreement has been, and
(assuming due authorization, execution and delivery by the Owner Participant of
this Trust Agreement) the Operative Agreements 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 the Trust Agreement constitutes the
legal, valid and binding obligation of Wilmington Trust Company or the Owner
Trustee, as the case may be, enforceable against Wilmington Trust Company or
the Owner Trustee, as the case may be, in accordance with its terms.
SECTION 6.04. No Segregation of Monies; Interest. Monies
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent provided by law and the Owner Trustee shall not 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 in
good faith 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 Participant or the Lessee mentioned herein or in
any of the Operative Agreements to which the Owner Trustee is a party shall be
sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President or any other duly authorized officer
or representative and in the name of any such Owner Participant or the Lessee,
as the case may be. The Owner Trustee may accept a copy of
<PAGE> 14
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a resolution of the Board of Directors or Executive Committee of the Lessee or
the Owner Participant, as the case may be, certified by the Secretary or an
Assistant Secretary of the Lessee or the Owner Participant, as the case may be,
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 the Chairman of the
Board, the President, any Vice President or any other duly authorized officer
or representative of Lessee or the Owner Participant, as the case may be, 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, unless and to the extent that the Owner
Trustee otherwise receives payment or reimbursement from the Lessee or any
other Person pursuant to any of the Operative Agreements), 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, within
the scope of such person's competence, 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. In no event shall the Owner Participant incur any
liability to any Person other than to Wilmington Trust Company pursuant to
Section 7.01 or except to the extent that the Owner Participant shall expressly
agree otherwise in any Operative Agreement to which it is a party.
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 Indenture, all Persons, other than the Owner
Participant, as provided herein, 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 except to the extent Wilmington
Trust Company shall expressly agree otherwise in writing.
SECTION 6.07. Compensation. Pursuant to Section 2.5(b) of
the Participation Agreement, the Lessee shall be required to pay the reasonable
fees and expenses of the Owner Trustee comprising the compensation and
reimbursement of expenses (including, without limitation, reasonable attorney's
fees and expenses) to which it is entitled hereunder. Except as provided in
Sections 5.03 and 7.01, the Owner Trustee agrees that it shall have no right
against the Owner Participant or (subject to the provisions of the Lien created
<PAGE> 15
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by the Indenture) the Trust Estate for any fee as compensation for its services
hereunder.
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
other agreement contemplated hereby. The Owner Participant shall be
responsible for causing to be prepared and filed all income tax returns
required to be filed by the Owner Participant. The Owner Trustee shall be
responsible for causing to be prepared, at the request of the Owner Participant
all income tax returns required to be filed with respect to the trust created
hereby and shall execute and file such returns; provided, however, the Owner
Trustee shall have no obligation to incur any costs in its individual capacity
in connection therewith. The Owner Trustee and the Owner Participant, upon
request, will furnish each other with all such information as may be reasonably
required in connection with the preparation of such income tax returns. The
Owner Trustee will give to the Owner Participant, upon request, such periodic
information concerning receipts and disbursements by it with respect to the
Trust Estate as would be helpful to the Owner Participant in preparing its tax
returns.
ARTICLE VII.
INDEMNIFICATION OF WILMINGTON TRUST
COMPANY BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify Wilmington Trust
Company. The Owner Participant hereby agrees, whether or not any of the
transactions contemplated hereby shall be consummated, to assume liability for,
and hereby indemnifies, protects, saves and keeps harmless Wilmington Trust
Company in its individual capacity and its successors, assigns and agents, from
and against any and all liabilities, obligations, losses (excluding loss of
anticipated profits), damages, penalties, taxes (excluding any taxes payable by
Wilmington Trust Company in its individual capacity on or measured by any
compensation received by Wilmington Trust Company in its individual capacity
for its services hereunder), claims, actions, suits, costs, expenses or
disbursements (including reasonable legal fees and expenses, but excluding
internal costs and expenses such as salaries and overhead) and including 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 Wilmington Trust Company in its individual capacity (whether or not
indemnified against by the Lessee under Section 7 of the Participation
Agreement, but only to the extent not otherwise paid or reimbursed by Lessee or
any other Person) in any way relating to or arising out of this Trust Agreement
or any of the Operative Agreements 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, rejection, ownership, delivery, lease,
<PAGE> 16
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possession, use, operation, condition, sale, return or other disposition of the
Equipment (including 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 Wilmington Trust Company in its
individual capacity hereunder, except (a) in the case of willful misconduct or
gross negligence on the part of the Owner Trustee or Wilmington Trust Company
in its individual capacity in the performance or nonperformance of its duties
hereunder or under any of the other Operative Agreements to which the Owner
Trustee is a party or (b) those claims resulting from the inaccuracy of any
representation or warranty of Wilmington Trust Company in its individual
capacity (or from the failure of Wilmington Trust Company in its individual
capacity to perform any of its covenants) referred to in Section 6.01 or
Section 6.3 or (c) as may result from a breach by Wilmington Trust Company in
its individual capacity of its covenant in the last sentence of Section 5.04 or
any other of its covenants made in its individual capacity contained herein or
(d) in the case of the failure to use ordinary care on the part of the Owner
Trustee or Wilmington Trust Company in its individual capacity in the
disbursement of funds or (e) taxes excluded from the indemnification provided
by the Lessee pursuant to Section 7.1(b) of the Participation Agreement
(disregarding for purposes of this Article VII clauses (ii) and (iv) of Section
7.2(c) of the Participation Agreement) or (f) claims excluded from the
indemnification provided by the Lessee pursuant to Section 7.2(c) of the
Participation Agreement (disregarding for purposes of this Article VII clauses
(i), (vi), (ix) and (x) of Section 7.2(d) of the Participation Agreement) or
(g) taxes, fees or other charges on, based on or measured by, any fees,
commissions or compensation received by Wilmington Trust Company or the Owner
Trustee in connection with the transactions contemplated by the Operative
Agreements; 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 Participant. The indemnities contained in this
Section 7.01 extend to Wilmington Trust Company 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 Wilmington Trust Company 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, Wilmington Trust Company in
its individual capacity shall be entitled to indemnification from the Trust
Estate, subject to the Lien of the 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 Participant or others, but without releasing any of them
from their respective agreements of reimbursement; and to secure the same
Wilmington Trust Company in its individual
<PAGE> 17
14
capacity shall have a Lien on the Trust Estate, subject to the Lien of the
Indenture, which shall be prior to any interest therein of the Owner
Participant. 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. Notwithstanding anything herein to the
contrary, Wilmington Trust company shall not make any claim hereunder without
first making demand on the Lessee.
ARTICLE VIII.
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interest. All provisions of
Section 6.1 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 the Owner Participant of any of its
right, title or interest in and to the Participation Agreement, the Trust
Estate or this Trust Agreement, so long as the Participation Agreement is in
effect.
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 may resign at any time without cause by giving at least 60 days'
prior written notice to the Owner Participant, the Indenture Trustee, the Pass
Through Trustee and the Lessee, such resignation to be effective upon the
acceptance of appointment by the successor Owner Trustee under Section 9.01(b).
In addition, the Owner Participant may at any time remove the Owner Trustee
without cause by a notice in writing delivered to the Owner Trustee, the
Indenture Trustee and Lessee, such removal to be effective with the consent of
the Lessee (not to be unreasonably withheld), and upon the acceptance of
appointment by the successor Owner Trustee under Section 9.01(b). In the case
of the removal or resignation of the Owner Trustee, the Owner Participant may
appoint a successor Owner Trustee by an instrument signed by the Owner
Participant. If a successor Owner Trustee shall not have been appointed within
30 days after such notice of resignation or removal, the Owner Trustee, the
Owner Participant 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 (with a copy
<PAGE> 18
15
to the Owner Participant and Indenture Trustee) 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 Equipment
included in the Trust Estate to be transferred upon the records of the (FAA 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 101(16) of the Federal Aviation Act 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 $100,000,000 (or the
obligations and liabilities of which are irrevocably and unconditionally
guaranteed by an affiliated company having a combined capital and surplus of at
least $100,000,000), if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
or customary terms.
(d) Merger, etc. Any corporation into which Wilmington Trust
Company may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
Wilmington Trust Company shall be a party, or any corporation to which
substantially all the corporate trust business of Wilmington Trust Company may
be transferred, shall, subject to the terms of Section 9.01(c), be the Owner
Trustee hereunder without further act.
SECTION 9.02. Co-Trustees and Separate Trustees. (a) 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
if the Owner Trustee shall have been requested to do so by the Owner
Participant, or the Owner Trustee being advised by counsel shall determine that
it is so necessary or prudent in the interest of the Owner Participant or the
Owner Trustee, the Owner Trustee and each Owner Participant shall execute and
deliver an agreement supplemental hereto and all
<PAGE> 19
16
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 101(16) of the Federal
Aviation Act)) approved by the Owner Trustee and the Owner Participant, 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").
(b) The Owner Trustee and the Owner Participant shall
execute, acknowledge and deliver all such instruments as may be required by any
such separate trustee or separate trustees for more fully confirming such
title, rights or duties to such separate trustee or separate trustees. Upon
the acceptance in writing of such appointment by any such separate trustee or
separate trustees, it, he or they shall be vested with such title to the Trust
Estate or any part thereof, and with such rights and duties, as shall be
specified in the instrument of appointment, jointly with the Owner Trustee
(except insofar as local law makes it necessary or prudent or desirable for any
such separate trustee or separate trustees to act alone) subject to all the
terms of this Trust Agreement. Any separate trustee or separate trustees may,
at any time by an instrument in writing, constitute the Owner Trustee, its or
his attorney-in-fact and agent with full power and authority to do all acts and
things on its or his behalf and in its or his name.
Every additional trustee hereunder shall (be a Citizen of the
United States and), to the extent permitted by law, be appointed and act, and
the Owner Trustee and its successors shall act, subject to the following
provisions and conditions:
(A) all powers, duties, obligations and rights
conferred upon the Owner Trustee in respect of the custody,
control and management of monies, the Equipment or documents
authorized to be received or 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) notwithstanding anything to the contrary
contained herein, 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
<PAGE> 20
17
trustee, except jointly with, or with the consent in writing
of, the Owner Trustee;
(D) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee
hereunder;
(E) the Owner Participant, at any time, by an
instrument in writing may remove any such additional trustee;
and
(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 Indenture or affect the interests of the Indenture Trustee
or the Equipment Note holders in the Indenture Estate.
In case such separate trustee shall die, become incapable of acting, resign or
be removed, the title to the Trust Estate and all rights and duties of such
separate trustee shall, so far as permitted by law, vest in and be exercised by
the Owner Trustee, without the appointment of a successor to such separate
trustee.
(c) All provisions of this Trust Agreement which are for the
benefit of the Owner Trustee shall extend to and apply to each separate trustee
appointed pursuant to the foregoing provisions of this Section 9.2, including
without limitation Article VII hereof.
ARTICLE X.
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments and Delivery
Thereof. (a) Supplements 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 the Owner Participant. Subject to compliance
with Section 10.02 hereof and the provisions of the Participation Agreement,
the Owner Trustee will execute any amendment, supplement or other modification
of this Trust Agreement or of any other Operative Agreement which the Owner
Participant requests the Owner Trustee to execute and to which the Owner
Trustee is a party.
(b) Delivery of Amendments and Supplements to Certain
Parties. A signed copy of each amendment or supplement referred to in Section
10.01(a) to which the Lessee is not a party shall be delivered promptly by the
Owner Trustee to 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, the Owner Trustee shall be
<PAGE> 21
18
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 such document adversely affects in any material respect any right,
duty, immunity or indemnity in favor of the Owner Trustee hereunder or under
any other Operative Agreement to which the Owner Trustee is a party, the Owner
Trustee may in its discretion decline to execute such document.
SECTION 10.03. Distribution of Documents. Promptly after the
execution by the Owner Trustee of any document entered into pursuant to Section
10.01, the Owner Trustee shall mail, by certified mail, postage prepaid, a
conformed copy thereof to the Owner Participant, but the failure of the Owner
Trustee to mail such conformed copy shall not impair or affect the validity of
such document.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. Termination of Trust Agreement. (a) This
Trust Agreement and the trusts created hereby shall terminate and be of no
further force or effect upon the earlier of (i) both the final discharge of the
Indenture pursuant to Section 10.01 thereof 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 (provided, that at such time Lessee shall have fully complied with
all of the terms of the Lease and the Participation Agreement) or (ii) 110
years from the earliest execution of this Trust Agreement by any party hereto,
provided, however, that if the trust shall be or become valid under applicable
law for a period subsequent to 110 years from the earliest execution of this
Trust Agreement by any party hereto (or, 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 (ii) 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.
(b) Termination at Option of Owner Participant.
Notwithstanding Section 11.01(a) hereof, this Trust Agreement may be terminated
or revoked at any time at the election of the Owner Participant. Upon any such
termination, all monies or other property or proceeds constituting part of the
Trust Estate shall be
<PAGE> 22
19
distributed in accordance with the terms of this Trust Agreement; otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the terms hereof.
SECTION 11.02. Owner Participant Has No Legal Title in Trust
Estate. The Owner Participant 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 Participant to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
SECTION 11.03. Assignment, Sale, Etc. of Equipment. Any
assignment, sale, transfer or other conveyance of the Equipment by the Owner
Trustee made pursuant to the terms hereof or of the Lease or the Participation
Agreement shall bind the Owner Participant and shall be effective to transfer
or convey all right, title and interest of the Owner Trustee and the Owner
Participant in and to the Equipment. 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 6.1 of the Participation Agreement
incorporated in Article VIII and except as otherwise provided in Article IX and
Sections 6.07 and 10.01, nothing herein, whether expressed or implied, shall be
construed to give any person other than the Owner Trustee and the Owner
Participant any legal or equitable right, remedy or claim under or in respect
of this Trust Agreement; and (except as aforesaid) this Trust Agreement shall
be held to be for the sole and exclusive benefit of the Owner Trustee and the
Owner Participant.
SECTION 11.05. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms hereof shall be
in given in the manner provided in Section 10.5 of the Participation Agreement.
SECTION 11.06. 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; and any
waiver of the terms hereof shall be effective only in the specific instance and
for the specific purpose given.
SECTION 11.07. 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
<PAGE> 23
20
such counterparts shall together constitute but one and the same instrument.
SECTION 11.08. 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 Participant,
its successors and, to the extent permitted by Article VIII, its assigns. Any
request, notice, direction, consent, waiver or other instrument or action by
the Owner Participant shall bind its successors and assigns.
SECTION 11.09. Governing Law. This Trust Agreement shall in
all respects be governed by, and construed in accordance with, the internal
laws of the State of Delaware, including all matters of construction, validity
and performance.
SECTION 11.10 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 Agreement or other document contemplated
herein, may be performed by the Owner Participant and any such performance
shall not be construed as a revocation of the trust created hereby.
<PAGE> 24
21
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.
(Owner Participant)
By:___________________________
Name:
Title:
WILMINGTON TRUST COMPANY
By:_____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4(e)(1)
__________________________________________________________________
EQUIPMENT LEASE AGREEMENT
(Phillips Trust No. 94-__)
Dated as of ________________, 1994
Between
Wilmington Trust Company,
not in its individual capacity except
as expressly provided herein but
solely as Owner Trustee,
Lessor
and
PHILLIPS PETROLEUM COMPANY,
Lessee
Covered Hoppers and Tank Cars
_________________________________________________________________
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO
THIS LEASE, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE
HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A
SECURITY INTEREST IN FAVOR OF, SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE AND SECURITY AGREEMENT (PHILLIPS TRUST NO. 94-__), DATED AS OF
_______, 1994 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED PARTY, AND LESSOR, AS
DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM THE
INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN SECTION 20 OF THIS LEASE. SEE
SECTION 24.2 FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND
THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.
_________________________________________________________________
Filed with the Interstate Commerce Commission pursuant to 49 U.S.C. Section
11303 on __________, 1994 at _______, Recordation Number ____________.
<PAGE> 2
TABLE OF CONTENTS
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Acceptance and Leasing of Equipment . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.1 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Adjustment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Manner of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Ownership and Equipment Identification . . . . . . . . . . . . . . . . . . . . . 4
4.1 Retention of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Equipment Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Certain Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Return of Equipment; Storage . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Return; Holdover Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 8. Maintenance; Operation; Possession; Compliance with Laws; Mileage Allowances . . 8
8.1 Maintenance and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.4 Mileage Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Required Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Optional Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.3 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.1 Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Retention of Equipment by Lessor . . . . . . . . . . . . . . . . . . . . . . . 13
10.4 Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 11. Loss, Destruction, Requisition, Etc. . . . . . . . . . . . . . . . . . . . . . . 14
11.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.2 Replacement or Payment upon Event of Loss . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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11.3 Rent Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.4 Disposition of Equipment; Replacement of Unit . . . . . . . . . . . . . . . . . 16
11.5 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.6 Lease Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.1 Property Damage and Public Liability Insurance . . . . . . . . . . . . . . . . 18
12.2 Proceeds of Property Insurance . . . . . . . . . . . . . . . . . . . . . . . . 19
12.3 Additional Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. Lessor's Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.2 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.3 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15.4 Lessee's Duty to Return Equipment Upon an Event of Default . . . . . . . . . . 25
15.5 Fair Market Sales Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Filings; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.1 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 17. Lessor's Right to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.1 Assignment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.2 Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.3 Sublessee's Performance and Rights . . . . . . . . . . . . . . . . . . . . . . 27
Section 19. Net Lease, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 21. (Intentionally Omitted.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 22. Purchase Options; Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . 30
22.1 Election to Retain or Return Equipment . . . . . . . . . . . . . . . . . . . . 30
22.2 Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.3 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22.4 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
22.5 Stipulated Loss Value and Termination Value During Renewal Term . . . . . . . . 33
22.6 Early Buy-Out Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 23. Limitation of Lessor's Liability . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<TABLE>
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<S> <C>
Section 24. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.1 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.2 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.3 Headings and Table of Contents: Section References . . . . . . . . . . . . . . 36
24.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.5 True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.7 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.8 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.9 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
Attachments to Equipment Lease:
Exhibit A Form of Lease Supplement
Exhibit B Form of Sublease Amendment
Appendix A Definitions
- iii -
<PAGE> 5
EQUIPMENT LEASE AGREEMENT
(Phillips Trust No. 94-__)
This EQUIPMENT LEASE AGREEMENT (Phillips Trust No. 94-__), dated
as of __________________, 1994 (the "Lease"), between WILMINGTON TRUST COMPANY,
a Delaware banking corporation, not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee under the Trustee
Agreement ("Lessor"), and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Lessee").
W I T N E S S E T H :
Section 1. Definitions.
Unless the context otherwise requires, all capitalized terms used
herein without definition shall have the respective meanings set forth in
Appendix A hereto for all purposes of this Lease.
Section 2. Acceptance and Leasing of Equipment. Lessor hereby
agrees (subject to satisfaction or waiver of the conditions set forth in
Section 4.1 and 4.3 of the Participation Agreement), simultaneously with the
delivery of each Unit from Lessee to Lessor and acceptance thereof by Lessor,
to accept delivery of such Unit from Lessee, as evidenced by the execution and
delivery by Lessor of a Certificate of Acceptance with respect to such Unit and
thereafter to lease such Unit to Lessee hereunder, and Lessee hereby agrees
(subject to satisfaction or waiver of the conditions set forth in Section 4.4
of the Participation Agreement) to lease from Lessor hereunder, such Unit, as
evidenced by the execution and delivery by Lessee and Lessor of a Lease
Supplement covering such Unit. Lessor hereby authorizes one or more employees
of Lessee, designated by Lessee, to act on behalf of Lessor as its authorized
representative or representatives to accept delivery of each Unit, to execute
and deliver such Certificate of Acceptance, all in accordance with Section
2.3(b) of the Participation Agreement. Lessee hereby agrees that such
acceptance of delivery by such authorized representative or representatives on
behalf of Lessor shall, without further act, irrevocably constitute acceptance
by Lessee of such Unit for all purposes of this Lease.
Section 3. Term and Rent.
3.1 Lease Term. The interim term of this Lease (the
"Interim Term") for each Unit shall commence on the Closing Date and shall
terminate the day before the Basic Term Commencement Date. The basic term of
this Lease (the "Basic Term") for each Unit shall commence on the Basic Term
Commencement Date and, subject to earlier termination pursuant to Sections 10,
11, 15 and 22.6 shall expire at 11:59 P.M. (New York City time) on the
<PAGE> 6
2
Basic Term Expiration Date for such Unit. Subject and pursuant to Section
22.3, Lessee may elect one or more Renewal Terms for any Unit.
3.2 Basic Rent. Lessee hereby agrees to pay Lessor as
Basic Rent for each Unit throughout the Basic Term applicable thereto Basic
Rent in consecutive semi-annual installments payable on each Rent Payment Date
during the Basic Term. Subject to Section 3.5, each such semi-annual payment
of Basic Rent shall be in an amount equal to the product of the Equipment Cost
for such Unit multiplied by the Basic Rent percentage for such Unit set forth
opposite such Rent Payment Date on Schedule 3 to the Participation Agreement
(as such Schedule 3 shall be adjusted pursuant to Section 2.6 of the
Participation Agreement). Basic Rent shall be payable in advance on certain
Rent Payment Dates and in arrears on certain Rent Payment Dates, as specified
in Schedule 3 to the Participation Agreement, as so adjusted from time to time.
Such Schedule 3, as so adjusted from time to time, is incorporated herein by
reference.
3.3 Supplemental Rent. Lessee also agrees to pay to
Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent, promptly as the same shall become due and owing, or where no due date is
specified, promptly after demand by the Person entitled thereto, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise as in the case of nonpayment of Basic Rent. Lessee will
also pay, as Supplemental Rent, (i) on demand, to the extent permitted by
applicable law, an amount equal to interest at the applicable Late Rate on any
part of any installment of Basic 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 or demanded, as the case may be, for the period from such due
date or demand until the same shall be paid, (ii) in the case of a prepayment
of the Equipment Notes as a result of the termination of this Lease with
respect to any Unit pursuant to Section 10, on the date of such prepayment, an
amount equal to the Make-Whole Amount, if any, payable in respect of the
principal amount of each Equipment Note being prepaid as a result of such
termination, (iii) in the case of any refinancing of the Equipment Notes
pursuant to Section 10.2 of the Participation Agreement, on the date of such
refinancing, an amount equal to the Make-Whole Amount, if any, payable in
respect of the principal amount of each Equipment Note being prepaid in
connection with such refinancing and (iv) in the case of a prepayment of the
Equipment Notes as a result of the exercise of the early buyout option pursuant
to Section 22.6, on the date of such prepayment, an amount equal to the
Make-Whole Amount, if any, payable in respect of the principal amount of each
Equipment Note being prepaid as a result of such exercise.
3.4 Adjustment of Rent. Lessee and Lessor agree that the
Basic Rent, Stipulated Loss Value, the Early Buyout Price and
<PAGE> 7
3
Termination Value percentages shall be subject to adjustment pursuant to
Section 2.6 of the Participation Agreement. Such Section 2.6 of the
Participation Agreement is incorporated herein by reference.
3.5 Advances. If and to the extent that the Indenture
Trustee on the Refinancing Date (but only if the Refinancing Date occurs prior
to the Basic Term Commencement Date) or the Basic Term Commencement Date shall
not have received funds from the Owner Trustee sufficient for the payment in
full of the interest then due and owing on the Equipment Notes on such
applicable date, Lessee shall pay as Supplemental Rent, on such date, an amount
equal to such deficiency (such payment being referred to herein as an
"Advance"). In the event Lessee makes any Advance pursuant to this Section 3.5
and is not promptly reimbursed therefor by the Owner Participant after demand
for such reimbursement in the manner set forth in Section 20, and so long as no
Lease Event of Default has occurred and is continuing, Lessee, without
otherwise limiting its rights against the Owner Participant, shall be entitled,
subject to Section 6.8 of the Participation Agreement, to offset and deduct
(without duplication) against each succeeding payment or portion thereof of
Basic Rent, Supplemental Rent, Stipulated Loss Value, Termination Value or any
other amount due from Lessee to Persons other than the holders of the Equipment
Notes, the Indenture Trustee, and the Owner Trustee in its individual capacity,
an amount equal to such Advance plus interest on such amount at the Late Rate
until Lessee has been fully reimbursed for such Advance plus such interest and
in each such case, such offset shall be deemed to constitute a reduction in the
amount of such Advance so payable; provided that no such offset or deduction
shall be made against any amount required pursuant to the Indenture to be paid
to the Indenture Trustee except to the extent that, under the circumstances
prevailing at the time such payment is to be made, such payment would then be
distributable by the Indenture Trustee to the Owner Participant (or to the
Lessor for distribution to the Owner Participant).
3.6 Manner of Payments. All Rent (other than
Supplemental Rent payable to Persons other than Lessor, which shall be payable
to such other Persons in accordance with written instructions furnished to
Lessee by such Persons, as otherwise provided in any of the Operative
Agreements or as required by law) shall be paid by Lessee to Lessor at its
office at 1100 North Market Street, Rodney Square North, Wilmington, Delaware
19890, Attention: Corporate Trust Administration (Phillips Trust No. 94-__).
All Rent shall be paid by Lessee in funds consisting of lawful currency of the
United States of America, which shall be immediately available to the recipient
not later than 1:00 P.M. (New York City time) on the date of such payment.
Notwithstanding the foregoing, so long as the Indenture shall not have been
discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee
agrees, that all Rent (excluding Excepted Property) payable to Lessor and
assigned to the Indenture Trustee
<PAGE> 8
4
shall be paid directly to the Indenture Trustee at the times and in funds of
the type specified in this Section 3.6 at the office of the Indenture Trustee,
Shawmut Bank Connecticut, National Association, ABA No. 011900445, at 777 Main
Street, Hartford, Connecticut 06115, Attention: Corporate Trust Administration
(Phillips Trust No. 94-__), or at such other location in the United States of
America as the Indenture Trustee may otherwise direct.
3.7 Minimum Rent. Section 6.8 of the Participation
Agreement is incorporated herein by reference.
Section 4. Ownership and Equipment Identification.
4.1 Retention of Title. Lessor shall and hereby does
retain full legal title to and beneficial ownership of the Equipment
notwithstanding the delivery to and possession and use of the Equipment by
Lessee hereunder or any sublessee under any sublease permitted hereby.
4.2 Equipment Identification. Lessee will cause each Unit
of Equipment to be kept marked with its reporting marks which have been filed
by Lessee with the Association of American Railroads and the identifying
numbers which are set forth in the related Lease Supplement under the heading
"Road Numbers" and will not change the identifying numbers of any Unit except
in accordance with a statement of new numbers to be substituted therefor, which
statement shall be delivered to Lessor by Lessee prior to or contemporaneously
with such change and a supplement to this Lease and the Indenture with respect
to such new numbers shall be filed or recorded in all public offices where this
Lease and the Indenture shall have been filed or recorded and in such other
places, if any, where Lessor may reasonably request in order to protect,
preserve and maintain its right, title and interest in the Units. The costs
and expenses of all such supplements, filings and recordings shall be borne by
Lessee.
4.3 Certain Designations. Lessee may cause the Units of
Equipment to be lettered with the names or initials or other insignia
customarily used by Lessee or any permitted sublessees or any of their
respective Affiliates for convenience of identification of the right of any
such Person to use the Units of Equipment.
Section 5. Disclaimer of Warranties.
5.1 Disclaimer of Warranties. Without waiving any claim
Lessee may have against any seller, supplier or manufacturer, LESSEE
ACKNOWLEDGES AND AGREES THAT, (i) EACH UNIT OF EQUIPMENT IS OF A SIZE, DESIGN,
CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS
SATISFIED THAT EACH UNIT OF EQUIPMENT IS SUITABLE FOR ITS PURPOSES, (iii)
NEITHER LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN
PROPERTY OF SUCH KIND, (iv) EACH UNIT OF EQUIPMENT IS
<PAGE> 9
5
LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS
NOW IN EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR LEASES AND LESSEE TAKES EACH
UNIT OF EQUIPMENT "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN WHATEVER
CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT NEITHER LESSOR, AS LESSOR OR
IN ITS INDIVIDUAL CAPACITY, NOR THE OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED
TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS,
WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF ANY UNIT OF EQUIPMENT, THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO
SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE
ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO
THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO,
except that Lessor, in its individual capacity, represents and warrants that on
the Closing Date, Lessor shall have received whatever title to the Equipment as
was conveyed to Lessor by Lessee and each Unit of Equipment will be free of
Lessor's Liens attributable to Lessor in its individual capacity and provided
that the foregoing disclaimer in clause (v) shall not extend to any of the
Owner Participant's representations and warranties contained in the
Participation Agreement. Lessor hereby appoints and constitutes Lessee its
agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole cost and expense of Lessee,
whatever claims and rights Lessor may have as owner of the Equipment against
the manufacturers or any prior owner thereof; provided, however, that if at any
time an Event of Default shall have occurred and be continuing, at Lessor's
option, such power of attorney shall terminate, and Lessor may assert and
enforce, at Lessee's sole cost and expense, such claims and rights. Lessee's
delivery of a Lease Supplement shall be conclusive evidence as between Lessee
and Lessor that all Units described therein are in all the foregoing respects
satisfactory to Lessee.
Section 6. Return of Equipment; Storage.
6.1 Return; Holdover Rent. (a) Within 90 days of the
expiration of the Lease Term with respect to any Tank Car which has not been
purchased by Lessee and within 180 days of the expiration of the Lease Term
with respect to any Covered Hopper which has not been purchased by Lessee,
Lessee will, at its own cost and expense, deliver possession of such Tank Car
or Covered Hopper, as the case may be, in the condition required by Section 6.2
to Lessor at any storage track location selected by Lessee, provided that the
Tank Cars shall be returned at any such location in groups of at least 25 (or
such lesser number which constitutes the remaining number of Tank Cars of a
Class which have not been previously returned and which have the same Lease
Term expiration date, provided that such Tank Cars shall be
<PAGE> 10
6
returned to a location where other Tank Cars have been returned and remain
located at such time) and the Covered Hoppers shall be returned at any such
location in groups of at least 50 (or such lesser number which constitutes the
remaining number of Covered Hoppers of a Class which have not been previously
returned and which have the same Lease Term expiration date, provided that such
Covered Hoppers shall be returned to a location where other Covered Hoppers
have been returned and remain located at such time) (the date of return of any
such group of Units in material compliance with the provisions of Section 6.2
being the "Return Date" for such Units); provided, further, that there shall be
no more than a total of three such return locations, each of which shall be
located in the continental United States (excluding Alaska) within 50 miles of
a major railroad interchange point. Lessee will notify Lessor in writing of
the return location for each Unit at least 60 days before the date of return of
such Unit and shall notify Lessor promptly of the Return Date for any Unit.
Subject to Section 6.1(b), upon expiration of the Lease Term with respect to
such Unit and compliance with this Section 6.1(a) and Section 6.2 and the
payment of all Rent then due and payable, this Lease and the obligation to pay
Basic Rent for such Unit accruing subsequent to the expiration of the Lease
Term with respect to such Unit shall terminate. If Lessor does not require
storage of the Units pursuant to Section 6.3, Lessee's obligation with respect
to the return of Units upon expiration of the Lease Term shall solely be as set
forth in this Section 6.1 and in Section 6.2.
(b) All amounts earned in respect of a Unit of Equipment
after the date of expiration of the Lease Term with respect to such Unit and
prior to the return of the Unit hereunder shall belong to Lessee and, if
received by Lessor, shall be promptly turned over to Lessee, provided that if a
Lease Event of Default shall have occurred and be continuing at such time, any
such amounts which are received by the Lessor shall be held as collateral
security by Lessor subject to the provisions of Section 11.6. In the event any
Unit of Equipment is not returned to Lessor on the last day of the Lease Term
for such Unit, on the Return Date for such Unit, Lessee shall pay to Lessor for
each day from and including the expiration date of the Lease Term and through
the Return Date for such Unit an amount equal to the per diem equivalent of
Basic Rent payable on account of such Unit during the last semi-annual period
of the Lease Term for such Unit. In the event any Unit shall not have been so
returned to Lessor by the 180th day following the expiration of the Lease Term
for such Unit, Lessee shall on such 180th day pay to Lessor the greater of the
applicable Termination Value for such Unit determined as of the last Rent
Payment Date for such Unit or the Fair Market Sales Value thereof as of such
last Rent Payment Date plus the rent payable pursuant to this sentence for such
180-day period, and Lessor shall thereupon transfer to Lessee all of Lessor's
right, title and interest in any such Unit on an "as-is", "where-is" basis
without representation or
<PAGE> 11
7
warranty, express or implied, except as to the absence of Lessor's Liens.
6.2 Condition of Equipment. Each Unit when returned to
Lessor pursuant to Section 6.1 shall be (i) free from accumulations or deposits
from the commodities transported in or on the Unit during the Lease Term and be
clean, suitable for human entry, (ii) in the condition required by Section 8.1
and 9.1, and (iii) free and clear of all Liens except Lessor Liens. All logs,
records, books and other materials relating to the maintenance of such Unit
shall be made available to Lessor or its designee upon the return of such Unit.
Lessor shall have the right to inspect any Unit that is returned pursuant to
Section 6.1 to ensure that such Unit is in compliance with the conditions set
forth in this Section 6.2, at Lessor's sole cost, expense and risk (including,
without limitation, the risk of personal injury or death), by its authorized
representatives, during Lessee's normal business hours and upon reasonable
prior notice to Lessee; provided, however, that Lessee shall not be liable for
any injury to, or the death of, any Person exercising, on behalf of Lessor, the
rights of inspection granted under this Section 6.2 unless caused by Lessee's
gross negligence or wilful misconduct. No inspection pursuant to this Section
6.2 shall interfere with the normal conduct of Lessee's business, and Lessee
shall not be required to undertake or incur any additional liabilities in
connection therewith. A Unit shall not be deemed to have been returned to
Lessor for purposes of this Lease unless and until it is in compliance with the
conditions set forth in this Section 6.2.
6.3 Storage. Unless Lessor otherwise advises Lessee in
writing, Lessee shall permit Lessor to store such Unit, free of charge, at a
permitted return location on the tracks used by Lessee for the storage of
rolling stock for a period (the "Initial Storage Period") beginning on the
Return Date for such Unit and ending not more than 60 days thereafter. During
the Initial Storage Period, Lessee shall be responsible for any storage or
parking fees in respect of the stored Units and shall maintain insurance in
respect thereof in accordance with Section 12. Following the expiration of the
Initial Storage Period, Lessee shall permit Lessor, at the sole risk and
expense of Lessor, to store the Equipment for up to an additional 60 days (the
"Additional Storage Period"; collectively with the Initial Storage Period, the
"Storage Period") at such location. During the Storage Period, Lessee will
permit Lessor or any person designated by it, including the authorized
representative or representatives of any prospective purchaser or user of such
Unit, to inspect the same during Lessee's normal business hours upon at least
one Business Day's prior telephonic notice; provided, however, that such
inspection shall be arranged at a mutually convenient time (not unduly delayed
from the time requested by Lessor) so as not to materially interfere with the
normal conduct of Lessee's business and such person shall be insured to the
reasonable satisfaction of Lessee with respect to
<PAGE> 12
8
any risks incurred in connection with any such inspections and Lessee (except
in the case of Lessee's gross negligence or willful misconduct) shall not be
liable for any injury to, or the death of, any person exercising, either on
behalf of Lessor or any prospective purchaser or user, the rights of inspection
granted pursuant hereto. Lessee shall not be required to store the Equipment
after the Storage Period.
Section 7. Liens.
Lessee will not directly or indirectly create, incur, assume,
permit or suffer to exist any Lien on or with respect to any Units or Lessee's
leasehold interest therein under this Lease, except Permitted Liens, Lessor's
Liens and Liens described in Section 6.4(a) and 6.4(b) of the Participation
Agreement, and Lessee shall promptly, at its own expense, take such action or
cause such action to be taken as may be necessary to duly discharge (by bonding
or otherwise) any such Lien not excepted above if the same shall arise at any
time.
Section 8. Maintenance; Operation; Possession; Compliance with
Laws; Mileage Allowances.
8.1 Maintenance and Operation. Lessee, at its own cost and
expense, shall maintain, repair and keep each Unit, and shall operate each Unit
(i) in good working order and repair, ordinary wear and tear excepted, and in a
manner consistent with maintenance practices used by Lessee in respect of
equipment owned or leased by Lessee similar in type to such Unit, (ii) in
accordance with all insurance policies required to be maintained pursuant to
Section 12 hereof, (iii) in compliance with all applicable laws, rules and
regulations, including the DOT, the ICC, the Federal Railroad Administration
and the Interchange Rules, (iv) if such Unit has the benefit of manufacturer
warranties, in a manner consistent with the manufacturer's requirements in
order to maintain such warranties and (v) in a condition suitable for
interchange under the Interchange Rules or under any agreement between Lessee
and any connecting railroad; provided, however, that Lessee may, in good faith
and by appropriate proceedings diligently conducted, contest the validity or
application of any such law, regulation, requirement or rule in any reasonable
manner which does not impair the Lien of the Indenture or create any material
risk or danger of (A) the sale, forfeiture or loss of, or interference with the
use or possession of, any Unit of Equipment, or interference with the payment
of Rent or (B) the imposition of criminal liability or unindemnified material
civil liability on the Lessor, the Owner Participant, the Indenture Trustee or
the Pass Through Trustee, or (C) extending the ultimate imposition of such law,
rule or regulation beyond the expiration or termination of this Lease solely
with respect to Equipment leased hereunder, or (D) the release of the Lessee
from the obligation to return the Equipment in compliance with the provisions
of Section 6.2. In no event shall Lessee discriminate as to the use or
maintenance of any
<PAGE> 13
9
Unit (including the periodicity of maintenance or recordkeeping in respect of
such Unit) as compared to equipment of a similar nature which Lessee owns or
leases. Lessee will maintain all records, logs and other materials required by
relevant industry standards or any governmental authority having jurisdiction
over the Units required to be maintained in respect of any Unit, all as if
Lessee were the owner of such Units, regardless of whether any such
requirements, by their terms, are nominally imposed on Lessee, Lessor or the
Owner Participant.
8.2 Possession. Lessee shall be entitled to the possession
of the Equipment and to the use of the Equipment by it or any Affiliate, in the
United States, Canada and Mexico, only in the manner for which it was designed
and intended and so as to subject it only to ordinary wear and tear. In no
event shall Lessee make use of any Equipment in any jurisdiction not included
in the insurance coverage required by Section 12.
8.3 Sublease. Lessee shall be entitled to sublease any
Unit of Equipment (pursuant to a car service contract or otherwise) to a
business entity which is not subject to any bankruptcy, insolvency or similar
proceedings other than proceedings under Chapter 11 of the Bankruptcy Code (and
in such case, all appropriate court approvals are obtained which are reasonably
required by Lessor in order to protect the interest of Lessor and its assigns
in the Equipment, including the Lien of the Indenture) (leases to such
sublessees being herein referred to as "Permitted Subleases"); provided that
(a) with respect to any sublease entered into prior to the commencement of the
Lease Term such sublease shall only be a Permitted Sublease if prior to the
commencement of the Lease Term, Lessee and the sublessee thereunder shall have
entered into an amendment to such sublease substantially in the form of Exhibit
B and (b) with respect to any sublease entered into after the commencement of
the Lease Term, such sublease shall only be a Permitted Sublease if at the time
Lessee enters into such sublease, the following conditions shall have been
satisfied:
(i) no Lease Default or Lease Event of Default shall have
occurred and be continuing;
(ii) Lessee shall remain primarily liable for performance of
all of its obligations under this Lease;
(iii) such sublease, and the rights and interest of any
sublessee thereunder, shall in all events be expressly
subject and subordinate to this Lease and the rights
and interest of Lessor and its respective successors
and assigns hereunder;
(iv) such sublease shall not be for a term which extends
beyond the Basic Term and any agreed upon Renewal Term;
and
<PAGE> 14
10
(v) such sublease shall not include any term or provision
which would require or permit the sublessee thereunder
to take any actions inconsistent with this Lease or the
other Operative Agreements.
Lessee shall make, or cause to be made, in a timely fashion all filings with
respect to any such Permitted Sublease necessary to protect the rights of
Lessor in the Unit subject to such Permitted Sublease and the lien of the
Indenture thereon.
8.4 Mileage Allowances. In the event that Lessor receives
any mileage allowances, rentals or other compensation paid by any rail carrier
on account of the use of any Unit of Equipment, Lessor shall promptly remit
such compensation to Lessee so long as no Payment Event of Default shall have
occurred and be continuing. If a Payment Event of Default shall have occurred
and be continuing, Lessor shall hold such amounts received as security for
Lessee's obligations hereunder subject to the provisions of Section 11.6.
Section 9. Modifications.
9.1 Required Modifications. In the event the Association
of American Railroads, the DOT, or any other United States, state or local
governmental agency or other governmental authority having jurisdiction over
any Unit requires that such Unit be altered, replaced or modified (a "Required
Modification"), Lessee agrees to promptly (but in any event within the time
period by which the Required Modification is required to be made) make such
Required Modification at its own expense; provided, however, that Lessee may,
in good faith and by appropriate proceedings diligently conducted, contest the
validity or application of any such law, regulation, requirement or rule in any
reasonable manner which complies with the requirements set forth in the proviso
to the first sentence of Section 8.1 provided further, that with respect to any
such contest conducted after the expiration of the Lease Term, such contest
shall be conducted in a manner mutually satisfactory to Lessee and Lessor.
Title to any Required Modification shall immediately vest in Lessor.
9.2 Optional Modifications. In addition to making Required
Modifications, Lessee at any time may otherwise modify, alter or improve any
Unit (an "Optional Modification"); provided that no Optional Modification shall
materially diminish the fair market value, utility, or remaining economic
useful life of such Unit below the value, utility, or remaining economic useful
life of such Unit immediately prior to such Optional Modification, assuming
such Unit was then in the condition required to be maintained by the terms of
this Lease. Title to any Optional Modification which is not readily removable
without causing material damage to a Unit shall immediately vest in Lessor, and
title to any other Optional Modification (a "Severable
<PAGE> 15
11
Modification") shall remain with Lessee. If Lessee shall at its cost cause
such Severable Modifications to be made to any Unit, Lessor shall have the
right, prior to the return of such Unit to Lessor hereunder, to purchase such
Severable Modifications (other than Severable Modifications consisting of
proprietary equipment) at their then Fair Market Sales Value. If Lessor does
not elect to purchase such Severable Modifications, Lessee may remove (and, at
Lessor's direction, will remove) such Severable Modifications at Lessee's cost
and expense. If Lessee does not elect to remove (or is not directed by Lessor
to remove) such Severable Modifications pursuant to the immediately preceding
sentence, Lessee shall return such Unit with such Severable Modifications
intact, in which case such Severable Modifications shall be deemed to be a part
of the Equipment and title thereto shall vest in Lessor without further act or
payment.
9.3 Replacement of Parts. Lessee will replace or cause to be
replaced as promptly as practicable, and at its own cost and expense, all Parts
of any Unit 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 herein.
All replacement parts shall be free and clear of all Liens (except in the case
of replacement parts temporarily installed on an emergency basis and Permitted
Liens) and shall be in at least as good operating condition and have at least
the same value and utility as the Part being replaced. All such replacement
parts (except in the case of replacement parts temporarily installed on an
emergency basis) shall become the property of the Lessor, shall constitute
Parts hereunder and shall immediately become subject to this Lease and shall be
deemed part of the Unit to which such Part is attached for all purposes hereof
to the same extent as the Parts originally comprising, or installed on, such
Unit. The Parts replaced thereby shall become Lessee's or its designee's
property.
Section 10. Voluntary Termination.
10.1 Right of Termination. Lessee shall have the right, at its
option (a) at any time or from time to time to terminate the Lease Term with
respect to not less than 25 nor more than 150 of the Tank Cars and (b) at any
time or from time to time after the third anniversary of the Closing Date to
terminate the Lease Term with respect to not less than 50 nor more than 250 of
the Covered Hoppers (any such Tank Car or Covered Hopper, a "Terminated Unit")
if Lessee determines in good faith that such Tank Cars or Covered Hoppers have
become obsolete, surplus or operationally uneconomic to Lessee's requirements,
by delivering at least 90 days' prior written notice to Lessor and the
Indenture Trustee specifying a proposed date of termination for such Units (the
"Termination Date"), which date shall be a Rent Payment Date, any such
termination to be effective on the Termination Date. Except as expressly
<PAGE> 16
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provided herein, there will be no conditions to Lessee's right to terminate
this Lease with respect to any Terminated Unit pursuant to this Section 10.1.
Lessee may withdraw the termination notice referred to above at any time at
least 30 days prior to the Termination Date, whereupon this Lease shall
continue in full force and effect; provided that Lessee may not exercise its
right to withdraw such a termination notice more than two times with respect to
a Unit plus one additional time with respect to a Unit if the sale thereof
pursuant to Section 10.2 shall not be consummated through no fault of the
Lessee (any such failure to consummate such termination shall be deemed to be a
withdrawal of a termination notice unless such failure is attributable solely
or jointly to Lessor and/or the Owner Participant). The Lessee agrees that,
without limiting Section 2.5(b) of the Participation Agreement, it will
reimburse the Lessor, the Owner Participant, the Indenture Trustee and the Loan
Participants for all reasonable out-of-pocket costs and expenses (including
transfer taxes) incurred by each such party in connection with the proposed
termination or the termination of this Lease with respect to any Units, except
that Owner Participant shall pay for all reasonable out-of-pocket costs and
expenses of Lessee, Lessor, the Indenture Trustee and the Loan Participants in
connection with the exercise by Lessor of its retention rights under Section
10.3.
10.2 Sale of Equipment. During the period from the date of such
notice given pursuant to Section 10.1 to the Termination Date, Lessee, as agent
for Lessor and at Lessee's sole cost and expense, shall use reasonable best
efforts to obtain bids from Persons other than Lessee or Affiliates thereof for
the cash purchase of a Terminated Unit, and Lessee shall promptly, and in any
event at least five Business Days prior to the proposed date of sale, certify
to Lessor in writing the amount and terms of each such bid, the proposed date
of such sale and the name and address of the party submitting such bid.
Lessor shall have the right (but not the obligation) to obtain bids for the
purchase of such Terminated Unit, either directly or through agents other than
Lessee, 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 arranging
such sale. Unless Lessor shall have elected to retain such Terminated Unit in
accordance with Section 10.3, on the Termination Date: (i) Lessee shall,
subject to receipt (x) by Lessor of all amounts owing to Lessor pursuant to the
next sentence, and (y) by the Persons (including, without limitation, Lessor)
entitled thereto of all unpaid Supplemental Rent due on or before the
Termination Date, deliver such Terminated Unit to the bidder (which shall not
be Lessee or any Affiliate thereof), if any, which shall have submitted the
highest cash bid prior to such date (or to such other bidder as Lessee and
Lessor shall agree), in the same manner and condition as if delivery were made
to Lessor pursuant to Section 6 and (ii) Lessor shall, without recourse or
warranty (except as to the absence of any Lessor's Lien attributable to Lessor)
simultaneously therewith sell such Terminated Unit to
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such bidder, provided that, if Lessee shall have previously exercised all of
its rights of withdrawal of termination notices pursuant to Section 10.1, and
Lessee is unable to obtain any bids for such Units, Lessee shall effect the
sale of such Units to any bidder identified by Lessor. The total selling price
realized at such sale shall be paid to and retained by Lessor and, in addition,
on the Termination Date, Lessee shall pay to Lessor, (A) all unpaid Basic Rent
with respect to such Terminated Unit due and payable on or prior to such
Termination Date (other than Basic Rent payable with respect to such Terminated
Unit in "advance" on such date), (B) the excess, if any, of (1) the Termination
Value for such Terminated Unit computed as of the related Termination Date,
over (2) the net cash sales proceeds (after the deduction of all reasonable
costs and expenses of Lessor and the Owner Participant in connection with such
sale (including, without limitation, transfer and other taxes (other than on
net income of the Owner Participant)) of such Terminated Unit and (C) an amount
equal to any Make-Whole Amount in respect of the principal amount of the
Equipment Notes to be prepaid in accordance with Section 2.10(a) of the
Indenture. If no sale shall have occurred, this Lease shall continue in full
force and effect with respect to such Unit. If Lessor elects not to exercise
its right to retain such Terminated Unit as provided in Section 10.3, Lessee,
in acting as agent for Lessor, shall have no liability to Lessor for failure to
obtain the best price, shall act in its sole discretion and shall be under no
duty to solicit bids publicly or in any particular market. Lessee's sole
interest in acting as agent shall be to use its reasonable best efforts to sell
the Units at the highest price then obtainable consistent with the terms of
this Lease.
10.3 Retention of Equipment by Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, no later than 30 days after receipt of Lessee's notice of
termination, not to sell a Terminated Unit on the Termination Date therefor,
whereupon Lessee shall (i) deliver such Terminated Unit to Lessor in the same
manner and condition as if delivery were made to Lessor pursuant to Section 6
(but Lessor shall have no storage rights pursuant to Section 6.3), treating the
Termination Date as the termination date of the Lease Term with respect to such
Terminated Unit, and (ii) pay to Lessor (A) all unpaid Basic Rent payable on or
prior to the related Termination Date (other than Basic Rent payable with
respect to such Terminated Unit in "advance" on such date) and (B) an amount
equal to any Make-Whole Amount in respect of the principal amount of the
Equipment Notes to be prepaid in accordance with Section 2.10(a) of the
Indenture and (iii) pay to the Persons entitled thereto all other unpaid
Supplemental Rent due on or before the Termination Date. If Lessor elects not
to sell a Terminated Unit as provided in this Section 10.3, then Lessor shall
pay, or cause to be paid, to the Indenture Trustee in funds of the type and in
an amount equal to the outstanding principal amount of the Equipment Notes to
be prepaid on account of such Terminated Unit pursuant to Section
<PAGE> 18
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2.10(a) of the Indenture, all accrued interest to the date of prepayment of
such Equipment Notes on such Termination Date and an amount equal to the
Make-Whole Amount, if any, in respect of the principal amount of the Equipment
Notes to be prepaid. If Lessor shall fail to perform any of its obligations
pursuant to this Section 10.3, this Lease shall not be terminated with respect
to any Terminated Unit on a proposed Termination Date, Lessor shall thereafter
no longer be entitled to exercise its election to retain any Terminated Unit
and Lessee may at its option at any time thereafter submit a new termination
notice pursuant to Section 10.1 with respect to a Terminated Unit specifying a
proposed Termination Date occurring not earlier than five Business Days from
the date of such notice.
10.4 Termination of Lease. In the event of (x) any such sale of
a Terminated Unit and receipt by Lessor and the Indenture Trustee of all of the
amounts provided in Section 10.2 or (y) retention of a Terminated Unit by
Lessor in compliance with Section 10.3 (including receipt by the Indenture
Trustee of all amounts provided in Section 10.3), and upon compliance by Lessee
with the other provisions of this Section 10, the obligation of Lessee to pay
Basic Rent hereunder for such Terminated Unit shall cease and the Lease Term
for and Lessee's other obligations in respect of such Terminated Unit shall
end.
Section 11. Loss, Destruction, Requisition, Etc.
11.1 Event of Loss. In the event that any Unit (i) shall suffer
damage or contamination which, in Lessee's opinion (as evidenced by an
Officers' Certificate to such effect), makes repair uneconomic or renders such
Unit permanently unfit for normal use for any reason whatsoever other than
obsolescence, (ii) shall suffer an actual or constructive total loss, (iii)
shall be permanently returned to the manufacturer pursuant to any patent
indemnity provisions, (iv) shall be prohibited from being used in the normal
course of interstate rail commerce by any federal governmental authority for a
period in excess of six months (but in no event shall such period extend beyond
the date such Unit is required to be returned to Lessor pursuant to Section
6.1, and in the event such period extends beyond the expiration of the Lease
Term for such Unit, Rent shall accrue in respect of such Unit as provided in
Section 6.1), (v) shall suffer theft or disappearance, (vi) shall have title
thereto taken or appropriated by any governmental authority under the power of
eminent domain or otherwise or (vii) shall be taken or requisitioned for use by
any governmental authority under the power of eminent domain or otherwise, and,
in the case of any such theft, disappearance, taking, appropriation or
requisition under clause (v) or (vii), the period thereof exceeds the lesser of
(x) 90 days or (y) the remaining Basic Term and any agreed upon Renewal Term
for such Unit (any such occurrence being hereinafter called an "Event of
Loss"), Lessee, in accordance with the terms of Section 11.2, shall inform
Lessor and the Indenture Trustee of such Event of Loss.
<PAGE> 19
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11.2 Replacement or Payment upon Event of Loss. Upon the
occurrence of an Event of Loss with respect to any Unit, Lessee shall within 90
days of such occurrence give Lessor and the Indenture Trustee notice of such
occurrence and of its election to perform one of the following options and the
contemplated date of performance of such option (it being agreed that if Lessee
shall not have given notice of such election within 90 days after such
occurrence, Lessee shall be deemed to have elected to perform the option set
forth in the following paragraph (ii)):
(i) within 180 days of such occurrence, Lessee shall comply
with Section 11.4(b) and shall convey or cause to be conveyed to Lessor a
Replacement Unit to be leased to Lessee hereunder, such Replacement Unit
to be free and clear of all Liens (other than Permitted Liens) and to
have a value, utility, capacity and remaining economic useful life at
least equal to the Unit so replaced (assuming such Unit was in the
condition required to be maintained by the terms of this Lease); provided
that, if Lessee shall not perform its obligation to effect such
replacement under this paragraph (i) during the period of time provided
herein, then Lessee shall pay on the next succeeding Determination Date
that is at least 30 days after the end of such period to Lessor the
amounts specified in paragraph (ii) below, provided, further, that if a
Payment Event of Default shall have occurred and be continuing, Lessee
shall be precluded from electing to perform the option set forth in this
paragraph (i); or
(ii) on a Determination Date within 180 days of such
occurrence, Lessee shall pay or cause to be paid (1) to Lessor (a) an
amount equal to the Stipulated Loss Value of each such Unit suffering
such occurrence determined as of such Determination Date and (b) if such
Determination Date is also a Rent Payment Date, all Basic Rent payable on
such date in respect of such Unit (other than Basic Rent payable in
"advance" on such date) or if such Determination Date is not a Rent
Payment Date, all Basic Rent accrued to such date in respect of such Unit
then due and payable and (2) to the Persons (including, without
limitation, Lessor) entitled thereto all other unpaid Supplemental Rent
in respect of such Unit due on or before such Determination Date
(including any transfer taxes arising in connection with such
termination); it being understood that until such Stipulated Loss Value
is paid, there shall be no abatement or reduction of Basic Rent.
11.3 Rent Termination. Upon the replacement of any Unit in
compliance with Section 11.2(i) or upon the payment of all sums required to be
paid pursuant to Section 11.2(ii) in respect of any Unit for which Lessee has
elected to pay (or deemed to have elected to pay pursuant to the first proviso
to Section 11.2(i)) the amounts specified in paragraph 11.2(ii), the
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Lease Term with respect to such Unit and the obligation to pay Rent for such
Unit accruing subsequent to the date of conveyance of such Replacement Unit
pursuant to Section 11.2(i) or the date of payment of all amounts due pursuant
to Section 11.2(ii), as the case may be, shall terminate; provided that Lessee
shall be obligated to pay all Rent in respect of such Unit which has accrued up
to and including the date of conveyance of such Replacement Unit pursuant to
Section 11.2(i) or the date of payment of all amounts due pursuant to Section
11.2(ii), as the case may be.
11.4 Disposition of Equipment; Replacement of Unit.
(a) Upon the payment of all sums required to be paid pursuant
to Section 11.2 in respect of any Unit, Lessor will convey to Lessee or its
designee all right, title and interest of Lessor in and to such Unit, "as is",
"where is", without recourse or warranty, except for a warranty against
Lessor's Liens, and shall execute and deliver to Lessee or its designee such
bills of sale and other documents and instruments as Lessee or its designee may
reasonably request to evidence such conveyance. As to each separate Unit so
disposed of, Lessee or its designee shall be entitled to any amounts arising
from such disposition, plus any awards, insurance or other proceeds and damages
received by Lessee, Lessor or the Indenture Trustee by reason of such Event of
Loss after having paid the Stipulated Loss Value attributable thereto and all
other amounts of Rent then due and payable in respect thereof, provided that if
a Lease of Event of Default shall have occurred and be continuing, the amounts
referred to in this sentence which are payable to Lessee shall be paid to
Lessor, and Lessor shall hold such amounts received as security for Lessee's
obligations hereunder subject to the provisions of Section 11.6.
(b) At the time of or prior to any replacement of any Unit,
Lessee, at its own expense, will (A) furnish Lessor with a bill of sale with
respect to the Replacement Unit, (B) cause a Lease Supplement substantially in
the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease,
and duly executed by Lessee, to be delivered to Lessor for execution and, upon
such execution, to be filed for recordation in the same manner as provided for
the original Lease Supplement in Section 16.1, (C) so long as the Indenture
shall not have been satisfied and discharged, cause an Indenture Supplement
substantially in the form of Exhibit A to the Indenture for such Replacement
Unit to be delivered to Lessor and to the Indenture Trustee for execution and,
upon such execution, to be filed for recordation in the same manner as provided
for the original Indenture Supplement in Section 16.1, (D) furnish Lessor and
the Indenture Trustee with an opinion of Lessee's counsel (which may be
Lessee's in- house counsel), to the effect that (x) the bill of sale referred
to in clause (A) above constitutes an effective instrument for the conveyance
of title to the Replacement Unit to Lessor, (y) legal and beneficial title to
the Replacement Unit has been delivered
<PAGE> 21
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to Lessor, free and clear of all Liens except for Liens described in clauses
(i), (ii) and (v) of the definition of "Permitted Liens" and Liens described in
clauses (iii) and (iv) of such definition for amounts which are not due and
payable, and (z) all filings, recordings and other action necessary or
appropriate to perfect and protect Lessor's interests in and Indenture
Trustee's Lien on the Replacement Unit have been accomplished, (E) furnish to
the Owner Participant an acknowledgement by Lessee, in form and substance
reasonably satisfactory to the Owner Participant, that Lessee will indemnify
the Owner Participant for any adverse tax consequences resulting from such
replacement consistent with the provisions of the Tax Indemnity Agreement, and
(F) furnish such other documents and evidence as the Owner Participant, Lessor
or Indenture Trustee, or their respective counsel, may reasonably request in
order to establish the consummation of the transactions contemplated by this
Section 11.4. For all purposes hereof, upon passage of title thereto to Lessor
the Replacement Unit shall be deemed part of the property leased hereunder and
the Replacement Unit shall be deemed a "Unit" of Equipment as defined herein.
Upon such passage of title, Lessor will transfer to Lessee, without recourse or
warranty (except as to Lessor's Liens), all Lessor's right, title and interest
in and to the replaced Unit, and upon such transfer, Lessor will request in
writing that the Indenture Trustee execute and deliver to Lessee an appropriate
instrument releasing such replaced Unit from the lien of the Indenture.
11.5 Eminent Domain. In the event that during the Lease Term
the use of any Unit is requisitioned or taken by any governmental authority
under the power of eminent domain or otherwise, Lessee's obligation to pay
Basic Rent shall continue unless and until such requisition or taking
constitutes an Event of Loss and such obligation shall be terminated in
accordance with Section 11.3. Subject to the last sentence of this Section
11.5, the Lessee shall be entitled to receive and retain for its own account
all sums payable for any such period by such governmental authority as
compensation for requisition or taking of possession. Subject to the last
sentence of this Section 11.5, the Lessor and/or the Indenture Trustee
immediately will pay to the Lessee any amounts received by them in respect of
any such acquisition or taking of possession (other than amounts received from
Lessee). If a Lease Event of Default shall have occurred and be continuing,
any amounts payable to Lessee pursuant to this Section 11.5 shall be paid to or
retained by Lessor, as the case may be, and Lessor shall hold such amounts as
security for Lessee's obligations hereunder subject to the provisions of
Section 11.6.
11.6 Lease Event of Default. Any amount referred to in
Section 6.1(b), 8.4, 11.4(a), 11.5 or 12.2 which is to be held by Lessor
subject to the provisions of this Section 11.6 shall be held by the Lessor (or,
so long as the Lien of the Indenture has not been discharged, the Indenture
Trustee) as security for the obligations of the Lessee under this Lease, and at
such time as
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there shall not be continuing any such Lease Event of Default, such amount
(unless theretofore otherwise applied to the obligations of the Lessee
hereunder) shall be paid over to the Lessee provided that no such amount shall
be so held as collateral security for more than 365 days unless Lessor shall
have commenced the exercise of remedies within such period.
Section 12. Insurance.
12.1 Property Damage and Public Liability Insurance.
(a) Lessee will, at all times prior to the return of the
Units to Lessor and, if applicable, during the Initial Storage Period, at its
own expense, cause to be carried and maintained with Approved Insurers (i)
physical damage insurance in respect of each Unit in an amount at any time not
less than the Termination Value for each such Unit at such time and (ii) public
liability insurance for such Units with respect to third-party personal injury
and property damage (including, in the case of the Tank Cars, sudden and
accidental pollution liability insurance), and Lessee will continue to carry
such insurance in such amounts and for such risks not less comprehensive in
amounts and against risks customarily insured against by Lessee in respect of
equipment owned or leased by it similar in type to the Equipment. Any policies
of insurance carried in accordance with this Section 12.1 and any policies
taken out in substitution or replacement for any of such policies (A) shall
provide that, if any such insurance is cancelled, materially modified or
terminated (other than upon normal policy expiration) for any reason
whatsoever, Lessor, Indenture Trustee and Owner Participant shall receive 30
days' prior notice of such cancellation, material modification or termination,
and no such cancellation, material modification or termination shall be
effective against such Party until receipt of such notice, (B) with respect to
insurance policies provided by insurers identified in clause (iv) of the
definition of "Approved Insurer", shall name the Owner Participant, Lessor, as
Lessor of the Equipment and in its individual capacity, and the Indenture
Trustee as additional insureds and loss payees as their interests may appear,
but only with respect to liability for which Lessee would have an indemnity
obligation under the Participant Agreement, (C) shall provide that neither the
Owner Participant, Lessor, as lessor of the Equipment and in its individual
capacity, or the Indenture Trustee shall have any responsibility for any
insurance premiums, whether for coverage before or after cancellation or
termination of any such policies as to Lessee, (D) as to the public liability
insurance referred to in this paragraph 12.1(a) shall provide that in as much
as such policies cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exceptions of limits of liability and
liability for premiums, commissions, assessments or calls (which shall be
solely a liability of Lessee), shall operate in the same manner as if there
were a separate policy or policies covering each insured, (E) shall waive any
rights of
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subrogation of the insurers against the Owner Participant, Lessor, as lessor of
the Equipment and in its individual capacity, and the Indenture Trustee, (F)
shall provide that the coverage of such policies shall not be invalidated
because of any action or inaction of Lessee or any other Person (other than the
Owner Participant, Lessor or the Indenture Trustee, but only in respect of
their respective coverages) and (G) shall be primary without the right of
contribution. Lessee shall, at its own expense, be entitled to make all proofs
of loss and take all other steps necessary to collect the proceeds of the
insurance required hereunder.
(b) Lessee shall, prior to the Closing Date and not less
than annually thereafter, furnish the Owner Participant, Lessor and the
Indenture Trustee with a certificate signed by the insurer or an independent
insurance broker evidencing each policy of insurance carried in accordance with
this Section 12.1.
(c) It is understood and agreed that the insurance
required hereunder may be part of the Lessee's world-wide corporate insurance
program, including with respect to risk retention and deductible limits, and,
at any time during the Lease Term Lessee may alter its insurance program in any
manner with respect to the risks (including liability) associated with the use,
possession and operation of the Equipment and for all similar equipment owned
or leased by Lessee, provided that any provision of this Section 12 to the
contrary notwithstanding: (1) the aggregate amount of the deductible limits of
the insurance policies carried by Lessee pursuant clauses (i) and (ii) of
Section 12.1(a) at any time shall not exceed (x) $__________ (as such amount
shall be increased by escalating such amount annually in ___________ ,1994
dollars by the Inflation Index) if Lessee has an Investment Grade Rating at
such time or (y) $_________ (as such amount shall be increased by escalating
such amount annually in ___________ ,1994 dollars by the Inflation Index) if
Lessee does not have an Investment Grade Rating at such time and (2) subject to
such insurance being reasonably and economically available to Lessee as
measured by prevailing domestic oil industry practice, Lessee shall carry
insurance pursuant to clause (ii) of Section 12.1(a) (A) in respect of the Tank
Cars (including sudden and accidental pollution coverage) in an amount not less
than $_________ and (B) in respect of the Covered Hoppers in an amount not
less than $_________ and to the extent such amounts are not reasonably and
economically available as measured by prevailing domestic oil industry
practice, then such lesser amounts as are reasonably and economically available
as measured by prevailing domestic oil industry practice and otherwise
consistent with the terms of this Section 12.1.
12.2 Proceeds of Property Insurance. So long as no Payment
Event of Default shall have occurred and be continuing, the entire proceeds of
any property insurance or third party payments for damages to any Unit received
by Lessor or the Indenture Trustee shall be paid over to Lessee; provided that
if
<PAGE> 24
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the proceeds received in respect of any Unit exceed $_________ such proceeds
shall be paid over to and held by Lessor and shall thereafter be released to
Lessee in order to pay the costs and expenses of the repair of such Unit, and
in any event shall be released in full to Lessee upon the completion of the
repair of such Unit, provided, further, that if such damages constitute an
Event of Loss with respect to such Unit, such proceeds shall be released in
full to Lessee upon Lessee's replacement of such Unit pursuant to Section
11.2(i) or, if such Unit is not replaced pursuant to Section 11.2(i), shall be
applied towards the satisfaction of Lessee's payment obligations pursuant to
Section 11.2(ii). Anything to the contrary in the preceding sentence
notwithstanding, if a Lease Event of Default shall have occurred and be
continuing such proceeds shall be paid to Lessor, and Lessor shall hold such
proceeds as security for Lessee's obligations hereunder subject to the
provisions of Section 11.6.
12.3 Additional Insurance. At any time Lessor (either
directly or in the name of the Owner Participant) may at its own expense carry
insurance with respect to its interest in the Units, provided that such
insurance does not interfere with Lessee's ability to insure the Equipment as
required by this Section 12 or adversely affect Lessee's insurance or the cost
thereof, it being understood that all salvage rights to each Unit shall remain
with Lessee's insurers at all times. Any insurance payments received from
policies maintained by Lessor pursuant to the previous sentence shall be
retained by Lessor without reducing or otherwise affecting Lessee's obligations
hereunder.
Section 13. Lessor's Inspection Rights. Lessor shall have
the right, but not the obligation, at its sole cost, expense and risk
(including, without limitation, the risk of personal injury or death), by its
authorized representatives, to inspect the Equipment and Lessee's records with
respect thereto during Lessee's normal business hours and upon reasonable prior
notice to Lessee; provided, however, that Lessee shall not be liable for any
injury to, or the death of, any Person exercising, either on behalf of Lessor
or any prospective user, the rights of inspection granted under this Section 13
unless caused by Lessee's gross negligence or wilful misconduct. No inspection
pursuant to this Section 13 shall interfere with the use, operation or
maintenance of the Equipment or the normal conduct of Lessee's business, and
Lessee shall not be required to undertake or incur any additional liabilities
in connection therewith. Lessor's inspection rights under this Section 13
shall be limited to once per calendar year prior to the last 360 days of the
Lease Term for a Class of Equipment and shall be limited to no more than three
times during the last 360 days of such Lease Term; provided that if a Lease
Default or Lease Event of Default shall have occurred and be continuing, the
limitation on the frequency of the Lessor's inspection rights contained in this
sentence shall not be applicable.
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Section 14. Events of Default.
The following events shall constitute Events of Default
hereunder (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
be deemed to exist and continue so long as, but only as long as, it shall not
have been remedied in accordance with the express terms hereof:
(a) Lessee shall fail to make any payment of Basic Rent,
Stipulated Loss Value or Termination Value within 10 Business Days
after the same shall have become due; or
(b) Lessee shall fail to make any payment of Supplemental
Rent, including indemnity or tax indemnity payments (but excluding
Stipulated Loss Value or Termination Value, which are subject to
clause (a) above) after the same shall have become due and such
failure shall continue unremedied for 15 Business Days after receipt
by Lessee of written notice of such failure from the Owner
Participant, Lessor or the Indenture Trustee; or
(c) any representation or warranty made by Lessee in any
Operative Agreement (other than the Tax Indemnity Agreement) to which
Lessee is a party or any certificate or document delivered in
connection with the transactions contemplated by the Operative
Agreements shall prove to be untrue or incorrect in any material
respect when made and such untruth or incorrectness (if subject to
cure) shall continue to be material and unremedied for a period of 30
days after receipt by Lessee of written notice thereof from Lessor or
the Indenture Trustee; or
(d) Lessee shall commence a voluntary case in the United
States under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of Lessee or of any substantial part of its property, or shall make
any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(e) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of Lessee in an
involuntary case in the United States under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Lessee or for any
substantial part of its property, or ordering the winding-up or
liquidation
<PAGE> 26
22
of its affairs and such decree or order shall remain unstayed and in
effect for a period of 90 consecutive days; or
(f) Lessee shall fail to observe or perform any other of
the covenants or agreements to be observed or performed by Lessee
under any Lessee Agreement (other than the Tax Indemnity Agreement)
and such failure shall continue unremedied for 60 days after notice
from Lessor, the Owner Participant or the Indenture Trustee to Lessee,
specifying the failure and demanding the same to be remedied; provided
that, if such failure is capable of being remedied, no such failure
shall constitute an Event of Default hereunder for a period of 360
days after receipt of such notice so long as Lessee is diligently
proceeding to remedy such failure;
provided that, notwithstanding anything to the contrary contained in this
Lease, any failure of Lessee to perform or observe any covenant or agreement
herein shall not constitute an Event of Default under paragraph (f) above if
such failure is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as Lessee is continuing to comply with
the applicable terms of Section 11 and 12.
Section 15. Remedies.
15.1 Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare this Lease to be in default by a written notice to
Lessee; and at any time thereafter, so long as Lessee shall not have remedied
all outstanding Events of Default, Lessor may do one or more of the following
(in any portion of this Section 15) 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:
(a) proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by Lessee of the
applicable covenants of this Lease or to recover damages for the
breach thereof;
(b) by notice in writing to Lessee, Lessor may demand
that Lessee, and Lessee shall, upon written demand of Lessor and at
Lessee's expense forthwith return any or all Units of the Equipment to
Lessor or its order in the manner and condition required by, and
otherwise in accordance with all of the provisions of Section 6.2 and
Section 15.4; or Lessor with only such notice as is reasonably
required to comply with Lessee's standard and customary safety
practices (but in no event more than 1 Business Day) may by Lessor or
its agents enter upon the premises of Lessee or other premises where
any of the Equipment may be located and take possession of and remove
all or any of the Units and
<PAGE> 27
23
thenceforth hold, use, operate, sublease, possess and enjoy the same
free from any right of Lessee, or its sublessees and successors or
assigns, to use such Units for any purpose whatever and without any
duty to account to Lessee with respect to the proceeds thereof (except
to the extent provided in paragraph (e) below);
(c) with or without taking possession, sell any Unit at
public or private sale, as Lessor may determine, with not less than 10
Business Days prior notice to Lessee but free and clear of any rights
of Lessee and without any duty to account to Lessee with respect to
such sale or for the proceeds thereof (except to the extent required
by paragraph (e) below), in which event Lessee's obligation to pay
Basic Rent with respect to such Unit hereunder due for any periods
subsequent to the date of such sale shall terminate (except to the
extent that Basic Rent is to be included in computations under
paragraph (d) or (e) below if Lessor elects to exercise its rights
under either of said paragraphs);
(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 any Unit, Lessor, by written
notice to Lessee specifying a payment date (which date shall be a
Determination Date) which shall be not earlier than 30 days after the
date of such notice, may demand that Lessee pay to Lessor, and Lessee
shall pay to Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty (in lieu
of the Basic Rent for such Unit due after the payment date specified
in such notice), all Rent due and payable (other than Basic Rent
payable in "advance" on such payment date), or accrued, for such Unit
as of the payment date specified in such notice plus an amount equal
to the excess, if any, of the Stipulated Loss Value for such Unit
computed as of the payment date specified in such notice over the fair
market sales value (as determined pursuant to Section 15.5) of such
Unit as of the payment date specified in such notice;
(e) if Lessor shall have sold any Unit pursuant to
paragraph (c) above, Lessor, in lieu of exercising its rights under
paragraph (d) above with respect to such Unit may, if it shall so
elect, demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Rent for such Unit due subsequent to the
Rent Payment Date next preceding such sale), any accrued and unpaid
Rent for such Unit as of the date of such sale and, if that date is a
Rent Payment Date, the Basic Rent due on that date (other than Basic
Rent payable in "advance" on such date), plus the amount, if any, by
which the Stipulated Loss Value of such Unit computed as of the Rent
Payment Date next preceding the
<PAGE> 28
24
date of such sale or, if such sale occurs on a Rent Payment Date, then
computed as of such Rent Payment Date, exceeds the net proceeds of
such sale;
(f) in lieu of exercising its rights pursuant to paragraph
(b), (c), (d) or (e) above with respect to such Unit, Lessor by
written notice to Lessee specifying a payment date (which date shall
be a Determination Date) which shall not be earlier than 30 days after
the date of such notice, may demand that Lessee pay to Lessor, and
Lessee shall pay Lessor, on the payment date specified in such notice,
as liquidated damages for loss of a bargain and not as a penalty (in
lieu of the Basic Rent for such Unit due after the payment date
specified in such notice) the sum of (A) all Rent due and payable
(other than Basic Rent payable in "advance" on such date), or accrued,
for such Unit as of the payment date specified in such notice plus (B)
an amount equal to the Stipulated Loss Value for such Unit computed as
of the payment date specified in such notice; and upon such payment of
liquidated damages and all transfer taxes which are payable Lessor
will transfer to Lessee, without recourse or warranty (except as to
Lessor's Liens), all Lessor's right, title and interest in and to such
Unit and upon such transfer, Lessor will request in writing that the
Indenture Trustee execute and deliver to Lessee an appropriate
instrument releasing such Unit from the lien of the Indenture; and/or
(g) Lessor may rescind or terminate this Lease or may
exercise any other right or remedy that may be available to it under
applicable law.
In addition, Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Supplemental Rent due hereunder before
or during the exercise of any of the foregoing remedies, and for reasonable
legal fees and other reasonable costs and expenses incurred by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies with
respect thereto, including without limitation the repayment in full of any
costs and expenses necessary to be expended in repairing any Unit in order to
cause it to be in compliance with all maintenance and regulatory standards
imposed by this Lease and expenses, including reasonable legal fees, involved
in any appearance by Lessor or the Indenture Trustee in any bankruptcy or
insolvency proceeding with respect to Lessee.
15.2 Cumulative Remedies. The remedies in this Lease
provided in favor of Lessor shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other remedies in its favor existing
at law or in equity. Lessee hereby waives any mandatory requirements of law,
now or hereafter in effect, which might limit or modify any of the remedies
herein provided, to the extent that such waiver is permitted by law.
<PAGE> 29
25
15.3 No Waiver. No delay or omission to exercise any right,
power or remedy accruing to Lessor upon any breach or default by Lessee under
this Lease shall impair any such right, power or remedy of Lessor, nor shall
any such delay or omission be construed as a waiver of any breach or default,
or of any similar breach or default hereafter occurring; nor shall any waiver
of a single breach or default be deemed a waiver of any subsequent breach or
default.
15.4 Lessee's Duty to Return Equipment Upon an Event of
Default. If Lessor or any assignee of Lessor shall terminate this Lease
pursuant to Section 15 hereof, Lessee shall forthwith deliver possession of the
Equipment to Lessor. For the purpose of delivering possession of any Unit to
Lessor as above required, Lessee shall at its own cost, expense and risk
(except as hereinafter stated):
(a) forthwith place such Equipment upon such storage
tracks of Lessee, at the expense of Lessee, as Lessor may designate
or, in the absence of such designation, as Lessee may select with
prior written notification to Lessor; and
(b) permit Lessor to store such Equipment on such tracks
without charge for insurance, rent or storage until the earlier of (x)
60 days after the date such storage begins, or (y) the date on which
such Equipment has been sold, leased or otherwise disposed of by
Lessor, and during such period of storage Lessee shall continue to
maintain all insurance required by Section 12.1 hereof.
All Equipment returned shall be in the condition required by Section 6.2
hereof.
15.5 Fair Market Sales Value. For purposes of Section
15.1(d), the "fair market sales value" of a Unit of Equipment shall be the
sales value that would be obtained in an arm's length transaction between an
informed and willing buyer under no compulsion to buy and an informed and
willing seller under no compulsion to sell, based upon the actual condition and
location of the Unit of Equipment in question, which value shall be determined
by an appraiser selected by Lessor and reasonably acceptable to Lessee.
Section 16. Filings; Further Assurances.
16.1 Filings. On or prior to the Closing Date Lessee will
cause this Lease, the Lease Supplement dated the Closing Date, the Indenture
and the Indenture Supplement or other appropriate evidence to be duly filed and
recorded with the ICC in accordance with 49 U.S.C. Section 11303 and to be
deposited with the Registrar General of Canada pursuant to Section 90 of the
Railway Act of Canada.
<PAGE> 30
26
16.2 Further Assurances. Lessee will duly execute and
deliver to Lessor and the Indenture Trustee such further documents and
assurances and take such further action as may be required by applicable law in
order to effectively establish and protect the rights and remedies created in
favor of Lessor, the Owner Participant and the Indenture Trustee hereunder and
under the Indenture, including, without limitation, the execution and delivery
of supplements or amendments hereto and to the Indenture, in recordable form,
subjecting to this Lease and to the Indenture any Replacement Unit and the
recording or filing of counterparts hereof or thereof in accordance with the
laws of such jurisdiction within the United States and such UCC financing
statements as are required to maintain the right, title and interest of Lessor
in and to the Equipment and the remainder of the Trust Estate and to maintain
the validity and perfection of the Lien of the Indenture on the Indenture
Estate or as Lessor or the Indenture Trustee may from time to time deem
advisable; provided that in connection with the foregoing Lessee shall also
take such further action as is reasonably requested by Lessor. In the event
Mexico adopts a system for the filing or recording of ownership of or liens on
the Equipment Lessee agrees to make filings and recordings of such documents in
Mexico as Lessor or the Indenture Trustee may reasonably request as being at
the time normal and customary practice for transactions of this type.
16.3 Expenses. Lessee will pay all costs, charges and
expenses (including, without limitation, reasonable attorneys fees and
expenses) incident to any such filing, refiling, recording and rerecording or
depositing and redepositing of any such instruments, UCC filings or incident to
the taking of such action.
Section 17. Lessor's Right to Perform.
If Lessee fails to make any payment required to be made by it
hereunder or fails to perform or comply with any of its other agreements
contained herein which requires the payment of money, Lessor may itself make
such payment or perform or comply with such agreement which requires the
payment of money, after giving prior written notice thereof to Lessee, but
shall not be obligated hereunder to do so, and the amount of such payment,
together with interest thereon at the Late Rate, to the extent permitted by
applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.
Section 18. Assignment.
18.1 Assignment by Lessor. Lessee and Lessor hereby confirm
that concurrently with the execution and delivery of this Lease, Lessor has
executed and delivered to the Indenture Trustee the Indenture, which is
intended to assign as collateral security and grants a lien and security
interest in favor of the Indenture Trustee in, to and under the Equipment, this
Lease and the Rent payable hereunder (excluding Excepted Property), all as more
<PAGE> 31
27
explicitly set forth in the Indenture. Lessor agrees that it shall not
otherwise assign or convey its right, title and interest in and to this Lease,
the Equipment or any Unit, except (i) as expressly permitted by and subject to
the provisions of the Participation Agreement, the Trust Agreement and the
Indenture or (ii) following completion of foreclosure or similar proceedings
pursuant to the Indenture or deed in lieu thereof. The Lessee hereby consents
to such assignment and to the creation of such lien and security interest and
consents to the terms and provisions thereof. The Lessee (a) acknowledges that
the Indenture provides for the exercise by the Indenture Trustee of all rights
of the Lessor hereunder to give any consents, approvals, waivers, notices or
the like, to make any elections, demands or the like, or to take any other
discretionary action hereunder, except as specifically set forth in the
Indenture, (b) acknowledges receipt of an executed counterpart of the Indenture
as in effect on the date hereof and consents to all of the provisions thereof
and (c) agrees that, to the extent provided in the Indenture, the Indenture
Trustee shall have all the rights of the Lessor hereunder as if the Indenture
Trustee had originally been named as the Lessor herein, to the extent provided
in the Indenture. Notwithstanding any provision of this Lease or any other
Operative Agreement but without prejudice to the Lessor's and the Owner
Participant's rights expressly provided for in the Indenture, so long as the
Lessor's interest in this Lease or the Equipment is subject to the Lien of the
Indenture, the Lessee shall make all payments of Rent, and all other amounts
payable hereunder to the Lessor, other than Excepted Property, to the Indenture
Trustee as provided in Section 3.6, and the obligation of Lessee to make all
such payments shall not be subject to any defense, counterclaim, setoff or
other right or claim of any kind which the Lessee may be able to assert against
the Lessor or the Owner Participant in an action brought by either thereof on
this Lease.
18.2 Assignment by Lessee. Except in the case of any
requisition for use by an agency or instrumentality of the United States
government referred to in Section 11.1, Lessee will not, without the prior
written consent of Lessor, assign any of its rights hereunder, except as
permitted in the Participation Agreement, provided that Lessee may assign its
rights and/or obligations hereunder to any corporation controlled by,
controlling or under common control with Lessee, so long as Lessee remains
primarily liable hereunder. Any sublease in accordance with Section 8.3 shall
not be construed as an assignment of Lessee's rights hereunder.
18.3 Sublessee's Performance and Rights. Any obligation
imposed on Lessee in this Lease shall require only that Lessee perform or cause
to be performed such obligation, even if stated herein as a direct obligation,
and the performance of any such obligation by any permitted assignee, sublessee
or transferee under an assignment, sublease or transfer agreement then in
effect and permitted by the terms of this Lease shall
<PAGE> 32
28
constitute performance by Lessee and discharge such obligation by Lessee.
Except as otherwise expressly provided herein, any right granted to Lessee in
this Lease shall grant Lessee the right to exercise such right or permit such
right to be exercised by any such assignee, sublessee or transferee, provided
that Lessee's purchase and renewal options set forth in Section 22 may be
exercised only by Lessee. The inclusion of specific references to obligations
or rights of any such assignee, sublessee or transferee in certain provisions
of this Lease shall not in any way prevent or diminish the application of the
provisions of the immediately preceding two sentences with respect to
obligations or rights in respect of which specific reference to any such
assignee, sublessee or transferee has not been made in this Lease.
Section 19. Net Lease, Etc.
This Lease is a net lease and Lessee's obligation to pay all
Rent payable hereunder shall, subject to Section 3.5, be absolute,
unconditional and irrevocable and shall not be affected by any circumstance of
any character including, without limitation, (i) any set-off, abatement,
counterclaim, suspension, recoupment, reduction, rescission, defense or other
right that Lessee may have (other than pursuant to Section 3.5) against Lessor,
the Owner Participant, the Indenture Trustee or any holder of an Equipment
Note, any vendor or manufacturer of any Unit, or any other Person for any
reason whatsoever, (ii) any defect in or failure of title, merchantability,
condition, design, compliance with specifications, operation or fitness for use
of all or any part of any Unit, or any interruption or cessation in or
prohibition of the use or possession of any Unit for any reason whatsoever,
(iii) any damage to, or removal, abandonment, requisition, taking,
condemnation, loss, theft or destruction of all or any part of any Unit or any
interference, interruption, restriction, curtailment or cessation in the use or
possession of any Unit by Lessee or any other Person for any reason whatsoever
or of whatever duration, (iv) any insolvency, bankruptcy, reorganization or
similar proceeding by or against Lessee, Lessor or any other Person, (v) the
invalidity, illegality or unenforceability of this Lease, any other Operative
Agreement, or any other instrument referred to herein or therein or any other
infirmity herein or therein or any lack of right, power or authority of Lessee
to enter into this Lease or any other Operative Agreement to which it is a
party or to perform the obligations hereunder or thereunder or consummate the
transactions contemplated hereby or thereby or any doctrine of force majeure,
impossibility, frustration or failure of consideration, or (vi) any other
circumstance or happening whatsoever, foreseeable or unforeseeable, whether or
not similar to any of the foregoing. To the extent permitted by applicable
law, Lessee hereby waives any and all rights which it may now have or which at
any time thereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease with respect to any Unit,
except in accordance with
<PAGE> 33
29
the express terms hereof. Each payment of Rent made by Lessee hereunder shall
be final and Lessee shall not seek or have any right to recover all or any part
of such payment from Lessor or any Person for any reason whatsoever. Nothing
contained herein shall be construed to waive any claim which Lessee might have
under any of the Operative Agreements or otherwise or to limit the right of
Lessee to make any claim it might have against Lessor or any other Person or to
pursue such claim in such manner as Lessee shall deem appropriate, except as
provided above. If for any reason whatsoever this Lease shall be terminated by
operation of law or otherwise except as expressly provided herein, the Lessee
shall nonetheless pay an amount equal to each Rent payment at the time and in
the manner that such payment would become due and payable hereunder if this
Lease had not been terminated.
Section 20. Notices.
Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices provided for herein shall be in writing
or by a telecommunications device capable of creating a written record, and any
such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by express mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by any of the methods set forth in clauses
(a) or (b) above or this clause (c), in each case addressed to each party
hereto at its address set forth below or, in the case of any such party hereto,
at such other address as such party may from time to time designate by written
notice to the other parties hereto:
If to the Lessee: Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma
Attention: Assistant Treasurer
Telephone:
Facsimile:
Confirmation No.:
If to the Owner
Trustee: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Telephone:
Facsimile:
Confirmation No.:
<PAGE> 34
30
with a copy to: the Owner Participant at the address set
forth below
If to the Owner
Participant:
Attention:
Telephone:
Facsimile:
If to the Indenture
Trustee or the Pass
Through Trustee: Shawmut Bank Connecticut, National
Association, ABA No. 011900445,
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
(Phillips Trust No. 94-__)
Telephone:
Facsimile:
Confirmation No.: (203) 986-1189
Section 21. (Intentionally Omitted.)
Section 22. Purchase Options; Renewal Options.
22.1 Election to Retain or Return Equipment. Not less than
120 days prior to the end of the Basic Term or any applicable Renewal Term with
respect to any Unit of Equipment, Lessee shall give Lessor irrevocable notice
of its decision to return or retain such Unit of Equipment. If Lessee elects
to retain such Unit of Equipment, Lessee shall comply with Section 22.2 and/or
22.3 hereof, as it may elect in accordance with the provisions thereof
including the notice requirements stated therein, and if Lessee elects to
retain such Unit of Equipment but fails to comply with the notice requirements
of Section 22.2 or 22.3 hereof, Lessee shall be deemed to have irrevocably
elected to renew the Lease for a Fair Market Renewal Term of one year and
Section 22.3(b) (other than the notice provisions thereof) shall be applicable
to such renewal. If Lessee fails to give the 120 days' notice required by this
Section 22.1, Lessee shall be deemed to have irrevocably elected to return such
Unit of Equipment at the end of the Basic Term or any applicable Renewal Term,
as the case may be, in accordance with Section 6.
22.2 Purchase Option. So long as no Payment Event of Default
shall have occurred and be continuing and Lessee shall have duly given notice
with respect to not less than 25 Tank Cars and/or not less than 50 Covered
Hoppers pursuant to Section 22.1 and the next succeeding sentence of this
Section 22.2, Lessee shall have the right at its option to purchase such Units
of Equipment at the expiration of the Basic Term or any Renewal Term
<PAGE> 35
31
then in effect, at a price equal to the Fair Market Sales Value of such Units
(as determined pursuant to Section 22.4). Lessee shall give Lessor irrevocable
written notice not less than 60 days prior to the end of the Basic Term or any
Renewal Term then in effect for such Units of its election to exercise the
purchase option in respect of such Units provided for in this Section 22.2.
Upon payment of the purchase price for any such Unit, together with all other
amounts due and owing by Lessee under the Operative Agreements, Lessor shall
deliver a bill of sale transferring and assigning to Lessee all right, title
and interest of Lessor in and to such Units on an "as-is" "where-is" basis and
containing a warranty against Lessor's Liens. Lessor shall not be required to
make any other representation or warranty as to the condition of the Units or
any other matters, and may specifically disclaim any such representations or
warranties.
22.3 Renewal Options. (a) So long as no Lease Default or
Lease Event of Default shall have occurred and be continuing and Lessee shall
have duly given notice with respect to not less than 25 Tank Cars and/or not
less than 50 Covered Hoppers pursuant to Section 22.1 and the next succeeding
sentence of this Section 22.3(a), and subject to the last sentence of this
Section 22.3(a), Lessee shall have the right at its option to renew the Lease
with respect to such Units of Equipment upon the expiration of the Basic Term
for such Units for a period of at least one year (such period, the "Fixed Rate
Renewal Term") in accordance with this Section 22.3; provided, that the
aggregate length of the Fixed Rate Renewal Terms for any Unit shall not exceed
(i) four years in the case of any Units in Rail Cars (Class A) or Rail Cars
(Class B) or six years in the case of any Units in Rail Cars (Class C) or Rail
Cars (Class D). Lessee shall give Lessor irrevocable written notice of the
length of the proposed Fixed Rate Renewal Term not less than 60 days prior to
the end of the Basic Term or any Fixed Rate Renewal Term then in effect for
such Unit. The Basic Rent for such Unit during any Fixed Rate Renewal Term
shall be 50% of the average of the semi-annual Basic Rent installments payable
hereunder for such Unit during the Basic Term payable semi-annually in arrears.
Notwithstanding anything herein to the contrary, Lessee shall be only entitled
to renew the Lease with respect to a Unit for a proposed Fixed Rate Renewal
Term if Lessor has received an appraisal pursuant to Section 22.4 in form
reasonably acceptable to Lessor confirming that:
(x) the elapsed time measured from the Closing Date to
the end of the proposed Fixed Rate Renewal Term does not exceed 80% of
the reappraised estimate economic useful life of such Unit, as
determined pursuant to Section 22.4; and
(y) at the end of the proposed Fixed Rate Renewal Term
the reasonably anticipated Fair Market Sales Value of such Unit,
(without giving the effect of inflation or deflation)
<PAGE> 36
32
is not less than 20% of the Equipment Cost of such Unit, as determined
pursuant to Section 22.4.
(b) So long as no Lease Default or Lease Event of Default
shall have occurred and be continuing and Lessee shall have duly given notice
with respect to not less than 25 Tank Cars and/or not less than 50 Covered
Hoppers pursuant to Section 22.1 and by the next succeeding sentence of this
Section 22.3(b), Lessee shall have the right to renew this Lease upon the
expiration of the Basic Term or any Renewal Term then in effect for such Units
for a period of at least one year (such period, a "Fair Market Renewal Term").
Lessee shall give Lessor irrevocable written notice of the length of the
proposed Fair Market Renewal Term not less than 60 days prior to the end of the
Basic Term or any Renewal Term then in effect for such Units. The Basic Rent
for a Unit leased during the Fair Market Renewal Term shall be the Fair Market
Rental Value thereof, as determined pursuant to Section 22.4, payable
semi-annually in arrears.
22.4 Appraisal. At least 60 days prior to the date Lessee is
required to notify Lessor of its election of any purchase option pursuant to
Section 22.2 or renewal option pursuant to Section 22.3 with respect to any
Unit of Equipment, Lessee will notify Lessor of its preliminary intent to
exercise one of such options with respect to such Unit and propose an appraiser
(the "Appraiser") to conduct an appraisal of such Unit in order to establish
(a) the Fair Market Sales Value of such Unit at the commencement of and the
expiration of the proposed Renewal Term, (b) the Fair Market Rental Value of
such Unit during the proposed Renewal Term and (c) the remaining useful life of
such Unit and the maximum length of a renewal term for such Unit such that (i)
the elapsed time measured from the Closing Date to the end of such renewal term
does not exceed 80% of the remaining useful life of such Unit and (ii) at the
end of such renewal term, the reasonably anticipated Fair Market Sales Value of
such Unit is not less than 20% of the Equipment Cost for such Unit (without
giving effect to inflation or deflation); provided that if Lessee irrevocably
notifies Lessor that Lessee will not elect the fixed rate renewal option with
respect to such Unit pursuant to Section 22.3(a), the Appraiser shall not
establish the matters set forth in clause (c) above. Lessee will consult with
Lessor prior to selecting the Appraiser with the intent of selecting a mutually
acceptable Appraiser. If no such agreement is reached within 10 days from the
date Lessee notifies Lessor of its intent to select the Appraiser, Lessee will
retain the Appraiser, and Lessor will retain an appraiser (the "Lessor
Appraiser") within 20 days of the date Lessee notifies Lessor of its intent to
select the Appraiser. Lessee will pay all fees and expenses of the Appraiser,
and Lessor will pay all fees and expenses of Lessor Appraiser. The Appraiser
and the Lessor Appraiser will consult for a period of not more than 10 days
with the intent of selecting a consensus appraiser (whose fees and expenses
will be shared equally by Lessee and Lessor) to complete the appraisal within
20 days of such selection. If the Appraiser
<PAGE> 37
33
and Lessor Appraiser cannot agree within the allotted time period, appraisal
values and amounts will be determined by binding arbitration pursuant to the
rules of the American Arbitration Association, the costs of which will be
shared equally by Lessee and Lessor.
22.5 Stipulated Loss Value and Termination Value During
Renewal Term. All of the provisions of this Lease, other than Section 10,
shall be applicable during any renewal term of a Unit, except as specified in
the next succeeding sentence. During any Renewal Term, the Stipulated Loss
Value and Termination Value of such Unit shall be determined on the basis of
the Fair Market Sales Value of such Unit as of the first day of such Renewal
Term, reduced in equal monthly increments to the Fair Market Sales Value of
such Unit as of the last day of such Renewal Term; provided that in no event
during any Fixed Rate Renewal Term shall the Stipulated Loss Value or
Termination Value of any Unit be less than 20% of the Equipment Cost of such
Unit.
22.6 Early Buy-Out Purchase Option.
(a) So long as no Payment Event of Default shall have
occurred and be continuing, on the Early Buyout Date for any Class of
Equipment, Lessee shall have the right, at its option, to purchase any or all
Tank Cars (but in no event less than 25 Tank Cars) and/or any or all Covered
Hoppers (but in no event less than 50 Covered Hoppers) of such Class of
Equipment. In order to exercise such option to purchase such Units of
Equipment Lessee shall provide Lessor with a revocable written notice not less
than 90 days prior to the Early Buyout Date therefor, and if such notice is not
revoked at least 30 days prior to such Early Buyout Date, such notice shall
become irrevocable.
(b) In the event that Lessee shall have elected to purchase
Units of Equipment pursuant to Section 22.6(a), Lessee at its option shall on
the related Early Buyout Date either:
(i) pay to Lessor (1) all unpaid Basic Rent with respect
to such Units due and payable on or prior to such Early Buyout Date
(other than the Basic Rent payable in "advance" on such date), (2) an
amount equal to the Early Buyout Price for such Units, (3) an amount
equal to any Make-Whole Amount in respect of the principal amount of
the Equipment Notes to be prepaid in accordance with Section 2.10(a)
of the Indenture, (4) applicable transfer taxes, if any, and (5) other
reasonable costs and expenses incurred by Lessor and the Owner
Participant in connection with Lessee's election,provided that so long
as no Lease Default or Lease Event of Default shall have occurred and
be continuing, Lessee may elect to pay the Early Buyout Price in
installments (but in no event over a period greater than 12 months
from the date of exercise) as Supplemental Rent, secured as provided
herein in which case, Lessee shall pay to Lessor, on each EBO
Installment Payment Date for such
<PAGE> 38
34
Units, the EBO Installment Payment Amount in respect of such Units for
such date; or
(ii) assume all of the rights and obligations of Lessor
under the Indenture in respect of the principal amount of the
outstanding Equipment Notes (excluding any obligations or liabilities
of Owner Trustee in its individual capacity incurred on or prior to
such Early Buyout Date, which obligations and liabilities shall remain
the sole responsibility of the Owner Trustee in its individual
capacity) in accordance with Section 10.3 of the Participation
Agreement and Article VII of the Indenture and simultaneously shall
pay to Lessor (1) all unpaid Basic Rent with respect to such Units
due and payable on or before such Early Buyout Date (other than Basic
Rent payable in "advance" on such date) and (2) the amount of the
excess, if any, of such Early Buyout Price over an amount equal to the
principal of the outstanding Equipment Notes so assumed on such Early
Buyout Date, after taking into account any payments of principal made
in respect of such outstanding Equipment Notes on such Early Buyout
Date, provided that so long as no Lease Default or Lease Event of
Default shall have occurred and be continuing, Lessee may by notice to
Lessor concurrently with notice of its election to assume such
obligations of the Owner Trustee, elect to pay the amount calculated
pursuant to clause (ii)(2) above in installments as Supplemental Rent,
in which case, Lessee shall pay to Lessor on the first EBO Installment
Payment Date for such Unit, the excess, if any, of (x) the EBO
Installment Payment Amount in respect of such Unit for such date over
(y) the principal amount of the outstanding Equipment Notes to be
assumed on account of such Units on such date, and shall pay to Lessor
on each subsequent EBO Installment Payment Date for such Unit, the EBO
Installment Payment Amount in respect of such Unit for such date.
(c) If Lessee elects to pay the Early Buyout Price for a Unit
in full on the Early Buyout Date for such Unit or in installments commencing on
the Early Buyout Date for such Unit, but, in connection therewith, does not
elect to assume the obligations of the Owner Trustee in respect of any
Equipment Notes in accordance with Section 10.3 of the Participation Agreement
and Article VII of the Indenture, upon payment in full of all amounts payable
in accordance with the immediately preceding sentence (including, in the case
of an election by Lessee to pay such Early Buyout Price in installments,
payment in full of all such installments), Lessor will convey to Lessee or its
designee all right, title and interest of Lessor in and to such Unit, "as is",
"where is", without recourse or warranty, except for a warranty against
Lessor's Liens, and shall execute and deliver to Lessee or its designee such
bills of sale and other documents and instruments as Lessee or its designee may
reasonably request to evidence such conveyance.
<PAGE> 39
35
(d) If Lessee elects to pay the Early Buyout Price for a Unit
in installments (and shall have paid in full the installment thereof due on
such Early Buyout Date), the following provisions shall also be applicable: (i)
no Basic Rent in respect of such Unit shall be payable after such Early Buyout
Date, (ii) the Stipulated Loss Value of such Unit determined at any time after
such Early Buyout Date shall be equal to the aggregate amount of the
installments of such Early Buyout Price which have not been paid at the time of
such determination and (iii) such installments, at the option of the Lessor,
shall, subject to Section 10.3 of the Participation Agreement, be secured by a
security interest in such Units, and the Lessee shall execute and deliver such
security agreement and instruments of further assurance as the Lessor shall
reasonably request, all at the expense of the Lessee.
Section 23. Limitation of Lessor's Liability.
It is expressly agreed and understood that all
representations, warranties and undertakings of Lessor hereunder (except as
expressly provided herein) shall be binding upon Lessor only in its capacity as
Owner Trustee under the Trust Agreement and in no case shall Wilmington Trust
Company be personally liable for or on account of, any statements,
representations, warranties, covenants or obligations stated to be those of
Lessor hereunder, except that Lessor (or any successor Owner Trustee) shall be
personally liable for its gross negligence or willful misconduct and for its
breach of its covenants, representations and warranties contained herein to the
extent covenanted or made in its individual capacity.
Section 24. Miscellaneous.
24.1 Governing Law; Severability. This Lease, and any
extensions, amendments, modifications, renewals or supplements hereto shall be
governed by and construed in accordance with the internal laws and decisions of
the State of New York; provided, however, that the parties shall be entitled to
all rights conferred by any applicable Federal statute, rule or regulation.
Whenever possible, each provision of this Lease shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Lease shall be prohibited by or invalid under the laws of any
jurisdiction, such provision, as to such jurisdiction, shall be, to the extent
permitted by law, ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Lease in any other jurisdiction.
24.2 Execution in Counterparts. This Lease may be executed
in any number of counterparts, each executed counterpart constituting an
original and in each case such counterparts shall constitute but one and the
same instrument; provided, however, that to the extent that this Lease
constitutes chattel paper (as
<PAGE> 40
36
such term is defined in the Uniform Commercial Code) no security interest in
this Lease may be created through the transfer or possession of any counterpart
hereof other than the counterpart bearing the receipt therefor executed by the
Indenture Trustee on the signature page hereof, which counterpart shall
constitute the only "original" hereof for purposes of the Uniform Commercial
Code.
24.3 Headings and Table of Contents: Section References. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this
Lease.
24.4 Successors and Assigns. This Lease shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective permitted successors and assigns.
24.5 True Lease. It is the intent of the parties to this
Lease that it will be a true lease and not a "conditional sale," and that
Lessor shall at all times be considered to be the owner of each Unit which is
the subject of this Lease for the purposes of all Federal, state, city and
local income taxes or for franchise taxes measured by income, and that this
Lease conveys to Lessee no right, title or interest in any Unit except as
lessee. Nothing contained in this Section 24.5 shall be construed to limit
Lessee's use or operation of any Unit or constitute a representation, warranty
or covenant by Lessee as to tax consequences.
24.6 Amendments and Waivers. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
24.7 Business Days. If any payment is to be made hereunder
or any action is to be taken hereunder on any date that is not a Business Day,
such payment or action otherwise required to be made or taken on such date
shall be made or taken on the immediately succeeding Business Day with the same
force and effect as if made or taken on such scheduled date and as to any
payment (provided any such payment is made on such succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business
Day.
24.8 Directly or Indirectly. Where any provision in this
Lease refers to action to be taken by any Person, or which
<PAGE> 41
37
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
24.9 Incorporation by Reference. (a) The payment
obligations set forth in Sections 7.1 and 7.2 of the Participation Agreement
are hereby incorporated by reference.
(b) Any provision of any other Operative Agreement stated
herein to be incorporated by reference shall be construed as having been
incorporated herein with the same effect as if such provision had been set
forth in this Lease in full, and shall survive any termination of the Operative
Agreement from which such provision is incorporated.
<PAGE> 42
38
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
to be duly executed and delivered on the day and year first above written.
LESSOR:
WILMINGTON TRUST COMPANY,
not in its individual capacity
except as otherwise expressly
provided but solely as Owner
Trustee
By___________________________
Name:
Title:
LESSEE:
PHILLIPS PETROLEUM COMPANY
By___________________________
Name:
Title:
<PAGE> 43
STATE OF )
) SS
COUNTY OF )
On this __th day of __________, before me personally appeared
______________________, to me personally known, who being by me duly sworn, say
that he is ____________ of WILMINGTON TRUST COMPANY, that said instrument was
signed on such date on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
_________________________________
Notary Public
(NOTARIAL SEAL)
My commission expires:
STATE OF )
) SS
COUNTY OF )
On this __th day of _____________, before me personally
appeared _________________, to me personally known, who being by me duly sworn,
say that he is the _____________ of PHILLIPS PETROLEUM COMPANY, that said
instrument was signed on such date on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
__________________________________
Notary Public
(NOTARIAL SEAL)
My commission expires:
<PAGE> 44
EXHIBIT A
EQUIPMENT LEASE AGREEMENT
(PHILLIPS TRUST NO. 94-__)
_________________________________________________________________
FORM OF
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. ___
Dated as of ______________, 19__
between
WILMINGTON TRUST COMPANY,
Lessor
and
PHILLIPS PETROLEUM COMPANY,
Lessee
_________________________________________________________________
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO
THIS LEASE SUPPLEMENT, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO
BECOME DUE UNDER THE LEASE HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND
ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE
TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT (PHILLIPS TRUST NO.
94-__), DATED AS OF ___________, 1994, BETWEEN SAID INDENTURE TRUSTEE, AS
SECURED PARTY, AND LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY
INTEREST MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN
SECTION 20 OF THE LEASE. SEE SECTION 24.2 OF THE LEASE FOR INFORMATION
CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS
COUNTERPARTS HEREOF.
_________________________________________________________________
Filed with the Interstate Commerce Commission pursuant
to 49 U.S.C. Section 11303 on _________, 1994, at __:__ _.M.
Recordation Number ___.
<PAGE> 45
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. ___
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. __ dated
____________, 19__ (this "Lease Supplement") between WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner Trustee ("Lessor") under the
Trust Agreement, and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Lessee");
W I T N E S S E T H:
Lessor and Lessee have heretofore entered into that certain
Equipment Lease Agreement (Phillips Trust No. 94-__) dated as of _____________,
1994 (the "Lease"). The Lease provides for the execution and delivery of a
Lease Supplement substantially in the form hereof for the purpose of confirming
the acceptance and lease of the Units under the Lease as and when delivered by
Lessor to Lessee in accordance with the terms thereof. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings specified
in Appendix A to the Lease;
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee hereby acknowledges and confirms that it has
approved the Units identified on Schedule 1 hereto at the time and on the date
set forth in the Certificate of Acceptance.
2. Lessor hereby confirms delivery and lease to Lessee,
and Lessee hereby confirms acceptance and lease from Lessor, under the Lease as
hereby supplemented, the Units listed on Schedule 1 hereto.
3. Lessee hereby represents and warrants that no Event
of Loss has occurred with respect to the Units set forth on Schedule 1 hereto
as of the date hereof.
4. The aggregate Equipment Cost of and Basic Rent for
the Units leased hereunder is set forth in Schedule 3 to the Participation
Agreement. The Stipulated Loss Values and Termination Values applicable in
respect of the Units are set forth, respectively, on Schedules 4 and 5 to the
Participation Agreement.
5. The Early Buyout Date, the Early Buyout Price, the
EBO Installment Payment Dates and the EBO Installment Payment Amounts for the
Rail Cars (Class A), Rail Cars (Class B), Rail Cars (Class C) and Rail Cars
(Class D) are set forth on Schedule 6 to the Participation Agreement.
<PAGE> 46
2
6. The Units set forth in Part A of Schedule 1 hereto
under the heading "Covered Hoppers (Class A)" constitute the Class of Equipment
known as the Covered Hoppers (Class A) and under the heading "Tank Cars (Class
A)" constitute the Class of Equipment known as the Tank Cars (Class A).
7. The Units set forth in Part B of Schedule 1 hereto
under the heading "Covered Hoppers (Class B)" constitute the Class of Equipment
known as the Covered Hoppers (Class B) and under the heading "Tank Cars (Class
B)" constitute the Class of Equipment known as the Tank Cars (Class B).
8. The Units set forth in Part C of Schedule 1 hereto
under the heading "Covered Hoppers (Class C)" constitute the Class of Equipment
known as the Covered Hoppers (Class C) and under the heading "Tank Cars (Class
C)" constitute the Class of Equipment known as the Tank Cars (Class C).
9. The Units set forth in Part D of Schedule 1 hereto
under the heading "Covered Hoppers (Class D)" constitute the Class of Equipment
known as the Covered Hoppers (Class D) and under the heading "Tank Cars (Class
D)" constitute the Class of Equipment known as the Tank Cars (Class D).
10. The Basic Term Expiration Date for (i) the Rail Cars
(Class A) is ______ __________, (ii) the Rail Cars (Class B) is
_________________, (iii) the Rail Cars (Class C) is _ _______________, and (iv)
the Rail Cars (Class D) is _________________.
11. Lessee hereby confirms its agreement, in accordance
with the Lease as supplemented by this Lease Supplement to pay Rent to Lessor
for each Unit leased hereunder as provided for in the Lease.
12. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Lease Supplement may refer to the "Equipment Lease Agreement, dated as of
_________, 1994", the "Lease Agreement, dated as of _ ___________, 1994," or
the "Lease, dated as of _______________, 1994," or may identify the Lease in
any other respect without making specific reference to this Lease Supplement,
but nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
13. This Lease Supplement shall be construed in
connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease shall be and remain in full force and effect.
14. This Lease Supplement may be executed in any number
of counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
<PAGE> 47
3
15. This Lease Supplement shall in all respects be
governed by, and construed in accordance with, the laws of the State of New
York, including all matters of construction, validity and performance.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered on the day and year first above
written.
LESSOR:
WILMINGTON TRUST COMPANY,
not in its individual
capacity, but solely as Owner
Trustee
By: _________________________
Name:
Title:
LESSEE:
PHILLIPS PETROLEUM COMPANY
By: _________________________
Name:
Title:
<PAGE> 48
STATE OF )
) SS
COUNTY OF )
On this _______________ of __________, 199_, before me
personally appeared ______________, to me personally known, who being by me
duly sworn, said that he/she is ____________________ of WILMINGTON TRUST
COMPANY, that said instrument was signed on behalf of said Delaware banking
corporation on such day by authority of its Board of Directors, and he
acknowledged that the execution of the foregoing instrument was the free act
and deed of said (corporation)(association).
____________________________
Notary Public
(NOTARIAL SEAL)
My commission expires: __________________
STATE OF )
) SS
COUNTY OF )
On this _______________ of ___________, 199_, before me
personally appeared ______________, to me personally known, who being by me
duly sworn, said that he/she is _____________________ of PHILLIPS PETROLEUM
COMPANY, that said instrument was signed on behalf of said corporation on such
day by authority of its Board of Directors, and he/she acknowledged that the
execution of the foregoing instrument was the free act and deed of said
corporation.
____________________________
Notary Public
(NOTARIAL SEAL)
My commission expires: __________________
<PAGE> 49
Schedule 1 to
Lease Supplement No. __
(Phillips Trust No. 94- )
Part A - Rail Cars (Class A)
<TABLE>
<CAPTION>
No. of Units Description Road Numbers
- ------------ ----------- ------------
<S> <C> <C>
(MANUFACTURER,
MODEL, SERIAL NOS.)
</TABLE>
Part B - Rail Cars (Class B)
<TABLE>
<CAPTION>
No. of Units Description Road Numbers
- ------------ ----------- ------------
<S> <C> <C>
</TABLE>
Part C - Rail Cars (Class C)
<TABLE>
<CAPTION>
No. of Units Description Road Numbers
- ------------ ----------- ------------
<S> <C> <C>
</TABLE>
Part D - Rail Cars (Class D)
<TABLE>
<CAPTION>
No. of Units Description Road Numbers
- ------------ ----------- ------------
<S> <C> <C>
</TABLE>
<PAGE> 50
APPENDIX A
Rail Car Lease Agreement
Trust Indenture and Security Agreement
Participation Agreement
PHILLIPS TRUST 1994-
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all
purposes of the Operative Agreements referred to below, unless otherwise
defined in an Operative Agreement or the context thereof shall otherwise
require and such meanings shall be equally applicable to both the singular and
the plural forms of the terms herein defined. In the case of any conflict
between the provisions of this Appendix A and the provisions of the main body
of any Operative Agreement, the provisions of the main body of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to
agreements shall be deemed to mean and include such agreements as the same may
be amended, supplemented and otherwise modified from time to time, and (ii)
references to parties to agreements shall be deemed to include the permitted
successors and assigns of such parties.
Defined Terms
"Additional Storage Period" shall have the meaning specified
in Section 6.3 of the Lease.
"Advance" shall have the meaning specified in Section 3.5 of
the Lease.
"Affiliate" of any Person shall mean any other Person which
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. 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, and the terms "controlling" and "controlled" shall
have meanings correlative to the foregoing.
"Appraisal" shall have the meaning specified in Section 4.3(a)
of the Participation Agreement.
"Approved Insurer" shall mean (i) any insurer on an approved
security list prepared from time to time by a generally recognized insurance
broker at the request of the Lessee and delivered to the Lessor and the
Indenture Trustee, (ii) Oil
<PAGE> 51
2
Insurance Limited, a Bermuda corporation, (iii) Oil Casualty Insurance Limited,
a Bermuda Corporation, and (iv) any insurance company which is an Affiliate of
the Lessee (but only to the extent the type and amount of insurance provided by
such insurance company has been approved by the insurance regulators in the
domicile of such insurance company).
"Average Life Date" shall mean, with respect to the prepayment
of an Equipment Note, the date which follows the prepayment date by a period
equal to the Remaining Weighted Average Life of such Equipment Note.
"Bankruptcy Code" shall mean the United States Bankruptcy
Reform Act of 1978, as amended from time to time, 11 U.S.C. Section 101 et
seq., or any successor thereto.
"Basic Rent" shall mean, with respect to any Unit of
Equipment, all rent payable by the Lessee to the Lessor pursuant to Section 3.2
of the Lease for the Basic Term thereunder for such Unit, and all rent payable
pursuant to Section 22.3 of the Lease for any Renewal Term thereunder for such
Unit.
"Basic Term" shall mean, for the Units of any Class of
Equipment, as specified in Section 3.1 of the Lease.
"Basic Term Commencement Date" shall mean __________, 1995,
which, in any event, shall not be more than 6 months less one day from the
commencement of the Interim Term.
"Basic Term Expiration Date" shall mean, for the Units of any
Class of Equipment, the date set forth in the Lease Supplement as the Basic
Term Expiration Date for such Class of Equipment.
"Beneficial Interest" shall mean the interest of the Owner
Participant under the Trust Agreement.
"Bill of Sale" shall mean the bill of sale, dated the Closing
Date from Lessee to Owner Trustee covering the Units delivered on the Closing
Date.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banking institutions are authorized or
required by law, regulation or executive order to be closed in New York, New
York, Bartlesville, Oklahoma, the city and state in which the principal
corporate trust office of the Owner Trustee is located, or, until the Lien of
the Indenture has been discharged, the city and state in which the principal
corporate trust office of the Indenture Trustee is located.
"Certificate of Acceptance" shall have the meaning specified
in Section 2.3(b) of the Participation Agreement.
"Change in Tax Law" shall mean a change, amendment,
modification, addition or deletion (whether proposed, temporary
<PAGE> 52
3
or final) in or to the Code, any regulation thereunder or any Revenue Ruling,
Revenue Procedure or other published administrative determination or judicial
proceeding, in each case after the execution and delivery of the Participation
Agreement.
"Class of Equipment" shall mean each of the Covered Hoppers
(Class A), the Covered Hoppers (Class B), the Covered Hoppers (Class C), the
Covered Hoppers (Class D), the Tank Cars (Class A), the Tank Cars (Class B),
the Tank Cars (Class C), and the Tank Cars (Class D).
"Closing" shall have the meaning specified in Section 2.3(b)
of the Participation Agreement.
"Closing Date" shall have the meaning specified in Section 2.1
of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
"Commitment" with respect to the Owner Participant, shall have
the meaning specified in Section 2.2(a) to the Participation Agreement and with
respect to the initial Loan Participant, shall have the meaning specified in
Section 2.2(b) to the Participation Agreement.
"Covered Hoppers" shall mean, collectively, the Covered
Hoppers (Class A), the Covered Hoppers (Class B), the Covered Hoppers (Class
C), and the Covered Hoppers (Class D).
"Covered Hoppers (Class A)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Covered
Hoppers (Class A)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Covered Hoppers (Class B)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Covered
Hoppers (Class B)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Covered Hoppers (Class C)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Covered
Hoppers (Class C)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
<PAGE> 53
4
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Covered Hoppers (Class D)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Covered
Hoppers (Class D)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Debt Amortization" with respect to any Equipment Note shall
mean the amortization schedule of principal payments applicable thereto.
"Debt Rate" shall mean as of the date of determination, a rate
equal to the rate of interest per annum borne by the Equipment Notes then
outstanding (computed on the basis of a 360-day year of twelve 30-day months).
"Determination Date" shall mean the ____ day of any calendar
month.
"DOT" shall mean the United States Department of
Transportation.
"Early Buyout Date" shall mean, for any Unit, the date set
forth in Schedule 6 to the Participation Agreement.
"Early Buyout Price" shall mean, with respect to any Unit, the
amount equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit.
"EBO Installment Payment Amount" shall mean, with respect to
any Unit on an EBO Installment Payment Date, the amount equal to the product of
the percentage set forth in Schedule 6 to the Participation Agreement and the
Equipment Cost for such Unit, provided that in no event shall such installment
payment dates extend for a period in excess of one year.
"EBO Installment Payment Dates" shall mean, with respect to
any Unit, the dates set forth in Schedule 6 to the Participation Agreement for
such Unit.
"Environmental Laws" means any federal, state, county or local
statute, law, regulation, rule, ordinance, code, order, decree, license, or
permit relating to environmental matters, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, or any other federal, state
or local statute, law, ordinance, code, rule,
<PAGE> 54
5
regulation, order, decree, license or permit regulating, or relating to, or
imposing liability for a standard of conduct concerning the environment, noise
or any hazardous, toxic or dangerous substance, products, materials, wastes,
pollutants or contaminants.
"Equipment" shall mean the Rail Cars.
"Equipment Cost" shall mean, for each Unit, the purchase price
therefor paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit.
"Equipment Notes" shall mean the Equipment Notes, each to be
substantially in the form therefor required by the Indenture, issued by the
Owner Trustee pursuant to Section 2.02 of the Indenture, and authenticated by
the Indenture Trustee, in principal amounts and bearing interest at the rates
and payable as provided in the Indenture and secured as provided in the
Granting Clause of the Indenture, and shall include any Equipment Notes issued
in exchange therefor or replacement thereof pursuant to Section 2.07 or 2.08 of
the Indenture.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor law.
"Event of Loss" shall mean, with respect to a Unit, as
specified in Section 11.1 of the Lease.
"Excepted Property" shall mean (i) all indemnity payments
(including, without limitation, payments pursuant to Section 7 of the
Participation Agreement and payments under the Tax Indemnity Agreement whether
made by adjustment to Basic Rent under the Lease or otherwise) to which the
Owner Participant, the Owner Trustee in its individual capacity or any of their
respective successors, permitted assigns, directors, officers, employees,
servants and agents is entitled pursuant to the Operative Agreements, (ii) any
right, title or interest of the Owner Trustee in its individual capacity or the
Owner Participant to any payment which by the terms of Section 17 of the Lease
or any corresponding payment under Section 3.3 of the Lease shall be payable to
the Owner Trustee in its individual capacity or to the Owner Participant, as
the case may be, (iii) any insurance proceeds payable under insurance
maintained by the Owner Trustee in its individual capacity or the Owner
Participant pursuant to Section 12.3 of the Lease, (iv) any insurance proceeds
payable to the Owner Trustee in its individual capacity or to the Owner
Participant, or their respective successors, permitted assigns, directors,
officers, employees, servants, or agents under any public liability insurance
maintained by Lessee pursuant to Section 12 of the Lease or by any other Person
(or governmental indemnities in lieu thereof or in addition thereto), (v) any
amount payable to the Owner Participant by any Transferee as the purchase price
of the Owner Participant's interest in the Trust
<PAGE> 55
6
Estate in compliance with the terms of the Participation Agreement and the
Trust Agreement, (vi) payments owing to the Owner Participant, including a
return of funds to the Owner Participant, in the event the Closing does not
occur, (vii) all right, title and interest of the Owner Trustee and the Owner
Participant to retain amounts that shall have been distributed to them as
provided in Article III of the Indenture and such other rights as are
specifically reserved or granted to the Owner Participant and the Owner Trustee
under the Indenture, (viii) the respective rights of the Owner Trustee in its
individual capacity or the Owner Participant to the proceeds of the foregoing
and (ix) any rights of the Owner Participant or the Owner Trustee in its
individual capacity to demand, collect, sue for, or otherwise receive and
enforce payment of the foregoing amounts.
"Fair Market Renewal Term" shall mean, for any Unit of
Equipment, as specified in Section 22.3 of the Lease.
"Fair Market Rental Value" shall mean, with respect to a Unit
of Equipment, the rental value of such Unit of Equipment that would be obtained
in an arm's length transaction between an informed and willing lessee under no
compulsion to lease and an informed and willing lessor under no compulsion to
lease, assuming such Unit of Equipment is in the condition required by the
Lease.
"Fair Market Sales Value" shall mean, with respect to a Unit
of Equipment, the sales value of such Unit of Equipment, that would be obtained
in an arm's length transaction between an informed and willing buyer under no
compulsion to buy and an informed and willing seller under no compulsion to
sell, assuming such Unit of Equipment is in the condition required by the
Lease.
"Fixed Rate Renewal Term" shall mean, for any Unit, as
specified in Section 22.3 of the Lease.
"Hazardous Materials" means any petroleum, petroleum
by-product, natural or synthetic gas, asbestos, polychlorinated biphenyls or
any other toxic, hazardous, flammable, corrosive or otherwise dangerous
substance, product, material, waste, pollutant or contaminant, the manufacture,
use, handling, storage, disposal or remediation of which is regulated under any
applicable Environmental Law.
"Holders" shall mean as of any particular time, the persons in
whose names one or more Pass Through Certificates shall be registered.
"ICC" shall mean the Interstate Commerce Commission or any
successor agency or agencies thereto.
"ICC Counsel" shall mean Donelan, Cleary, Wood & Maser, P.C.
"Indemnified Person" shall have the meaning specified in
Section 7.2(b) of the Participation Agreement.
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"Indenture" or "Trust Indenture" shall mean the Trust
Indenture and Security Agreement (Phillips Trust No. 94-__), dated as of
__________, 1994 between the Owner Trustee, in the capacities described
therein, and the Indenture Trustee, as amended, supplemented or otherwise
modified from time to time, including supplementation by each Indenture
Supplement pursuant thereto.
"Indenture Default" shall mean an event which with notice or
the lapse of time or both would become an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified in the
Granting Clause of the Indenture.
"Indenture Event of Default" shall have the meaning specified
in Section 4.01 of the Indenture.
"Indenture Investment" shall mean any obligation issued or
guaranteed by the United States of America or any of its agencies for the
payment of which the full faith and credit of the United States of America is
pledged.
"Indenture Supplement" shall mean an Indenture Supplement
dated the Closing Date or the date that any Replacement Unit is subjected to
the lien and security interest of the Indenture, substantially in the form of
Exhibit A to the Indenture, between the Owner Trustee, in the capacities
described therein, and the Indenture Trustee, covering the Units delivered on
the Closing Date or such Replacement Unit, as the case may be.
"Indenture Trustee" shall mean Shawmut Bank Connecticut,
National Association, a national banking association, as trustee under the
Indenture and its successors thereunder.
"Indenture Trustee Agreements" shall mean the Operative
Agreements to which the Indenture Trustee is or will be a party.
"Inflation Index" shall mean the Gross National Product
Implicit Price Deflator as published from time to time in the United States
Department of Commerce Bureau of Economic Analysis publication entitled "Survey
of Current Business"; provided that if such Gross National Implicit Price
Deflator is no longer published or otherwise available, the "Inflation Index"
shall mean an index selected by Lessee and reasonably acceptable to the Owner
Participant.
"Initial Lease Period Interest" shall have the meaning
specified in Section 2.2(c) of the Participation Agreement.
"Initial Storage Period" shall mean, for any Rail Car, the
period specified in Section 6.3 of the Lease.
"Interchange Rules" mean the interchange rules or supplements
thereto of the Mechanical Division of the Association
<PAGE> 57
8
of American Railroads, as the same may be in effect from time to time, or any
replacement or successor rules issued by such division or any nationally
recognized successor thereto.
"Interim Indenture Supplement" shall mean the Interim Trust
Indenture Supplement (Phillips Trust No. 94-___) dated as of _____________,
1994, between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee.
"Interim Lease Supplement" shall mean the Interim Lease
Supplement (Phillips Trust No. 94-__) dated as of ______________, 1994, between
the Lessor and the Lessee.
"Interim Loan Participant" shall mean _____________, a
_____________ banking corporation, and its permitted successors and assigns.
"Interim Term" shall have the meaning specified in Section 3.1
of the Lease.
"Investment Banker" shall mean an independent investment
banking institution of national standing appointed by Lessee.
"Investment Grade Rating" shall mean in respect of any Person
as of any date of determination, a rating on the long-term unsecured
indebtedness issued by such Person of "BBB-" or better by Moody's Investors
Service, Inc. or "Baa3" or better by Standard & Poor's Corporation.
"Late Rate" shall mean (i) with respect to the portion of any
payment of Rent that would be required to be distributed to the holders of the
Equipment Notes pursuant to the terms of the Indenture, the lesser of 2% over
the Debt Rate and the maximum interest rate from time to time permitted by law,
and (ii) with respect to the portion of any payment of Rent that would be
required to be distributed to Lessor pursuant to the terms of the Indenture or
would be payable directly to Lessor, the Owner Participant or the Owner Trustee
in its individual capacity, the lesser of 2% over the Prime Rate and the
maximum interest rate from time to time permitted by law.
"Lease" shall mean the Equipment Lease Agreement (Phillips
Trust No. 94-_), relating to the Rail Cars, dated as of __________, 1994,
between the Owner Trustee, in the capacities described therein, as Lessor, and
the Lessee as amended, supplemented or otherwise modified from time to time.
"Lease Default" shall mean an event which with notice or lapse
of time or both would become a Lease Event of Default thereunder.
"Lease Event of Default" and "Event of Default" shall mean an
Event of Default as specified in Section 14 of the Lease.
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"Lease Supplement" shall mean a Lease Supplement (Phillips
Trust No. 94-_), dated the Closing Date or the date that any Replacement Unit
is subjected to the Lease, substantially in the form of Exhibit A to the Lease,
between the Lessor and the Lessee, covering the Units delivered on the Closing
Date or such Replacement Unit, as the case may be.
"Lease Term" shall mean, with respect to any Unit, the Interim
Term applicable to such Unit, the Basic Term applicable to such Unit and all
Renewal Terms applicable to such Unit.
"Lessee" shall mean Phillips Petroleum Company, a Delaware
corporation, and any corporation which succeeds thereto by merger or
consolidation or which acquires all or substantially all of the assets thereof
in accordance with the terms of Section 6.7 of the Participation Agreement.
"Lessee Agreements" shall mean the Operative Agreements to
which Lessee is a party.
"Lessor" shall have the meaning specified in the recitals to
the Lease.
"Lessor's Liens" means any Lien affecting, on or in respect of
the Equipment, the Lease or the Trust Estate arising as a result of (i) claims
against Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, not related to the transactions contemplated by the Operative
Agreements, or (ii) acts or omissions of the Lessor (in its individual capacity
or as Owner Trustee) or the Owner Participant, not related to the transactions
contemplated by the Operative Agreements or in breach of any covenant or
agreement of such Person set forth in any of the Operative Agreements, or (iii)
taxes imposed against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant or the Trust Estate which are not indemnified
against by the Lessee pursuant to the Participation Agreement or under the Tax
Indemnity Agreement, except to the extent not due and payable or the amount or
validity of which is being contested in good faith by appropriate proceedings
so long as there is no material risk of the impairment of the Lien of the
Indenture or the loss of the benefit of the Equipment to Lessee under the Lease
or (iv) claims against the Lessor or the Owner Participant arising out of the
transfer (whether voluntary or involuntary) by the Lessor or the Owner
Participant (without the consent of the Lessee, the Indenture Trustee and the
Loan Participants) of all or any portion of their respective interests in the
Equipment, the Trust Estate or the Operative Agreements, other than a transfer
pursuant to Sections 10, 11, 12, 15 or 22 of the Lease.
"Lien" shall mean any mortgage, pledge, security interest,
lien, encumbrance, or disposition of title.
"Loan Participant" shall mean and include each registered
holder from time to time of an Equipment Note issued under the Indenture,
including, so long as it holds any Equipment
<PAGE> 59
10
Notes issued thereunder, the Interim Loan Participant, and, after the
Refinancing Date, so long as it holds any Equipment Notes issued thereunder,
the Pass Through Trustee under one or more Pass Through Trust Agreements.
"Majority In Interest" as of a particular date of
determination shall mean with respect to any action or decision of the holders
of the Equipment Notes, the holders of more than 50% in aggregate principal
unpaid amount of the Equipment Notes, if any, then outstanding which are
affected by such decision or action, excluding any Equipment Notes held by the
Owner Participant or an Affiliate of the Owner Participant unless all Equipment
Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal
amount of any Equipment Note to be prepaid on any prepayment date, the amount
which the Investment Banker determines as of the third Business Day prior to
such prepayment date to equal the product obtained by multiplying (a) the
excess, if any, of (i) the sum of the present values of all the remaining
scheduled payments of principal and interest from the prepayment date to
maturity of such Equipment Note, discounted semi-annually on each __________
and ______________ at a rate equal to the Treasury Rate based on a 360-day year
of twelve 30-day months, over (ii) the aggregate unpaid principal amount of
such Equipment Note plus any accrued but unpaid interest thereon by (b) a
fraction the numerator of which shall be the principal amount of such Equipment
Note to be prepaid on such prepayment date and the denominator of which shall
be the aggregate unpaid principal amount of such Equipment Note; provided that
the aggregate unpaid principal amount of such Equipment Note for the purposes
of clause (a)(ii) and (b) of this definition shall be determined after
deducting the principal installment, if any, due on such prepayment date.
"Net Economic Return" shall mean both the net after-tax yield
and total after-tax cash flow and the timing thereof expected by the original
Owner Participant with respect to the Equipment, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant in making the computations of Basic Rent, Stipulated
Loss Value and Termination Value initially set forth in Schedules 3, 4 and 5 to
the Participation Agreement.
"Notice of Delivery" shall have the meaning specified in
Section 2.3(a) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate signed (i) in
the case of a corporation by the Chairman of the Board of Directors, President,
any Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of such corporation, (ii) in the case of a partnership by
the Chairman of the Board of Directors, the President or any Vice President,
the Treasurer or an Assistant Treasurer of a corporate general partner, and
(iii) in the case of a commercial bank or trust company, the Chairman or Vice
Chairman of the Executive
<PAGE> 60
11
Committee or the Treasurer, any Trust Officer, any Vice President, any
Executive or Senior or Second or Assistant Vice President, or any other officer
or assistant officer customarily performing the 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 the particular subject.
"Operative Agreements" shall mean the Participation Agreement,
the Bill of Sale, the Trust Agreement, each Pass Through Trust Agreement, the
Equipment Notes, the Lease, the Interim Lease Supplement, each Lease
Supplement, the Indenture, the Interim Indenture Supplement, each Indenture
Supplement and the Tax Indemnity Agreement.
"Optional Modification" shall mean, for any Unit, as specified
in Section 9.2 of the Lease.
"Overall Transaction" shall mean the sale/leaseback and
financing transactions contemplated by the Operative Agreements and the
Underwriting Agreement.
"Owner Participant" shall mean _______________________________
__, a _____________________ corporation, and its permitted successors and
assigns.
"Owner Participant Agreements" shall mean the Operative
Agreements to which the Owner Participant is or will be a party.
"Owner Trust" or "Trust" shall mean the trust created by the
Trust Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement and its successors thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements
to which the Owner Trustee, either in its individual or fiduciary capacity, is
or will be a party.
"Participants" shall mean the Loan Participant and the Owner
Participant.
"Participation Agreement" shall mean the Participation
Agreement (Phillips Trust No. 94-__) dated as of ___________, 1994, among the
Lessee, the Interim Loan Participant, the Owner Participant, the Owner Trustee
and the Indenture Trustee.
"Participation Agreement Supplement" shall mean the supplement
to the Participation Agreement, substantially in the form of Exhibit F to the
Participation Agreement, to be executed pursuant to Section 10.2(e) of the
Participation Agreement by the Pass Through Trustee.
<PAGE> 61
12
"Parts" shall mean all appliances, parts, components,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature which may from time to time be incorporated or installed in or
attached to a Unit of Equipment or until replaced, if not so incorporated or
installed, in accordance with the terms of Section 9.3 of the Lease.
"Pass Through Certificates" shall mean the Pass Through
Certificates issued pursuant to any Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean any Pass Through
Trust Agreement, substantially in the form of Exhibit H to the Participation
Agreement, to be executed pursuant to Section 10.2(e) of the Participation
Agreement by the Lessee and the Pass Through Trustee.
"Pass Through Trustee" shall mean Shawmut Bank Connecticut,
National Association, a national banking association in its capacity as trustee
under one or more Pass Through Trust Agreements, and each other person which
may from time to time be acting as successor trustee under any Pass Through
Trust Agreement.
"Payment Date" shall have the meaning specified in Section 6.8
of Participation Agreement.
"Payment Event of Default" shall mean with respect to each
Lease, an Event of Default arising under Section 14(a), 14(b), 14(d) or 14(e)
of the Lease.
"Permitted Investments" shall mean (i) direct obligations of
the United States of America and agencies thereof for which the full faith and
credit of the United States is pledged, (ii) obligations fully guaranteed by
the United States of America, (iii) certificates of deposit issued by, or
bankers, acceptances of, or time deposits 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 $500,000,000 (including
the Indenture Trustee and the Owner Trustee if such conditions are met) and
having a rating assigned to the long-term unsecured debt of such institutions
by Standard & Poor's Corporation and Moody's Investors Service, Inc. at least
equal to AA and Aa2, respectively, (iv) commercial paper of companies, banks,
trust companies or national banking associations incorporated or doing business
under the laws of the United States of America or one of the States thereof and
in each case having a rating assigned to such commercial paper by Standard &
Poor's Corporation or Moody's Investors Service, Inc. (or, if neither such
organization shall rate such commercial paper at any time, by any nationally
recognized rating organization in the United States of America) equal to the
highest rating assigned by such organization, and (v) a money market fund
registered under the Investment Company Act of 1940, as amended, the portfolio
of which is limited to the United States government obligations and United
States agency
<PAGE> 62
13
obligations; provided 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 (iii) above; and provided further that no investment shall
be eligible as a "Permitted Investment" unless the final maturity or date of
return of such investment is 90 days or less from the date of purchase thereof.
"Permitted Liens" with respect to the Equipment, shall mean:
(i) the interests of the Lessee and the Owner Trustee under the Leases and the
Lease Supplements; (ii) the interest of the Lessee and any sublessee as
provided in any sublease permitted pursuant to Section 8.3 of the Lease; (iii)
any Liens thereon for taxes, assessments, levies, fees and other governmental
and similar charges not due and payable or the amount or validity of which is
being contested in good faith by appropriate proceedings so long as there
exists no material risk of sale, forfeiture, loss, or loss of or interference
with use or possession of, any Unit or impairment of the Lien of the Indenture
thereon, criminal sanctions arising therefrom or interference with the payment
of Rent and appropriate reserves with respect thereto are maintained in
accordance with generally accepted accounting principles; (iv) any Liens of
mechanics, suppliers, materialmen, laborers, employees, repairmen and other
like Liens arising in the ordinary course of Lessee's (or if a sublease is then
in effect, any sublessee's) business securing obligations which are not due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or impairment of the Lien of the Indenture thereon, criminal sanctions arising
therefrom or interference with the payment of Rent; (v) the Lien and security
interest granted to the Indenture Trustee under and pursuant to the Indenture,
if any, and the respective rights of the Loan Participants, the Indenture
Trustee, the Owner Participant and the Owner Trustee under the Operative
Agreements; (vi) Liens arising out of any judgment or award against the Lessee
(or any sublessee permitted pursuant to Section 8.3 of the Lease) with respect
to which an appeal or proceeding for review being prosecuted in good faith and
for the payment of which adequate reserves have been provided as required by
generally accepted accounting principles or other appropriate provisions have
been made and with respect to which there shall have been secured a stay of
execution pending such appeal or proceeding for review and there exists no
material risk of sale, forfeiture, loss, or loss of or interference with the
use or possession of any Unit or any interest therein or impairment of the Lien
of the Indenture thereon, criminal sanctions arising therefrom or interference
with the payment of Rent; (vii) salvage rights of insurers under insurance
policies maintained pursuant to Section 12 of each Lease; and (viii) other
Liens bonded to the reasonable satisfaction of the Owner Participant and the
Indenture Trustee.
"Permitted Subleases" shall have the meaning specified in
Section 8.3 of the Lease.
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"Person" shall mean an individual, partnership, corporation,
trust, limited liability company, association or unincorporated organization,
and a government or agency or political subdivision thereof.
"Prime Rate" shall mean the rate announced from time to time
by Chemical Bank, as its prime commercial lending rate at its principal office
in New York City.
"Rail Cars" shall mean, collectively, the Tank Cars and the
Covered Hoppers.
"Rail Cars (Class A)" shall mean, collectively, the Covered
Hoppers (Class A) and the Tank Cars (Class A).
"Rail Cars (Class B)" shall mean, collectively, the Covered
Hoppers (Class B) and the Tank Cars (Class B).
"Rail Cars (Class C)" shall mean, collectively, the Covered
Hoppers (Class C) and the Tank Cars (Class C).
"Rail Cars (Class D)" shall mean, collectively, the Covered
Hoppers (Class D) and the Tank Cars (Class D).
"Registration Statement" shall mean the Form S-3 Registration
Statement (Registration No. 33-54987) filed by the Lessee on August 10, 1994,
as amended from time to time, in connection with the offering of the Pass
Through Certificates.
"Remaining Weighted Average Life" shall mean, with respect to
prepayment of an Equipment Note, the number of days equal to the quotient
obtained by dividing (a) the sum of the products obtained by multiplying (1)
the amount of each remaining principal payment on such Equipment Note by (2)
the number of days from and including the prepayment date to but excluding the
scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term
in respect of which the Lessee shall have exercised its option to renew the
Lease for such Unit pursuant to Section 22.3 thereof, including any Fixed Rate
Renewal Term or Fair Market Renewal Term with respect to such Unit.
"Rent" shall mean, for any Unit, all Basic Rent and
Supplemental Rent therefor.
"Rent Payment Date" or "Payment Date" shall mean each
_______________ and ____________ of each year occurring during the Lease Term
of the Lease, commencing ______________, 1995, provided that if any such date
shall not be a Business Day, then "Rent Payment Date" or "Payment Date" shall
mean the next succeeding Business Day.
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15
"Replacement Unit" shall mean a Unit of Equipment which shall
have been leased under the Lease pursuant to Section 11 thereof.
"Required Modification" shall mean, for any Unit, as specified
in Section 9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject
matter of any covenant, agreement or obligation of any party contained in any
Operative Agreement, the Chairman of the Board of Directors, the President, or
any Vice President, Treasurer, Assistant Treasurer or other officer, who in the
normal performance of his operational responsibility would have knowledge of
such matters and the requirements with respect thereto.
"Return Date" shall mean, for any Unit of Equipment as
specified in Section 6.1 of the Lease.
"Scheduled Closing Date" shall have the meaning specified in
Section 2.7 of the Participation Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act.
"Severable Modification" shall mean, for any Unit, as
specified in Section 9.2 of the Lease.
"Stipulated Loss Value" for any Unit as of any date of
determination shall mean the amount (as adjusted pursuant to Section 2.6 of the
Participation Agreement and Section 3.4 of the Lease) determined by multiplying
the Equipment Cost for such Unit by the percentage set forth in Schedule 4 to
the Participation Agreement opposite the Determination Date on which such
Stipulated Loss Value is being determined; provided that during any Renewal
Term, "Stipulated Loss Value" shall be determined as provided in Section 22.5
of the Lease.
"Storage Period" shall mean, for any Unit of Equipment as
specified in Section 6.3 of the Lease.
"Subsidiary" of any Person shall mean any corporation,
association, or other business entity of which more than 50% (by number of
votes) of the voting stock at the time outstanding shall at the time be owned,
directly or indirectly, by such Person or by any other corporation, association
or trust which is itself a Subsidiary within the meaning of this definition, or
collectively by such Person and any one or more such Subsidiaries.
"Supplemental Rent" shall mean, for any Lease, all amounts,
liabilities and obligations (other than Basic Rent
<PAGE> 65
16
thereunder) which the Lessee is obligated to pay under the Operative Agreements
to or on behalf of any of the other parties thereto, including, but not limited
to, Termination Value and Stipulated Loss Value payments thereunder.
"Tank Cars" shall mean, collectively, the Tank Cars (Class A),
the Tank Cars (Class B), the Tank Cars (Class C), and the Tank Cars (Class D).
"Tank Cars (Class A)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Tank Cars
(Class A)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Tank Cars (Class B)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Tank Cars
(Class B)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Tank Cars (Class C)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Tank Cars
(Class C)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Tank Cars (Class D)" shall mean those items of railroad
rolling stock to be sold by Lessee to Lessor pursuant to the Participation
Agreement and to be leased under the Lease, which are identified as "Tank Cars
(Class D)" in the initial Lease Supplement to the Lease and the initial
Indenture Supplement, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or installed in
any item thereof which are or become the property of the Lessor pursuant to the
terms of the Lease.
"Tax Indemnity Agreement" shall mean the Tax Indemnity
Agreement (Phillips Trust No. 94-___) dated as of _____________, 1994 between
the Lessee and the Owner Participant.
"Taxes" shall have the meaning specified in Section 7.1(b) of
the Participation Agreement.
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"Term Sheet" shall mean the commitment letter and accompanying
term sheet dated ____________, 1994 between the Lessee, the Owner Participant
and the other owner participants relating to the Overall Transaction.
"Terminated Unit" shall mean, for any Unit, as specified in
Section 10.1 of the Lease.
"Termination Date" shall mean, for any Unit, as specified in
Section 10.1 of the Lease.
"Termination Value" for any Unit as of any date of
determination shall mean the amount (as adjusted pursuant to Section 2.6 of the
Participation Agreement and Section 3.4 of the Lease) determined by multiplying
the Equipment Cost for such Unit by the percentage set forth in Schedule 5 to
the Participation Agreement opposite the Determination Date on which such
Termination Value is being determined; provided that during any Renewal Term,
"Termination Value" shall be determined as provided in Section 22.5 of the
Lease.
"Total Equipment Cost" shall mean the sum of the Equipment
Costs for all Units.
"Transaction Costs" shall have the meaning specified in
Section 2.5(a) of the Participation Agreement.
"Transferee" shall have the meaning specified in Section
6.1(b) of the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each
Equipment Note, a per annum rate (expressed as a semiannual equivalent and as a
decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield), determined to be the per annum rate equal to the semiannual
yield to maturity for United States Treasury securities maturing on the
Average Life Date of such Equipment Note, as determined by interpolation
between the most recent weekly average yields to maturity for two series of
United States Treasury securities, (A) one maturing as close as possible to,
but earlier than, the Average Life Date of such Equipment Note and (B) the
other maturing as close as possible to, but later than, the Average Life Date
of such Equipment Note, in each case as published in the most recent H.15(519)
(or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
in the most recent H.15(519), as published in H.15(519)). H.15(519) means
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, published by the Board of Governors of the Federal Reserve System.
The most recent H.15(519) means the latest H.15(519) which is published prior
to the close of business on the third Business Day preceding the scheduled
prepayment date.
"Trust Agreement" shall mean that certain Trust Agreement
(Phillips Trust No. 94-___), dated as of _____________,
<PAGE> 67
18
1994, between the Owner Participant and Wilmington Trust Company, as amended,
supplemented or otherwise modified from time to time.
"Trust Estate" shall have the meaning set forth in Section 1.1
of the Trust Agreement.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.
"Trustees" shall mean the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee.
"Underwriter" shall mean Chemical Securities, Inc.
"Underwriting Agreement" shall mean the agreement among the
Lessee and the Underwriter substantially in the form of Exhibit G to the
Participation Agreement, to be executed pursuant to Section 10.2(e) of the
Participation Agreement, by the Lessee and the Underwriter, relating to the
purchase by such Underwriter of the Pass Through Certificates.
"Unit" shall mean each unit or item of Equipment.
<PAGE> 1
EXHIBIT 4(e)(2)
EQUIPMENT LEASE AGREEMENT
(Phillips Trust No. 94-__)
Dated as of ___________, 1994
Between
Wilmington Trust Company,
not in its individual capacity except
as expressly provided herein but
solely as Owner Trustee,
Lessor
and
PHILLIPS PETROLEUM COMPANY,
Lessee
Aircraft
________________________________________________________________________________
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO
THIS LEASE, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE
HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A
SECURITY INTEREST IN FAVOR OF, SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE AND SECURITY AGREEMENT (PHILLIPS TRUST NO. 94-__), DATED AS OF __
________, 1994 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED PARTY, AND LESSOR, AS
DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM THE
INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN SECTION 20 OF THIS LEASE. SEE
SECTION 24.2 FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND
THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Acceptance and Leasing of Equipment . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.1 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Adjustment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Manner of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Ownership and Equipment Identification . . . . . . . . . . . . . . . . . . . . . 4
4.1 Retention of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Equipment Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Certain Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Return of Equipment; Storage . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Return; Holdover Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.3 Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 8. Maintenance; Operation; Possession; Compliance with Laws; Registration . . . . . 8
8.1 Maintenance and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.4 Aircraft Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. Modifications; Replacement of Parts . . . . . . . . . . . . . . . . . . . . . 11
9.1 Required Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Optional Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.3 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 10. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.3 Retention of Equipment by Lessor . . . . . . . . . . . . . . . . . . . . . . . 14
10.4 Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 11. Loss, Destruction, Requisition, Etc. . . . . . . . . . . . . . . . . . . . . 15
11.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.2 Replacement or Payment upon Event of Loss . . . . . . . . . . . . . . . . . . 15
11.3 Rent Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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11.4 Disposition of Equipment; Replacement of Unit . . . . . . . . . . . . . . . . 16
11.5 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.6 Lease Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.7 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . 18
Section 12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Property Damage and Public Liability Insurance . . . . . . . . . . . . . . . . 20
12.2 Proceeds of Property Insurance . . . . . . . . . . . . . . . . . . . . . . . . 21
12.3 Additional Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 13. Lessor's Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.2 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.3 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.4 Lessee's Duty to Return Equipment Upon an Event of Default . . . . . . . . . . 26
15.5 Fair Market Sales Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 16. Filings; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.1 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 17. Lessor's Right to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18.1 Assignment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18.2 Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18.3 Sublessee's Performance and Rights . . . . . . . . . . . . . . . . . . . . . . 29
Section 19. Net Lease, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 21. (Intentionally Omitted.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 22. Purchase Options; Renewal Options . . . . . . . . . . . . . . . . . . . . . . 31
22.1 Election to Retain or Return Equipment . . . . . . . . . . . . . . . . . . . . 32
22.2 Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
22.3 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
22.4 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.5 Stipulated Loss Value and Termination Value During Renewal Term . . . . . . . 34
22.6 Early Buy-Out Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 23. Limitation of Lessor's Liability . . . . . . . . . . . . . . . . . . . . . . . 36
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Section 24. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
24.1 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . 37
24.2 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 37
24.3 Headings and Table of Contents: Section References . . . . . . . . . . . . . . 37
24.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
24.5 True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
24.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
24.7 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
24.8 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
24.9 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 25. TRUTH IN LEASING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
Attachments to Equipment Lease:
Exhibit A Form of Lease Supplement
Appendix A Definitions
- iii -
<PAGE> 5
EQUIPMENT LEASE AGREEMENT
(Phillips Trust No. 94-__)
This EQUIPMENT LEASE AGREEMENT (Phillips Trust No. 94-__),
dated as of ___________, 1994 (the "Lease"), between WILMINGTON TRUST COMPANY,
a Delaware banking corporation, not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee under the Trustee
Agreement ("Lessor"), and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Lessee").
W I T N E S S E T H :
Section 1. Definitions.
Unless the context otherwise requires, all capitalized terms
used herein without definition shall have the respective meanings set forth in
Appendix A hereto for all purposes of this Lease.
Section 2. Acceptance and Leasing of Equipment. Lessor hereby
agrees (subject to satisfaction or waiver of the conditions set forth in
Section 4.1 and 4.3 of the Participation Agreement), simultaneously with the
delivery of each Unit from Lessee to Lessor and acceptance thereof by Lessor,
to accept delivery of such Unit from Lessee, as evidenced by the execution and
delivery by Lessor of a Certificate of Acceptance with respect to such Unit and
thereafter to lease such Unit to Lessee hereunder, and Lessee hereby agrees
(subject to satisfaction or waiver of the conditions set forth in Section 4.4
of the Participation Agreement) to lease from Lessor hereunder, such Unit, as
evidenced by the execution and delivery by Lessee and Lessor of a Lease
Supplement covering such Unit. Lessor hereby authorizes one or more employees
of Lessee, designated by Lessee, to act on behalf of Lessor as its authorized
representative or representatives to accept delivery of each Unit, to execute
and deliver such Certificate of Acceptance, all in accordance with Section
2.3(b) of the Participation Agreement. Lessee hereby agrees that such
acceptance of delivery by such authorized representative or representatives on
behalf of Lessor shall, without further act, irrevocably constitute acceptance
by Lessee of such Unit for all purposes of this Lease.
Section 3. Term and Rent.
3.1 Lease Term. The interim term of this Lease (the "Interim
Term") for each Unit shall commence on the Closing Date and shall terminate the
day before the Basic Term Commencement Date. The basic term of this Lease (the
"Basic Term") for each Unit shall commence on the Basic Term Commencement Date
and, subject to earlier termination pursuant to Sections 10, 11, 15 and 22.6
shall expire at 11:59 P.M. (New York City time) on the
<PAGE> 6
2
Basic Term Expiration Date for such Unit. Subject and pursuant to Section
22.3, Lessee may elect one or more Renewal Terms for any Unit.
3.2 Basic Rent. Lessee hereby agrees to pay Lessor as Basic
Rent for each Unit throughout the Basic Term applicable thereto Basic Rent in
consecutive semi-annual installments payable on each Rent Payment Date during
the Basic Term. Subject to Section 3.5, each such semi-annual payment of Basic
Rent shall be in an amount equal to the product of the Equipment Cost for such
Unit multiplied by the Basic Rent percentage for such Unit set forth opposite
such Rent Payment Date on Schedule 3 to the Participation Agreement (as such
Schedule 3 shall be adjusted pursuant to Section 2.6 of the Participation
Agreement). Basic Rent shall be payable in advance on certain Rent Payment
Dates and in arrears on certain Rent Payment Dates, as specified in Schedule 3
to the Participation Agreement, as so adjusted from time to time. Such
Schedule 3, as so adjusted from time to time, is incorporated herein by
reference.
3.3 Supplemental Rent. Lessee also agrees to pay to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent,
promptly as the same shall become due and owing, or where no due date is
specified, promptly after demand by the Person entitled thereto, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise as in the case of nonpayment of Basic Rent. Lessee will
also pay, as Supplemental Rent, (i) on demand, to the extent permitted by
applicable law, an amount equal to interest at the applicable Late Rate on any
part of any installment of Basic 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 or demanded, as the case may be, for the period from such due
date or demand until the same shall be paid, (ii) in the case of a prepayment
of the Equipment Notes as a result of the termination of this Lease with
respect to any Unit pursuant to Section 10, on the date of such prepayment, an
amount equal to the Make-Whole Amount, if any, payable in respect of the
principal amount of each Equipment Note being prepaid as a result of such
termination, (iii) in the case of any refinancing of the Equipment Notes
pursuant to Section 10.2 of the Participation Agreement, on the date of such
refinancing, an amount equal to the Make-Whole Amount, if any, payable in
respect of the principal amount of each Equipment Note being prepaid in
connection with such refinancing and (iv) in the case of a prepayment of the
Equipment Notes as a result of the exercise of the early buyout option pursuant
to Section 22.6, on the date of such prepayment, an amount equal to the
Make-Whole Amount, if any, payable in respect of the principal amount of each
Equipment Note being prepaid as a result of such exercise.
3.4 Adjustment of Rent. Lessee and Lessor agree that the Basic
Rent, Stipulated Loss Value, the Early Buyout Price and Termination Value
percentages shall be subject to adjustment
<PAGE> 7
3
pursuant to Section 2.6 of the Participation Agreement. Such Section 2.6 of
the Participation Agreement is incorporated herein by reference.
3.5 Advances. If and to the extent that the Indenture Trustee
on the Refinancing Date (but only if the Refinancing Date occurs prior to the
Basic Term Commencement Date) or on the Basic Term Commencement Date shall not
have received funds from the Owner Trustee sufficient for the payment in full
of the interest then due and owing on the Equipment Notes on such applicable
date, Lessee shall pay as Supplemental Rent, on such date, an amount equal to
such deficiency (any such payment being referred to herein as an "Advance").
In the event Lessee makes any Advance pursuant to this Section 3.5 and is not
promptly reimbursed therefor by the Owner Participant after demand for such
reimbursement in the manner set forth in Section 20, and so long as no Lease
Event of Default has occurred and is continuing, Lessee, without otherwise
limiting its rights against the Owner Participant, shall be entitled, subject
to Section 6.8 of the Participation Agreement, to offset and deduct (without
duplication) against each succeeding payment or portion thereof of Basic Rent,
Supplemental Rent, Stipulated Loss Value, Termination Value or any other amount
due from Lessee to Persons other than the holders of the Equipment Notes, the
Indenture Trustee, and the Owner Trustee in its individual capacity, an amount
equal to such Advance plus interest on such amount at the Late Rate until
Lessee has been fully reimbursed for such Advance plus such interest and in
each such case, such offset shall be deemed to constitute a reduction in the
amount of such Advance so payable; provided that no such offset or deduction
shall be made against any amount required pursuant to the Indenture to be paid
to the Indenture Trustee except to the extent that, under the circumstances
prevailing at the time such payment is to be made, such payment would then be
distributable by the Indenture Trustee to the Owner Participant (or to the
Lessor for distribution to the Owner Participant).
3.6 Manner of Payments. All Rent (other than Supplemental
Rent payable to Persons other than Lessor, which shall be payable to such
other Persons in accordance with written instructions furnished to Lessee by
such Persons, as otherwise provided in any of the Operative Agreements or as
required by law) shall be paid by Lessee to Lessor at its office at 1100 North
Market Street, Rodney Square North, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration (Phillips Trust No. 94-__). All Rent shall be
paid by Lessee in funds consisting of lawful currency of the United States of
America, which shall be immediately available to the recipient not later than
1:00 P.M. (New York City time) on the date of such payment. Notwithstanding
the foregoing, so long as the Indenture shall not have been discharged pursuant
to the terms thereof, Lessor hereby directs, and Lessee agrees, that all Rent
(excluding Excepted Property) payable to Lessor and assigned to the Indenture
Trustee shall be paid directly to the Indenture Trustee at the times and in
funds of the type specified in this Section 3.6 at the office
<PAGE> 8
4
of the Indenture Trustee, Shawmut Bank Connecticut, National Association, ABA
No. 011900445, 777 Main Street, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration (Phillips Trust No. 94-__), or at such other
location in the United States of America as the Indenture Trustee may otherwise
direct.
3.7 Minimum Rent. Section 6.8 of the Participation Agreement is
incorporated herein by reference.
Section 4. Ownership and Equipment Identification.
4.1 Retention of Title. Lessor shall and hereby does retain
full legal title to and beneficial ownership of the Equipment notwithstanding
the delivery to and possession and use of the Equipment by Lessee hereunder or
any sublessee under any sublease permitted hereby.
4.2 Equipment Identification. On or prior to the Closing Date
or as soon thereafter as practicable, Lessee will cause to be affixed to, and
maintained in, the cockpit of each Unit of Equipment in a clearly visible
location a plate of reasonable size bearing the following legend:
"Leased from
Wilmington Trust Company,
as trustee,
Owner and Lessor"
and while the Lien of the Trust Indenture is in effect shall bear the following
additional legend:
"Mortgaged to
Shawmut Bank Connecticut,
National Association,
as Indenture Trustee and Mortgagee"
4.3 Certain Designations. Lessee may cause the Units of
Equipment to be lettered with the names or initials or other insignia
customarily used by Lessee or any permitted sublessees or any of their
respective Affiliates for convenience of identification of the right of any
such Person to use the Units of Equipment.
Section 5. Disclaimer of Warranties.
5.1 Disclaimer of Warranties. Without waiving any claim Lessee
may have against any seller, supplier or manufacturer, LESSEE ACKNOWLEDGES AND
AGREES THAT, (i) EACH UNIT OF EQUIPMENT IS OF A SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT
EACH UNIT OF EQUIPMENT IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER LESSOR NOR
THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND,
(iv) EACH UNIT OF EQUIPMENT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS
AND GOVERNMENTAL
<PAGE> 9
5
REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR LEASES AND
LESSEE TAKES EACH UNIT OF EQUIPMENT "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS",
IN WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT NEITHER LESSOR,
AS LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR THE OWNER PARTICIPANT MAKES NOR
SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS,
CLAIMS, WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF ANY UNIT OF EQUIPMENT, THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO
SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE
ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO
THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO,
except that Lessor, in its individual capacity, represents and warrants that on
the Closing Date, Lessor shall have received whatever title to the Equipment as
was conveyed to Lessor by Lessee and each Unit of Equipment will be free of
Lessor's Liens attributable to Lessor in its individual capacity and provided
that the foregoing disclaimer in clause (v) shall not extend to any of the
Owner Participant's representations and warranties contained in the
Participation Agreement. Lessor hereby appoints and constitutes Lessee its
agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole cost and expense of Lessee,
whatever claims and rights Lessor may have as owner of the Equipment against
the manufacturers or any prior owner thereof; provided, however, that if at any
time an Event of Default shall have occurred and be continuing, at Lessor's
option, such power of attorney shall terminate, and Lessor may assert and
enforce, at Lessee's sole cost and expense, such claims and rights. Lessee's
delivery of a Lease Supplement shall be conclusive evidence as between Lessee
and Lessor that all Units described therein are in all the foregoing respects
satisfactory to Lessee.
Section 6. Return of Equipment; Storage.
6.1 Return; Holdover Rent. (a) Upon expiration of the Lease
Term with respect to any Unit of Equipment which has not been purchased by
Lessee, Lessee will, at its own cost and expense, deliver possession of such
Unit in the condition required by Section 6.2 to Lessor at Lessee's base of
operations within the continental United States, provided that Lessor may
select a return location within the continental United States (excluding
Alaska) which is reasonably accessible to Lessee and notify Lessee thereof in
writing at least 30 days before the expiration of the Lease Term with respect
to such Unit. Upon expiration of the Lease Term with respect to such Unit and
compliance with this Section 6.1 and Section 6.2 and the payment of all Rent
then due and payable, this Lease and the obligation to pay Basic Rent for such
Unit accruing subsequent to the expiration of the Lease Term with respect to
such Unit shall
<PAGE> 10
6
terminate. Lessee's obligation with respect to the return of a Unit upon
expiration of its Lease Term shall solely be as set forth in this Section 6.1
and in Section 6.2.
(b) All amounts earned in respect of a Unit of Equipment after
the date of expiration of the Lease Term with respect to such Unit of Equipment
and prior to the return of such Unit of Equipment hereunder shall belong to
Lessee and, if received by Lessor, shall be promptly turned over to Lessee,
provided that if a Lease Event of Default shall have occurred and be continuing
at such time, any such amounts which are received by the Lessor shall be held
as collateral security by Lessor subject to the provisions of Section 11.6. In
the event any Unit of Equipment is not returned to Lessor on the last day of
the Lease Term for such Unit of Equipment, on the date of material compliance
with Section 6.2 (the "Return Date") for such Unit of Equipment, Lessee shall
pay to Lessor for each day from and including the expiration date of the Lease
Term to and through the Return Date for such Unit of Equipment an amount equal
to the per diem equivalent of Basic Rent payable on account of such Unit of
Equipment during the last semi-annual period of the Lease Term for such Unit of
Equipment. In the event any Unit of Equipment shall not have been so returned
to Lessor by the 45th day following the expiration of the Lease Term for such
Unit of Equipment, Lessee shall on such 45th day pay to Lessor the greater of
the applicable Termination Value for such Unit of Equipment determined as of
the last Rent Payment Date for such Unit of Equipment or the Fair Market Sales
Value thereof as of such last Rent Payment Date plus the rent payable pursuant
to this sentence for such 45-day period, and Lessor shall thereupon transfer to
Lessee all of Lessor's right, title and interest in any such Unit of Equipment
on an "as-is", "where-is" basis without representation or warranty, express or
implied except as to the absence of Lessor's Liens.
6.2 Condition of Equipment. (a) Each Unit when returned to
Lessor pursuant to Section 6.1 shall (i) possess a valid certificate of
airworthiness issued under Part 91 of the FAA Act by the FAA in the name of
Lessor or its designee (or, if not registered under the FAA Act by reason of
Lessor or its designee not being eligible to own an aircraft registered with
the FAA on such date, be eligible for such registration and such certificate of
airworthiness), (ii) be in a state of cleanliness consistent with Lessee's
normal standards for operation, (iii) be in the condition required by Section
8.1, (iv) be fully equipped with Engines installed thereon, (v) be free and
clear of all Liens except Lessor Liens and (vi) be in compliance with Lessee's
then approved FAA approved maintenance program. All logs, records, books and
other materials relating to the maintenance of such Unit shall be made
available to Lessor or its designee upon the return of such Unit.
(b) Upon return of a Unit, (i) in the event that Lessee (or any
permitted sublessee) shall not then be using a progressive airframe inspection
program approved by the FAA with
<PAGE> 11
7
respect to the Airframe of such Unit immediately prior to such return, Lessee
agrees that the Airframe of such Unit shall have remaining until the next
scheduled A, B and C checks at least 50% of the allowable time or cycles
remaining until such next checks, (ii) the time since the last core inspection
(hot and cold sections) on each Engine of such Unit shall not exceed 50% of the
allowable time between Engine core inspections then recommended by the
manufacturer in accordance with Lessee's FAA-approved maintenance program,
(iii) for all cycle and time limited components of each Engine of such Unit the
average actual time or cycles on such components shall not exceed 50% of the
allowable time or cycle limits for such components and (iv) such Unit shall be
in compliance with all applicable FAA Airworthiness Directives and mandatory
Service Change Bulletins stating a compliance date (except for directives or
bulletins which have been waived by Lessor) (i) issued prior to the expiration
of the Lease Term for such Unit and compliance with which is required prior to
the expiration of the Lease Term for such Unit and (ii) issued 30 days or more
prior to the expiration of the Lease Term for such Unit and compliance with
which is required prior to one year after the expiration of the Lease Term for
such Unit.
(c) If clause (i) of Section 6.2(b) shall be applicable but the
Airframe of such Unit does not meet the conditions specified in said clause
(i), Lessee shall pay or cause to be paid to Lessor, concurrently with the
return thereof, an amount computed by multiplying (I) the amount of a bona fide
quotation from an FAA-approved maintenance provider selected by Lessor and
reasonably acceptable to Lessee of the cost of performing the next scheduled
check of the type referred to in said clause (i), by (II) a fraction of which
(aa) the numerator shall be the excess of 50% of the time or cycles of
operation allowable between such checks, phases or overhauls over the actual
number of time or cycles of operation remaining on the Airframe of such Unit
until the next such check and (bb) the denominator shall be the number of time
or cycles of operation allowable between such check in accordance with Lessee's
FAA-approved maintenance program.
(d) In the event Lessee does not satisfy the requirements of
clause (ii) of Section 6.2(b) in respect of any Engine of a Unit, Lessee shall
pay or cause to be paid to Lessor, concurrently with the return thereof, an
amount computed by multiplying (I) the amount of a bona fide quotation from an
FAA approved maintenance provider selected by Lessor and reasonably acceptable
to Lessee of the cost of performing the scheduled core inspection of the type
referred to in said clause (ii) for such Engine by (II) a fraction of which
(aa) the numerator shall be the excess of 50% of the amount of time or cycles
since the last such core inspection performed on such Engine over the actual
average amount of time or cycles of operation of such Engines remaining until
the next such scheduled core inspection and (bb) the denominator shall be the
amount of time or cycles allowable between such scheduled core inspections.
<PAGE> 12
8
(e) In the event the cycle or time limited components of any
Engine of any Unit are not on average in the condition required by clause (iii)
of Section 6.2(b), Lessee shall pay or cause to be paid to Lessor, concurrently
with the return thereof, an amount computed by multiplying (I) the amount of
the average fair market replacement cost of all such components by (II) the
difference of (aa) 50% and (bb) the percentage equivalent of the average actual
amount of time or cycles remaining on such components.
(f) Upon return of a Unit, Lessee shall have removed all
designations on such Unit of the type referred to in Section 4.3 (other than
the registration number assigned by the FAA) and shall have painted the
affected area in a workmanlike manner.
6.3 Storage. With respect to any Unit returned by Lessee to its
base of operations pursuant to Section 6.1 and at the request of Lessor, Lessee
shall permit Lessor to store such Unit at Lessee's sole risk and expense for a
period (the "Storage Period") beginning on the date of return of such Unit in
material compliance with the provisions of Section 6.2 and ending not more than
90 days thereafter. During the Storage Period, Lessee will permit Lessor or
any person designated by it, including the authorized representative or
representatives of any prospective purchaser or user of such Unit, to inspect
the same during Lessee's normal business hours upon at least one Business Day's
prior telephonic notice; provided, however, that such inspection shall not
materially interfere with the normal conduct of Lessee's business and such
person shall be insured to the reasonable satisfaction of Lessee with respect
to any risks incurred in connection with any such inspections and Lessee
(except in the case of Lessee's gross negligence or willful misconduct) shall
not be liable for any injury to, or the death of, any person exercising, either
on behalf of Lessor or any prospective purchaser or user, the rights of
inspection granted pursuant hereto. Lessee shall not be required to store any
Unit of Equipment except during the Storage Period.
Section 7. Liens.
Lessee will not directly or indirectly create, incur, assume,
permit or suffer to exist any Lien on or with respect to any Units or Lessee's
leasehold interest therein under this Lease, except Permitted Liens, Lessor's
Liens and Liens described in Section 6.4(a) and 6.4(b) of the Participation
Agreement, and Lessee shall promptly, at its own expense, take such action or
cause such action to be taken as may be necessary to duly discharge (by bonding
or otherwise) any such Lien not excepted above if the same shall arise at any
time.
Section 8. Maintenance; Operation; Possession; Compliance with
Laws; Registration.
8.1 Maintenance and Operation. Lessee, at its own cost and
expense, shall maintain, repair and keep each Unit, and
<PAGE> 13
9
shall operate each Unit (i) in good working order and repair, ordinary wear and
tear excepted, in accordance with the standards of a reasonably prudent
operator with an Investment Grade Rating and in a manner consistent with
maintenance practices used by Lessee in respect of equipment owned or leased by
Lessee similar in type to such Unit, (ii) in accordance with all insurance
policies required to be maintained pursuant to Section 12 hereof, (iii) as may
be necessary to enable the airworthiness certification for the Unit under Part
91 of the FAA Act to be maintained in good standing at all times (other than
during temporary periods of storage or during any period of grounding ordered
by the FAA (other than by reason of Lessee's failure to satisfy its maintenance
obligations hereunder), (iv) in compliance with all applicable laws, rules and
regulations and mandatory service bulletins and, in Lessee's reasonable
opinion, all appropriate maintenance, service, repair and overhaul manuals and
(v) if such Unit has the benefit of manufacturer warranties, in a manner
consistent with the manufacturer's requirements in order to maintain such
warranties; provided, however, that Lessee may, in good faith and by
appropriate proceedings diligently conducted, contest the validity or
application of any such law, regulation, requirement or rule in any reasonable
manner which does not impair the Lien of the Indenture or create any material
risk or danger of (A) the sale, forfeiture or loss of, or interference with the
use or possession of, any Unit of Equipment, or interference with the payment
of Rent or (B) the imposition of criminal liability or unindemnified material
civil liability on the Lessor, the Owner Participant, the Indenture Trustee or
the Pass Through Trustee, or (C) extending the ultimate imposition of such law,
rule or regulation beyond the expiration or termination of this Lease solely
with respect to Equipment leased hereunder, or (D) the release of the Lessee
from the obligation to return the Equipment in compliance with the provisions
of Section 6.2; provided further, that Lessee shall not operate any Unit
pursuant to Part 135 of the Federal Aviation Rules. Lessee's obligations in
the preceding sentence shall be performed by appropriately licensed, qualified
and certificated personnel in accordance with all applicable laws, rules and
regulations. In no event shall Lessee discriminate as to the use or
maintenance of any Unit (including the periodicity of maintenance or
recordkeeping in respect of such Unit) as compared to equipment of a similar
nature which Lessee owns or leases. Lessee will maintain all records, logs and
other materials required by relevant industry standards or any governmental
authority having jurisdiction over the Units required to be maintained in
respect of any Unit, all as if Lessee were the owner of such Units, regardless
of whether any such requirements, by their terms, are nominally imposed on
Lessee, Lessor or the Owner Participant.
8.2 Use. (a) Lessee will not fly or locate any Unit, or suffer
any Unit to be flown or located in any area of actual hostilities or which is a
recognized war zone or which is otherwise expressly excluded from coverage of
the insurance policies in effect with respect to the Unit which are required by
<PAGE> 14
10
the terms of Section 12; provided, however, that the failure of Lessee to
comply with the provisions of this sentence shall not give rise to a Lease
Event of Default if the Unit is located in such area as a result of a
hijacking, medical emergency, equipment malfunction, weather condition,
navigational error or other isolated or extraordinary event beyond the control
of Lessee and Lessee is using all reasonable efforts to remove the Unit from
such area.
8.3 Sublease. Lessee shall be entitled to sublease any Unit of
Equipment to a business entity which is not subject to any bankruptcy,
insolvency or similar proceedings other than proceedings under Chapter 11 of
the Bankruptcy Code (and in such case, all appropriate court approvals are
obtained which are reasonably required by Lessor in order to protect the
interest of Lessor and its assigns in the Equipment, including the Lien of the
Indenture) (leases to such sublessees being herein referred to as "Permitted
Subleases"); provided that such sublease shall only be a Permitted Sublease if
at the time Lessee enters into such sublease, the following conditions shall
have been satisfied:
(i) no Lease Default or Lease Event of Default shall have
occurred and be continuing;
(ii) Lessee shall remain primarily liable for performance of all
of its obligations under this Lease;
(iii) such sublease and the rights and interest of any sublessee
thereunder, shall in all events be expressly subject and subordinate to
this Lease and the rights and interest of Lessor and its respective
successors and assigns hereunder;
(iv) such sublease shall not be for a term extending beyond the
earlier of (x) 60 days (or such longer period approved in writing by
Lessor, such approval not to be unreasonably withheld) and (y) the Basic
Term and any agreed upon Renewal Term; and
(v) such sublease shall not include any term or provision which
would require or permit the sublessee thereunder to take any actions
inconsistent with this Lease or the other Operative Agreements.
Lessee shall make, or cause to be made, in a timely fashion all filings with
respect to any such sublease necessary to protect the rights of Lessor in the
Unit subject to such sublease and the lien of the Indenture thereon.
8.4 Aircraft Registration. Lessee shall forthwith upon the
delivery of the Aircraft cause the Aircraft to be duly registered in the name
of Lessor and to remain duly registered in the name of Lessor under the FAA Act
except to the extent such registration cannot be effected because of Lessor's
or the Owner
<PAGE> 15
11
Participant's failure to comply with the citizenship or other eligibility
requirements relating to Lessor or the Owner Participant under the FAA Act,
provided that Lessor shall execute and deliver all such documents as Lessee may
reasonably request for the purpose of effecting and continuing such
registration.
Section 9. Modifications; Replacement of Parts.
9.1 Required Modifications. In the event the FAA or any other
United States, state or local governmental agency or other governmental
authority having jurisdiction over any Unit requires that such Unit be altered,
replaced or modified (a "Required Modification"), Lessee agrees to promptly
(but in any event within the time period by which the Required Modification is
required to be made) make such Required Modification at its own expense;
provided, however, that Lessee may, in good faith and by appropriate
proceedings diligently conducted, contest the validity or application of any
such law, regulation, requirement or rule in any reasonable manner which
complies with the requirements set forth in the proviso to the first sentence
of Section 8.1, provided further, that with respect to any such contest
conducted after the expiration of the Lease Term, such contest shall be
conducted in a manner mutually satisfactory to Lessee and Lessor. Title to any
Required Modification shall immediately vest in Lessor.
9.2 Optional Modifications. In addition to making Required
Modifications, Lessee at any time may otherwise modify, alter or improve any
Unit (an "Optional Modification"); provided that no Optional Modification shall
materially diminish the fair market value, utility, or remaining economic
useful life of such Unit below the value, utility, or remaining economic useful
life of such Unit immediately prior to such Optional Modification, assuming
such Unit was then in the condition required to be maintained by the terms of
this Lease. Title to any Optional Modification which is not readily removable
without causing material damage to a Unit shall immediately vest in Lessor, and
title to any other Optional Modification (a "Severable Modification") shall
remain with Lessee. If Lessee shall at its cost cause such Severable
Modifications to be made to any Unit, Lessor shall have the right, prior to the
return of such Unit to Lessor hereunder, to purchase such Severable
Modifications (other than Severable Modifications consisting of proprietary
equipment) at their then Fair Market Sales Value. If Lessor does not elect to
purchase such Severable Modifications, Lessee may remove (or, at Lessor's
direction, will remove) such Severable Modifications at Lessee's cost and
expense. If Lessee does not elect to remove (and, is not directed by Lessor to
remove) such Severable Modifications pursuant to the immediately preceding
sentence, Lessee shall return such Unit with such Severable Modifications
intact, in which case such Severable Modifications shall be deemed to be a part
of the Equipment and title thereto shall vest in Lessor without further act or
payment.
<PAGE> 16
12
9.3 Replacement of Parts. Lessee will replace or cause to be
replaced as promptly as practicable, and at its own cost and expense, all Parts
of any Unit 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 herein.
All replacement parts shall be free and clear of all Liens (except in the case
of replacement parts temporarily installed on an emergency basis and Permitted
Liens) and shall be in at least as good operating condition and have at least
the same value and utility as the Part being replaced. All such replacement
parts (except in the case of replacement parts temporarily installed on an
emergency basis) shall become the property of Lessor, shall constitute Parts
hereunder and shall immediately become subject to this Lease and shall be
deemed part of the Unit to which such Part is attached for all purposes hereof
to the same extent as the Parts originally comprising, or installed on, such
Unit. The Parts replaced thereby shall become Lessee's or its designee's
property.
Section 10. Voluntary Termination.
10.1 Right of Termination. Lessee shall have the right, at its
option at any time or from time to time during the Lease Term to terminate the
Lease Term in respect of one F- 20 , provided such termination is in connection
with a reduction in the Lessee's corporate aircraft fleet and after the third
anniversary to terminate the Lease Term with respect to the other Units (each a
"Terminated Unit") if Lessee determines in good faith that such Unit has become
obsolete, surplus or operationally uneconomic to Lessee's requirements, by
delivering at least 90 days' prior written notice to Lessor and the Indenture
Trustee specifying a proposed date of termination for such Unit (the
"Termination Date"), which date shall be a Rent Payment Date, any such
termination to be effective on the Termination Date. Except as expressly
provided herein, there will be no conditions to Lessee's right to terminate
this Lease with respect to any Unit pursuant to this Section 10.1. Lessee may
withdraw the termination notice referred to above at any time at least 30 days
prior to the Termination Date, whereupon this Lease shall continue in full
force and effect; provided that Lessee may not exercise its right to withdraw
such a termination notice more than two times with respect to a Unit plus one
additional time with respect to a Unit if the sale thereof pursuant to Section
10.2 shall not be consummated through no fault of the Lessee (any such failure
to consummate such termination shall be deemed to be a withdrawal of a
termination notice unless such failure is attributable solely or jointly to
Lessor and/or the Owner Participant). The Lessee agrees that, without limiting
Section 2.5(b) of the Participation Agreement, it will reimburse the Lessor,
the Owner Participant, the Indenture Trustee and the Loan Participants for all
reasonable out-of-pocket costs and expenses (including transfer taxes) incurred
by each such party in connection with the proposed termination or the
termination of this Lease with respect to any
<PAGE> 17
13
Units, except that Owner Participant shall pay for all reasonable out-of-pocket
costs and expenses of Lessee, Lessor, the Indenture Trustee and the Loan
Participants in connection with the exercise by Lessor of its retention rights
under Section 10.3.
10.2 Sale of Equipment. During the period from the date of
such notice given pursuant to Section 10.1 to the Termination Date, Lessee, as
agent for Lessor and at Lessee's sole cost and expense, shall use reasonable
best efforts to obtain bids from Persons other than Lessee or Affiliates
thereof for the cash purchase of a Terminated Unit, and Lessee shall promptly,
and in any event at least five Business Days prior to the proposed date of
sale, certify to Lessor in writing the amount and terms of each such bid, the
proposed date of such sale and the name and address of the party submitting
such bid. Lessor shall have the right (but not the obligation) to obtain bids
for the purchase of such Terminated Unit, either directly or through agents
other than Lessee, 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 arranging such sale. Unless Lessor shall have elected to retain such
Terminated Unit in accordance with Section 10.3, on the Termination Date: (i)
Lessee shall, subject to receipt (x) by Lessor of all amounts owing to Lessor
pursuant to the next sentence, and (y) by the Persons (including, without
limitation, Lessor) entitled thereto of all unpaid Supplemental Rent due on or
before the Termination Date, deliver such Terminated Unit to the bidder (which
shall not be Lessee or any Affiliate thereof), if any, which shall have
submitted the highest cash bid prior to such date (or to such other bidder as
Lessee and Lessor shall agree), in the same manner and condition as if delivery
were made to Lessor pursuant to Section 6 and (ii) Lessor shall, without
recourse or warranty (except as to the absence of any Lessor's Lien
attributable to Lessor) simultaneously therewith sell such Terminated Unit to
such bidder, provided that, if Lessee shall have previously exercised all of
its rights of withdrawal of termination notices pursuant to Section 10.1 and
Lessee is unable to obtain any bids for such Units, Lessee shall effect the
sale of such Units to any bidder identified by Lessor. The total selling price
realized at such sale shall be paid to and retained by Lessor and, in addition,
on the Termination Date, Lessee shall pay to Lessor, (A) all unpaid Basic Rent
with respect to such Terminated Unit due and payable on or prior to such
Termination Date (other than Basic Rent payable with respect to such Terminated
Unit in "advance" on such date), (B) the excess, if any, of (1) the Termination
Value for such Terminated Unit computed as of the related Termination Date,
over (2) the net cash sales proceeds (after the deduction of all reasonable
costs and expenses of Lessor and the Owner Participant in connection with such
sale (including, without limitation, transfer and other taxes (other than on
net income of the Owner Participant))) of such Terminated Unit and (C) an
amount equal to any Make-Whole Amount in respect of the principal amount of the
Equipment Notes to be prepaid in accordance with Section 2.10(a) of the
Indenture. If no sale shall have occurred, this Lease shall continue in full
force and
<PAGE> 18
14
effect with respect to such Unit. If Lessor elects not to exercise its right
to retain such Terminated Unit as provided in Section 10.3, Lessee, in acting
as agent for Lessor, shall have no liability to Lessor for failure to obtain
the best price, shall act in its sole discretion and shall be under no duty to
solicit bids publicly or in any particular market. Lessee's sole interest in
acting as agent shall be to use its reasonable best efforts to sell the Units
at the highest price then obtainable consistent with the terms of this Lease.
10.3 Retention of Equipment by Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, no later than 30 days after receipt of Lessee's notice of
termination, not to sell a Terminated Unit on the Termination Date therefor,
whereupon Lessee shall (i) deliver such Terminated Unit to Lessor in the same
manner and condition as if delivery were made to Lessor pursuant to Section 6
(but Lessor shall have no storage rights pursuant to Section 6.3), treating the
Termination Date as the termination date of the Lease Term with respect to such
Terminated Unit, and (ii) pay to Lessor (A) all unpaid Basic Rent payable on or
prior to the related Termination Date (other than Basic Rent payable with
respect to such Terminated Unit in "advance" on such date) and (B) an amount
equal to any Make-Whole Amount in respect of the principal amount of the
Equipment Notes to be prepaid in accordance with Section 2.10(a) of the
Indenture and (iii) pay to the Persons entitled thereto all other unpaid
Supplemental Rent due on or before the Termination Date. If Lessor elects not
to sell a Terminated Unit as provided in this Section 10.3, then Lessor shall
pay, or cause to be paid, to the Indenture Trustee in funds of the type and in
an amount equal to the outstanding principal amount of the Equipment Notes to
be prepaid on account of such Terminated Unit pursuant to Section 2.10(a) of
the Indenture, all accrued interest to the date of prepayment of such Equipment
Notes on such Termination Date and an amount equal to the Make-Whole Amount, if
any, in respect of the principal amount of the Equipment Notes to be prepaid.
If Lessor shall fail to perform any of its obligations pursuant to this Section
10.3 this Lease shall not be terminated with respect to any Terminated Unit on
a proposed Termination Date, Lessor shall thereafter no longer be entitled to
exercise its election to retain any Terminated Unit and Lessee may at its
option at any time thereafter submit a new termination notice pursuant to
Section 10.1 with respect to a Terminated Unit specifying a proposed
Termination Date occurring not earlier than five Business Days from the date of
such notice.
10.4 Termination of Lease. In the event of (x) any such sale
of a Terminated Unit and receipt by Lessor and the Indenture Trustee of all of
the amounts provided in Section 10.2 or (y) retention of a Terminated Unit by
Lessor in compliance with Section 10.3 (including receipt by the Indenture
Trustee of all amounts provided in Section 10.3), and upon compliance by Lessee
with the other provisions of this Section 10, the obligation of Lessee to pay
Basic Rent hereunder for such
<PAGE> 19
15
Terminated Unit shall cease and the Lease Term for and Lessee's other
obligations in respect of such Terminated Unit shall end.
Section 11. Loss, Destruction, Requisition, Etc.
11.1 Event of Loss. In the event that the Airframe or any
Engine of any Unit (i) shall suffer damage or destruction which, in Lessee's
opinion (as evidenced by an Officers' Certificate to such effect), makes repair
uneconomic or renders such Unit permanently unfit for normal use for any reason
whatsoever, (ii) shall suffer an actual or constructive total loss, (iii) shall
be permanently returned to the manufacturer pursuant to any patent indemnity
provisions, (iv) shall suffer a requisition of title by any governmental
authority, (v) shall suffer theft or disappearance or be the subject of a
condemnation, a confiscation, a seizure or a requisition of use by any
governmental authority, that, in any such case of this clause (v), results in
Lessee's loss of possession for a period in excess of 6 months (or such longer
period not to exceed one year from the end of such 6 month period but extending
only so long as the location of such Unit is known and Lessee is diligently
pursuing recovery), provided that in no event shall such period extend beyond
the date 30 days after the expiration of the Lease Term for such Unit (in which
case Rent shall accrue as provided in Section 6.1), or (vi) shall be the
subject of any rule, regulation, order or other action by the FAA or other
governmental authority which results in the prohibition of operation of such
Unit in the normal course of air transportation for a period in excess of six
consecutive months but less than twelve consecutive months, unless Lessee prior
to the expiration of such period is diligently taking all steps necessary or
desirable to permit the normal use of such Unit by Lessee (any such occurrence
being hereinafter called an "Event of Loss"), Lessee, in accordance with the
terms of Section 11.2 (or in accordance with the terms of Section 11.7 if such
Event of Loss occurs solely with respect to an Engine or Engines), shall inform
Lessor and the Indenture Trustee of such Event of Loss. Anything to the
contrary in the preceding sentence notwithstanding, a requisition of use by the
United States government or any agency or instrumentality thereof shall not
constitute an Event of Loss unless such requisition of use continues 30 days
beyond the expiration of the Lease Term for such Unit. An Event of Loss with
respect to a Unit shall be deemed to have occurred if an Event of Loss occurs
with respect to the Airframe of such Unit.
11.2 Replacement or Payment upon Event of Loss. Upon the
occurrence of an Event of Loss with respect to any Unit, Lessee shall within 90
days of such occurrence give Lessor and the Indenture Trustee notice of such
occurrence and of its election to perform one of the following options and the
contemplated date of performance of such option (it being agreed that if Lessee
shall not have given notice of such election within 90 days after such
occurrence, Lessee shall be deemed to have elected to perform the option set
forth in the following paragraph (ii)):
<PAGE> 20
16
(i) within 180 days of such occurrence, Lessee shall comply with
Section 11.4(b) and shall convey or cause to be conveyed to Lessor a
Replacement Unit to be leased to Lessee hereunder, such Replacement Unit
to be free and clear of all Liens (other than Permitted Liens) and to
have a value, utility and remaining economic useful life at least equal
to the Unit so replaced (assuming such Unit was in the condition required
to be maintained by the terms of this Lease); provided that, if Lessee
shall not perform its obligation to effect such replacement under this
paragraph (i) during the period of time provided herein, then Lessee
shall pay on the next succeeding Determination Date that is at least 30
days after the end of such period to Lessor the amounts specified in
paragraph (ii) below, provided, further, that if a Lease Default or Lease
Event of Default shall have occurred and be continuing, Lessee shall be
precluded from electing to perform the option set forth in this paragraph
(i); or
(ii) on a Determination Date within 180 days of such occurrence,
Lessee shall pay or cause to be paid (1) to Lessor (a) an amount equal to
the Stipulated Loss Value of each such Unit suffering such occurrence
determined as of such Determination Date and (b) if such Determination
Date is also a Rent Payment Date, all Basic Rent payable on such date in
respect of such Unit (other than Basic Rent payable in "advance" on such
date) or if such Determination Date is not a Rent Payment Date, all Basic
Rent accrued to such date in respect of such Unit then due and payable
and (2) to the Persons (including, without limitation, Lessor) entitled
thereto all other unpaid Supplemental Rent in respect of such Unit due on
or before such Determination Date (including any transfer taxes arising
in connection with such termination); it being understood that until such
Stipulated Loss Value is paid, there shall be no abatement or reduction
of Basic Rent.
11.3 Rent Termination. Upon the replacement of any Unit in
compliance with Section 11.2(i) or upon the payment of all sums required to be
paid pursuant to Section 11.2(ii) in respect of any Unit for which Lessee has
elected to pay (or deemed to have elected to pay pursuant to the first proviso
to Section 11.2(i)) the amounts specified in paragraph 11.2(ii), the Lease Term
with respect to such Unit and the obligation to pay Rent for such Unit accruing
subsequent to the date of conveyance of such Replacement Unit pursuant to
Section 11.2(i) or the date of payment of all amounts due pursuant to Section
11.2(ii), as the case may be, shall terminate; provided that Lessee shall be
obligated to pay all Rent in respect of such Unit which has accrued up to and
including the date of conveyance of such Replacement Unit pursuant to Section
11.2(i) or the date of payment of all amounts due pursuant to Section 11.2(ii),
as the case may be.
11.4 Disposition of Equipment; Replacement of Unit.
<PAGE> 21
17
(a) Upon the payment of all sums required to be paid pursuant
to Section 11.2 in respect of any Unit, Lessor will convey to Lessee or its
designee all right, title and interest of Lessor in and to such Unit, "as is",
"where is", without recourse or warranty, except for a warranty against
Lessor's Liens, and shall execute and deliver to Lessee or its designee such
bills of sale and other documents and instruments as Lessee or its designee may
reasonably request to evidence such conveyance. As to each separate Unit so
disposed of, Lessee or its designee shall be entitled to any amounts arising
from such disposition, plus any awards, insurance or other proceeds and damages
received by Lessee, Lessor or the Indenture Trustee by reason of such Event of
Loss after having paid the Stipulated Loss Value attributable thereto and all
other amounts of Rent then due and payable in respect thereof, provided that if
a Lease of Event of Default shall have occurred and be continuing, the amounts
referred to in this sentence which are payable to Lessee shall be paid to
Lessor, and Lessor shall hold such amounts received as security for Lessee's
obligations hereunder subject to the provisions of Section 11.6.
(b) At the time of or prior to any replacement of any Unit,
Lessee, at its own expense, will (A) furnish Lessor with a bill of sale with
respect to the Replacement Unit, (B) cause a Lease Supplement substantially in
the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease,
and duly executed by Lessee, to be delivered to Lessor for execution and, upon
such execution, to be filed for recordation in the same manner as provided for
the original Lease Supplement in Section 16.1, (C) so long as the Indenture
shall not have been satisfied and discharged, cause an Indenture Supplement
substantially in the form of Exhibit A to the Indenture for such Replacement
Unit to be delivered to Lessor and to the Indenture Trustee for execution and,
upon such execution, to be filed for recordation in the same manner as provided
for the original Indenture Supplement in Section 16.1, (D) furnish Lessor and
the Indenture Trustee with an opinion of Lessee's counsel (which may be
Lessee's in- house counsel), to the effect that (x) the bill of sale referred
to in clause (A) above constitutes an effective instrument for the conveyance
of title to the Replacement Unit to Lessor, (y) legal and beneficial title to
the Replacement Unit has been delivered to Lessor, free and clear of all Liens
except Liens described in clauses (i), (ii) and (v) of the definition of
"Permitted Liens" and Liens described in clauses (iii) and (iv) of such
definition for amounts which are not due and payable, and (z) all filings,
recordings and other action necessary or appropriate to perfect and protect
Lessor's interests in and Indenture Trustee's Lien on the Replacement Unit have
been accomplished, (E) furnish to the Owner Participant an acknowledgement by
Lessee, in form and substance reasonably satisfactory to the Owner Participant,
that Lessee will indemnify the Owner Participant for any adverse tax
consequences resulting from such replacement consistent with the provisions of
the Tax Indemnity Agreement, and (F) furnish such other documents and evidence
as the Owner Participant, Lessor or Indenture Trustee, or their respective
counsel, may reasonably
<PAGE> 22
18
request in order to establish the consummation of the transactions contemplated
by this Section 11.4. For all purposes hereof, upon passage of title thereto
to Lessor the Replacement Unit shall be deemed part of the property leased
hereunder and the Replacement Unit shall be deemed a "Unit" of Equipment as
defined herein. Upon such passage of title, Lessor will transfer to Lessee,
without recourse or warranty (except as to Lessor's Liens), all Lessor's right,
title and interest in and to the replaced Unit, and upon such transfer, Lessor
will request in writing that the Indenture Trustee execute and deliver to
Lessee an appropriate instrument releasing such replaced Unit from the lien of
the Indenture.
11.5 Eminent Domain. In the event that during the Lease Term
the use of any Unit is requisitioned or taken by any governmental authority
under the power of eminent domain or otherwise, Lessee's obligation to pay
Basic Rent shall continue unless and until such requisition or taking
constitutes an Event of Loss, and such obligation shall be terminated in
accordance with Section 11.3. Subject to the last sentence of this Section
11.5, the Lessee shall be entitled to receive and retain for its own account
all sums payable for any such period by such governmental authority as
compensation for requisition or taking of possession. Subject to the last
sentence of this Section 11.5, the Lessor and/or the Indenture Trustee
immediately will pay to the Lessee any amounts received by them in respect of
any such acquisition or taking of possession other than amounts received from
Lessee. If a Lease Event of Default shall have occurred and be continuing, any
amounts payable to Lessee pursuant to this Section 11.5 shall be paid to or
retained by Lessor, as the case may be, and Lessor shall hold such amounts as
security for Lessee's obligations hereunder subject to the provisions of
Section 11.6.
11.6 Lease Event of Default. Any amount referred to in Section
6.1(b), 11.4(a), 11.5 or 12.2 which is to be held by Lessor subject to the
provisions of this Section 11.6 shall be held by the Lessor (or, so long as the
Lien of the Indenture has not been discharged, the Indenture Trustee) as
security for the obligations of the Lessee under this Lease, and at such time
as there shall not be continuing any such Lease Event of Default, such amount
(unless theretofore otherwise applied to the obligations of the Lessee
hereunder) shall be paid over to the Lessee provided that no such amount shall
be so held as collateral security for more than 365 days unless Lessor shall
have commenced the exercise of remedies within such period.
11.7 Event of Loss with Respect to an Engine. Notwithstanding
anything to the contrary contained herein, upon the occurrence of an Event of
Loss with respect to an Engine of any Unit in any case where the provisions of
Section 11.2 are not applicable, Lessee shall give Lessor written notice
thereof and shall, within 180 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement
<PAGE> 23
19
for the Engine with respect to which such Event of Loss occurred, a Replacement
Engine having at least the same value and utility as the Engine being replaced
had immediately prior to the occurrence of such Event of Loss (assuming such
Engine had been maintained in accordance with the terms of this Lease), such
Replacement Engine to be free and clear of all Liens (other than Permitted
Liens) and in at least as good operating condition as the Engine with respect
to which such Event of Loss occurred. Lessee, at its own expense, will (i)
furnish Lessor with a bill of sale with respect to such Replacement Engine,
(ii) cause a Lease Supplement substantially in the form of Exhibit A hereto,
subjecting such Replacement Engine to this Lease, with respect to such
Replacement Engine to be duly executed by Lessee and delivered to Lessor for
execution, and upon such execution, to be filed in the same manner as provided
for the original Lease Supplement in Section 16.1, (iii) so long as the
Indenture shall not have been satisfied and discharged, cause an Indenture
Supplement substantially in the form of Exhibit A to the Indenture to be
delivered to Lessor and to the Indenture Trustee for execution, to be filed for
recordation in the same manner as provided for the original Indenture
Supplement in Section 16.1, (iv) furnish Lessor with an opinion of Lessee's
counsel (which may be Lessee's in-house counsel), to the effect that (x) the
bill of sale referred to in clause (i) above constitutes an effective
instrument for the conveyance of title to the Replacement Engine to Lessor, (y)
legal and beneficial title to the Replacement Engine has been delivered to
Lessor, free and clear of all Liens (other than Permitted Liens), and (z) all
filings, recordings and other action necessary or appropriate to perfect and
protect Lessor's and the Indenture Trustee's respective interests in the
Replacement Unit have been accomplished, (v) furnish to the Owner Participant
an acknowledgement by Lessee, in form and substance reasonably satisfactory to
the Owner Participant, that Lessee will indemnify the Owner Participant for any
adverse tax consequences resulting from such replacement consistent with the
provisions of the Tax Indemnity Agreement, and (vi) furnish such other
documents and evidence as the Owner Participant, Lessor or Indenture Trustee,
or their respective counsel, may reasonably request in order to establish the
consummation of the transactions contemplated by this Section 11.7. For all
purposes hereof, upon passage of title thereto to Lessor the Replacement Engine
shall be deemed part of the property leased hereunder and the Replacement
Engine shall be deemed part of the relevant "Unit" of Equipment as defined
herein. Upon such passage of title, Lessor will convey to Lessee or its
designee, all right, title and interest of Lessor in and to the replaced
Engine, "as is", "where is", without recourse or warranty, except for a
warranty against Lessor's Liens and shall execute and deliver to Lessee or its
designee, such bills of sale and other documents and instruments as Lessee or
its designee may reasonably request to evidence such conveyance. No Event of
Loss covered by this Section 11.7 shall result in any change in Basic Rent,
Stipulated Loss Values or Termination Values.
<PAGE> 24
20
Section 12. Insurance.
12.1 Property Damage and Public Liability Insurance.
(a) Lessee will, at all times prior to the return of the Units
to Lessor and, if applicable, during the Initial Storage Period, at its own
expense, cause to be carried and maintained with Approved Insurers (i) physical
damage insurance in respect of each Unit in an amount at any time not less than
the Termination Value for each such Unit at such time and (ii) public liability
insurance for such Units with respect to third-party personal injury and
property damage, and Lessee will continue to carry such insurance in such
amounts and for such risks not less comprehensive in amounts and against risks
customarily insured against by Lessee in respect of equipment owned or leased
by it similar in type to the Equipment. Any policies of insurance carried in
accordance with this Section 12.1 and any policies taken out in substitution or
replacement for any of such policies (A) shall provide that, if any such
insurance is cancelled, materially modified or terminated (other than upon
normal policy expiration) for any reason whatsoever, Lessor, Indenture Trustee
and Owner Participant shall receive 30 days' prior notice of such cancellation,
material modification or termination, and no such cancellation, material
modification or termination shall be effective against such party until receipt
of such notice, (B) with respect to insurance policies provided by insurers
identified in clause (iv) of the definition of "Approved Insurer" shall name
the Owner Participant, Lessor, as Lessor of the Equipment and in its individual
capacity, and the Indenture Trustee as additional insureds and loss payees as
their interests may appear, but only with respect to liability for which Lessee
would have an indemnity obligation under the Participant Agreement, (C) shall
provide that neither the Owner Participant, Lessor, as lessor of the Equipment
and in its individual capacity, or the Indenture Trustee shall have any
responsibility for any insurance premiums, whether for coverage before or after
cancellation or termination of any such policies as to Lessee, (D) as to the
public liability insurance referred to in this paragraph 12.1(a) shall provide
that in as much as such policies cover more than one insured, all terms,
conditions, insuring agreements and endorsements, with the exceptions of limits
of liability and liability for premiums, commissions, assessments or calls
(which shall be solely a liability of Lessee), shall operate in the same manner
as if there were a separate policy or policies covering each insured, (E) shall
waive any rights of subrogation of the insurers against the Owner Participant,
Lessor, as lessor of the Equipment and in its individual capacity, and the
Indenture Trustee, (F) shall provide that the coverage of such policies shall
not be invalidated because of any action or inaction of Lessee or any other
Person (other than the Owner Participant, Lessor or the Indenture Trustee, but
only in respect of their respective coverages) and (G) shall be primary without
the right of contribution. Lessee shall, at its own expense, be entitled to
make all proofs of loss
<PAGE> 25
21
and take all other steps necessary to collect the proceeds of the insurance
required hereunder.
(b) Lessee shall, prior to the Closing Date and not less than
annually thereafter, furnish the Owner Participant, Lessor and the Indenture
Trustee with a certificate signed by the insurer or an independent insurance
broker evidencing each policy of insurance carried in accordance with this
Section 12.1.
(c) It is understood and agreed that the insurance required
hereunder may be part of the Lessee's world-wide corporate insurance program,
including risk retention and deductible limits, and, at any time during the
Lease Term Lessee may alter its insurance program in any manner with respect to
the risks (including liability) associated with the use, possession and
operation of the Equipment and for all similar equipment owned or leased by
Lessee, provided that any provision of this Section 12 to the contrary
notwithstanding: (1) the aggregate amount of the deductible limits of the
insurance policies carried by Lessee pursuant clauses (i) and (ii) of Section
12.1(a) at any time shall not exceed (x) $__________ (as such amount shall be
increased by escalating such amount annually in ___________, 1994 dollars by
the Inflation Index if Lessee has an Investment Grade Rating at such time or
(y) $__________ (as such amount shall be increased by escalating such amount
annually in ___________, 1994 dollars by the Inflation Index if Lessee does not
have an Investment Grade Rating at such time and (2) subject to such insurance
being reasonably and economically available to Lessee as measured by prevailing
domestic oil industry practice, Lessee shall carry insurance pursuant to clause
(ii) of Section 12.1(a) in an amount not less than $_______________, and to the
extent such amounts are not reasonably and economically available as measured
by prevailing domestic oil industry practice, then such lesser amounts as are
reasonably and economically available as measured by prevailing domestic oil
industry practice and otherwise consistent with the terms of this Section 12.1.
12.2 Proceeds of Property Insurance. So long as no Payment
Event of Default shall have occurred and be continuing, the entire proceeds of
any property insurance or third party payments for damages to any Unit received
by Lessor or the Indenture Trustee shall be paid over to Lessee; provided that
if the proceeds received in respect of any Unit exceed $_________________, such
proceeds shall be paid over to and held by Lessor and it shall thereafter be
released to Lessee in order to pay the costs and expenses of the repair of such
Unit, and in any event shall be released in full to Lessee upon the completion
of the repair of such Unit, provided, further, that if such damages constitute
an Event of Loss with respect to such Unit, such proceeds shall be released in
full to Lessee upon Lessee's replacement of such Unit pursuant to Section
11.2(i) or, if such Unit is not replaced pursuant to Section 11.2(i), shall be
applied towards the satisfaction of Lessee's payment obligations pursuant to
Section 11.2(ii). Anything to the contrary in the preceding sentence
notwithstanding, if a Lease Event of Default shall have occurred
<PAGE> 26
22
and be continuing, such proceeds shall be paid to Lessor, and Lessor shall hold
such proceeds as security for Lessee's obligations hereunder subject to the
provisions of Section 11.6.
12.3 Additional Insurance. At any time Lessor (either directly
or in the name of the Owner Participant) may at its own expense carry insurance
with respect to its interest in the Units, provided that such insurance does
not interfere with Lessee's ability to insure the Equipment as required by this
Section 12 or adversely affect Lessee's insurance or the cost thereof, it being
understood that all salvage rights to each Unit shall remain with Lessee's
insurers at all times. Any insurance payments received from policies
maintained by Lessor pursuant to the previous sentence shall be retained by
Lessor without reducing or otherwise affecting Lessee's obligations hereunder.
Section 13. Lessor's Inspection Rights. Lessor shall have the
right, but not the obligation, at its sole cost, expense and risk (including,
without limitation, the risk of personal injury or death), by its authorized
representatives, to inspect the Equipment and Lessee's records with respect
thereto (and on one occasion during the last 90 days of the Lease Term for any
Unit require a ground evaluation and a test flight of such Unit at Lessee's
expense) during Lessee's normal business hours and upon reasonable prior notice
to Lessee; provided, however, that Lessee shall not be liable for any injury
to, or the death of, any Person exercising, either on behalf of Lessor or any
prospective user, the rights of inspection granted under this Section 13 unless
caused by Lessee's gross negligence or wilful misconduct. No inspection or
test flight pursuant to this Section 13 shall interfere with the use, operation
or maintenance of the Equipment or the normal conduct of Lessee's business, and
Lessee shall not be required to undertake or incur any additional liabilities
in connection therewith. Lessor's inspection rights under this Section 13
shall be limited to once per calendar year prior to the last 360 days of the
Lease Term and shall be limited to no more than three times during the last 360
days of such Lease Term; provided that if a Lease Default or Lease Event of
Default shall have occurred and be continuing, the limitation on the frequency
of the Lessor's inspection rights contained in this sentence shall not be
applicable.
Section 14. Events of Default.
The following events shall constitute Events of Default
hereunder (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
be deemed to exist and continue so long as, but only as long as, it shall not
have been remedied in accordance with the express terms hereof:
<PAGE> 27
23
(a) Lessee shall fail to make any payment of Basic Rent,
Stipulated Loss Value or Termination Value within 10 Business Days after
the same shall have become due; or
(b) Lessee shall fail to make any payment of Supplemental Rent,
including indemnity or tax indemnity payments (but excluding Stipulated
Loss Value or Termination Value, which are subject to clause (a) above)
after the same shall have become due and such failure shall continue
unremedied for 15 Business Days after receipt by Lessee of written notice
of such failure from the Owner Participant, Lessor or the Indenture
Trustee; or
(c) any representation or warranty made by Lessee in any
Operative Agreement (other than the Tax Indemnity Agreement) to which
Lessee is a party or any certificate or document delivered in connection
with the transactions contemplated by Operative Agreements shall prove to
be untrue or incorrect in any material respect when made and such untruth
or incorrectness (if subject to cure) shall continue to be material and
unremedied for a period of 30 days after receipt by Lessee of written
notice thereof from Lessor or the Indenture Trustee; or
(d) Lessee shall commence a voluntary case in the United States
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of Lessee or
of any substantial part of its property, or shall make any general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due; or
(e) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee in an involuntary case in
the United States under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Lessee or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs and such decree or
order shall remain unstayed and in effect for a period of 90 consecutive
days; or
(f) Lessee shall fail to observe or perform any other of the
covenants or agreements to be observed or performed by Lessee under any
Lessee Agreement (other than the Tax Indemnity Agreement) and such
failure shall continue unremedied for 60 days after notice from Lessor,
the Owner Participant or the Indenture Trustee to Lessee, specifying the
failure and demanding the same to be remedied; provided
<PAGE> 28
24
that, if such failure is capable of being remedied, no such failure shall
constitute an Event of Default hereunder for a period of 360 days after
receipt of such notice so long as Lessee is diligently proceeding to
remedy such failure;
provided that, notwithstanding anything to the contrary contained in this
Lease, any failure of Lessee to perform or observe any covenant or agreement
herein shall not constitute an Event of Default under paragraph (f) above if
such failure is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as Lessee is continuing to comply with
the applicable terms of Section 11 and 12.
Section 15. Remedies.
15.1 Remedies. Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, Lessor may, at
its option, declare this Lease to be in default by a written notice to Lessee;
and at any time thereafter, so long as Lessee shall not have remedied all
outstanding Events of Default, Lessor may do one or more of the following (in
any portion of this Section 15) 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:
(a) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, Lessor may demand that
Lessee, and Lessee shall, upon written demand of Lessor and at Lessee's
expense forthwith return any or all of the Equipment to Lessor or its
order in the manner and condition required by, and otherwise in
accordance with all of the provisions of Section 6.2 and Section 15.4; or
Lessor with only such notice as is reasonably required to comply with
Lessee's standard and customary safety practices (but in no event more
than 1 Business Day; provided that this provision shall not be used to
hinder, delay, interfere with or otherwise adversely affect, Lessor's
exercise of its remedies) may by Lessor or its agents enter upon the
premises of Lessee or other premises where any of the Equipment may be
located and take possession of and remove all or any of the Units and
thenceforth hold, use, operate, sublease, possess and enjoy the same free
from any right of Lessee, or its sublessees and successors or assigns, to
use such Units for any purpose whatever and without any duty to account
to Lessee with respect to the proceeds thereof (except to the extent
provided in paragraph (e) below);
(c) with or without taking possession, sell any Unit at public
or private sale, as Lessor may determine, with not less than 10 Business
Day prior notice to Lessee but free
<PAGE> 29
25
and clear of any rights of Lessee and without any duty to account to
Lessee with respect to such sale or for the proceeds thereof (except to
the extent required by paragraph (e) below) in which event Lessee's
obligation to pay Basic Rent with respect to such Unit hereunder due for
any periods subsequent to the date of such sale shall terminate (except
to the extent that Basic Rent is to be included in computations under
paragraph (d) or (e) below if Lessor elects to exercise its rights under
either of said paragraphs);
(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 any Unit, Lessor, by written notice to
Lessee specifying a payment date (which date shall be a Determination
Date) which shall be not earlier than 30 days after the date of such
notice, may demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the Basic
Rent for such Unit due after the payment date specified in such notice),
all Rent due and payable (other than Basic Rent payable in "advance" on
such payment date), or accrued, for such Unit as of the payment date
specified in such notice plus an amount equal to the excess, if any, of
the Stipulated Loss Value for such Unit computed as of the payment date
specified in such notice over the fair market sales value (as determined
pursuant to Section 15.5) of such Unit as of the payment date specified
in such notice;
(e) if Lessor shall have sold any Unit pursuant to paragraph (c)
above, Lessor, in lieu of exercising its rights under paragraph (d) above
with respect to such Unit may, if it shall so elect, demand that Lessee
pay to Lessor, and Lessee shall pay to Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for
such Unit due subsequent to the Rent Payment Date next preceding such
sale), any accrued and unpaid Rent for such Unit as of the date of such
sale and, if that date is a Rent Payment Date, the Basic Rent due on that
date (other than Basic Rent payable in "advance" on such date), plus the
amount, if any, by which the Stipulated Loss Value of such Unit computed
as of the Rent Payment Date next preceding the date of such sale or, if
such sale occurs on a Rent Payment Date, then computed as of such Rent
Payment Date, exceeds the net proceeds of such sale;
(f) in lieu of exercising its rights pursuant to paragraph (b),
(c), (d) or (e) above with respect to such Unit, Lessor by written notice
to Lessee specifying a payment date (which date shall be a Determination
Date) which shall not be earlier than 30 days after the date of such
notice, may demand that Lessee pay to Lessor, and Lessee shall pay
Lessor, on the payment date specified in
<PAGE> 30
26
such notice, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Rent for such Unit due after the payment
date specified in such notice) the sum of (A) all Rent due and payable
(other than Basic Rent payable in "advance" on such date), or accrued,
for such Unit as of the payment date specified in such notice plus (B) an
amount equal to the Stipulated Loss Value for such Unit computed as of
the payment date specified in such notice; and upon such payment of
liquidated damages and all transfer taxes which are payable Lessor will
transfer to Lessee, without recourse or warranty (except as to Lessor's
Liens), all Lessor's right, title and interest in and to such Unit and
upon such transfer, Lessor will request in writing that the Indenture
Trustee execute and deliver to Lessee an appropriate instrument releasing
such Unit from the lien of the Indenture; and/or
(g) Lessor may rescind or terminate this Lease or may exercise
any other right or remedy that may be available to it under applicable
law.
In addition, Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Supplemental Rent due hereunder before
or during the exercise of any of the foregoing remedies, and for reasonable
legal fees and other reasonable costs and expenses incurred by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies with
respect thereto, including without limitation the repayment in full of any
costs and expenses necessary to be expended in repairing any Unit in order to
cause it to be in compliance with all maintenance and regulatory standards
imposed by this Lease and expenses, including reasonable legal fees, involved
in any appearance by Lessor or the Indenture Trustee in any bankruptcy or
insolvency proceeding with respect to Lessee.
15.2 Cumulative Remedies. The remedies in this Lease provided
in favor of Lessor shall not be deemed exclusive, but shall be cumulative and
shall be in addition to all other remedies in its favor existing at law or in
equity. Lessee hereby waives any mandatory requirements of law, now or
hereafter in effect, which might limit or modify any of the remedies herein
provided, to the extent that such waiver is permitted by law.
15.3 No Waiver. No delay or omission to exercise any right,
power or remedy accruing to Lessor upon any breach or default by Lessee under
this Lease shall impair any such right, power or remedy of Lessor, nor shall
any such delay or omission be construed as a waiver of any breach or default,
or of any similar breach or default hereafter occurring; nor shall any waiver
of a single breach or default be deemed a waiver of any subsequent breach or
default.
15.4 Lessee's Duty to Return Equipment Upon an Event of
Default. If Lessor or any assignee of Lessor shall terminate this Lease
pursuant to Section 15 hereof, Lessee shall forthwith
<PAGE> 31
27
deliver possession of the Equipment to Lessor at a location in the continental
United States, at the expense of Lessee, as Lessor may designate or, in the
absence of such designation, as Lessee may select. All Equipment returned
shall be in the condition required by Section 6.2 hereof.
15.5 Fair Market Sales Value. For purposes of Section 15.1(d),
the "fair market sales value" of a Unit of Equipment shall be the sales value
that would be obtained in an arm's length transaction between an informed and
willing buyer under no compulsion to buy and an informed and willing seller
under no compulsion to sell, based upon the actual condition and location of
the Unit of Equipment in question, which value shall be determined by an
appraiser selected by Lessor and reasonably acceptable to Lessee.
Section 16. Filings; Further Assurances.
16.1 Filings. On or prior to the Closing Date Lessee will
cause this Lease, the Lease Supplement dated the Closing Date, the Trust
Agreement, the FAA Bill of Sale, the Indenture and the Indenture Supplement or
other appropriate evidence to be duly filed and recorded with the FAA in
accordance with the Federal Aviation Act.
16.2 Further Assurances. Lessee will duly execute and deliver
to Lessor and the Indenture Trustee such further documents and assurances and
take such further action as may be required by applicable law in order to
effectively establish and protect the rights and remedies created in favor of
Lessor, the Owner Participant and the Indenture Trustee hereunder and under the
Indenture, including, without limitation, the execution and delivery of
supplements or amendments hereto and to the Indenture, in recordable form,
subjecting to this Lease and to the Indenture any Replacement Unit and the
recording or filing of counterparts hereof or thereof in accordance with the
laws of such jurisdiction within the United States and such UCC financing
statements as are required to maintain the right, title and interest of Lessor
in and to the Equipment and the remainder of the Trust Estate and to maintain
the validity and perfection of the Lien of the Indenture on the Indenture
Estate as Lessor or the Indenture Trustee may from time to time deem advisable;
provided that in connection with the foregoing, Lessee shall also take such
further action as is reasonably required by Lessor.
16.3 Expenses. Lessee will pay all costs, charges and expenses
(including, without limitation, reasonable attorneys fees and expenses)
incident to any such filing, refiling, recording and rerecording or depositing
and redepositing of any such instruments, UCC filings or incident to the taking
of such action.
<PAGE> 32
28
Section 17. Lessor's Right to Perform.
If Lessee fails to make any payment required to be made by it
hereunder or fails to perform or comply with any of its other agreements
contained herein which requires the payment of money, Lessor may itself make
such payment or perform or comply with such agreement which requires the
payment of money, after giving prior written notice thereof to Lessee, but
shall not be obligated hereunder to do so, and the amount of such payment,
together with interest thereon at the Late Rate, to the extent permitted by
applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.
Section 18. Assignment.
18.1 Assignment by Lessor. Lessee and Lessor hereby confirm
that concurrently with the execution and delivery of this Lease, Lessor has
executed and delivered to the Indenture Trustee the Indenture, which is
intended to assign as collateral security and grant a lien and security
interest in favor of the Indenture Trustee in, to and under the Equipment, this
Lease and the Rent payable hereunder (excluding Excepted Property), all as more
explicitly set forth in the Indenture. Lessor agrees that it shall not
otherwise assign or convey its right, title and interest in and to this Lease,
the Equipment or any Unit, except (i) as expressly permitted by and subject to
the provisions of the Participation Agreement, the Trust Agreement and the
Indenture or (ii) following completion of foreclosure or similar proceedings
pursuant to the Indenture or deed in lieu thereof. The Lessee hereby consents
to such assignment and to the creation of such lien and security interest and
consents to the terms and provisions thereof. The Lessee (a) acknowledges that
the Indenture provides for the exercise by the Indenture Trustee of all rights
of the Lessor hereunder to give any consents, approvals, waivers, notices or
the like, to make any elections, demands or the like, or to take any other
discretionary action hereunder, except as specifically set forth in the
Indenture, (b) acknowledges receipt of an executed counterpart of the Indenture
as in effect on the date hereof and consents to all of the provisions thereof
and (c) agrees that, to the extent provided in the Indenture, the Indenture
Trustee shall have all the rights of the Lessor hereunder as if the Indenture
Trustee had originally been named as the Lessor herein, to the extent provided
in the Indenture. Notwithstanding any provision of this Lease or any other
Operative Agreement but without prejudice to the Lessor's and the Owner
Participant's rights expressly provided for in the Indenture, so long as the
Lessor's interest in this Lease or the Equipment is subject to the Lien of the
Indenture, the Lessee shall make all payments of Rent, and all other amounts
payable hereunder to the Lessor, other than Excepted Property, to the Indenture
Trustee as provided in Section 3.6, and the obligation of Lessee to make all
such payments shall not be subject to any defense, counterclaim, setoff or
other right or claim of any kind which the Lessee may be able to assert against
the Lessor or the Owner Participant in an action brought by either thereof on
this Lease.
<PAGE> 33
29
18.2 Assignment by Lessee. Except in the case of any
requisition for use by an agency or instrumentality of the United States
government referred to in Section 11.1, Lessee will not, without the prior
written consent of Lessor, assign any of its rights hereunder, except as
permitted in the Participation Agreement, provided that Lessee may assign its
rights and/or obligations hereunder to any corporation controlled by,
controlling or under common control with Lessee, so long as Lessee remains
primarily liable hereunder. Any sublease in accordance with Section 8.3 shall
not be construed as an assignment of Lessee's rights hereunder.
18.3 Sublessee's Performance and Rights. Any obligation
imposed on Lessee in this Lease shall require only that Lessee perform or cause
to be performed such obligation, even if stated herein as a direct obligation,
and the performance of any such obligation by any permitted assignee, sublessee
or transferee under an assignment, sublease or transfer agreement then in
effect and permitted by the terms of this Lease shall constitute performance by
Lessee and discharge such obligation by Lessee. Except as otherwise expressly
provided herein, any right granted to Lessee in this Lease shall grant Lessee
the right to exercise such right or permit such right to be exercised by any
such assignee, sublessee or transferee, provided that Lessee's purchase and
renewal options set forth in Section 22 may be exercised only by Lessee. The
inclusion of specific references to obligations or rights of any such assignee,
sublessee or transferee in certain provisions of this Lease shall not in any
way prevent or diminish the application of the provisions of the immediately
preceding two sentences with respect to obligations or rights in respect of
which specific reference to any such assignee, sublessee or transferee has not
been made in this Lease.
Section 19. Net Lease, Etc.
This Lease is a net lease and Lessee's obligation to pay all
Rent payable hereunder shall, subject to Section 3.5, be absolute,
unconditional and irrevocable and shall not be affected by any circumstance of
any character including, without limitation, (i) any set-off, abatement,
counterclaim, suspension, recoupment, reduction, rescission, defense or other
right that Lessee may have (other than pursuant to Section 3.5) against Lessor,
the Owner Participant, the Indenture Trustee or any holder of an Equipment
Note, any vendor or manufacturer of any Unit, or any other Person for any
reason whatsoever, (ii) any defect in or failure of title, merchantability,
condition, design, compliance with specifications, operation or fitness for use
of all or any part of any Unit, or any interruption or cessation in or
prohibition of the use or possession of any Unit for any reason whatsoever,
(iii) any damage to, or removal, abandonment, requisition, taking,
condemnation, loss, theft or destruction of all or any part of any Unit or any
interference, interruption, restriction, curtailment or cessation in the use or
possession of any Unit by Lessee or any other Person for any
<PAGE> 34
30
reason whatsoever or of whatever duration, (iv) any insolvency, bankruptcy,
reorganization or similar proceeding by or against Lessee, Lessor or any other
Person, (v) the invalidity, illegality or unenforceability of this Lease, any
other Operative Agreement, or any other instrument referred to herein or
therein or any other infirmity herein or therein or any lack of right, power or
authority of Lessee to enter into this Lease or any other Operative Agreement
to which it is a party or to perform the obligations hereunder or thereunder or
consummate the transactions contemplated hereby or thereby or any doctrine of
force majeure, impossibility, frustration or failure of consideration, or (vi)
any other circumstance or happening whatsoever, foreseeable or unforeseeable,
whether or not similar to any of the foregoing. To the extent permitted by
applicable law, Lessee hereby waives any and all rights which it may now have
or which at any time thereafter may be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender this Lease with respect to
any Unit, except in accordance with the express terms hereof. Each payment of
Rent made by Lessee hereunder shall be final and Lessee shall not seek or have
any right to recover all or any part of such payment from Lessor or any Person
for any reason whatsoever. Nothing contained herein shall be construed to
waive any claim which Lessee might have under any of the Operative Agreements
or otherwise or to limit the right of Lessee to make any claim it might have
against Lessor or any other Person or to pursue such claim in such manner as
Lessee shall deem appropriate, except as provided above. If for any reason
whatsoever this Lease shall be terminated by operation of law or otherwise
except as expressly provided herein, the Lessee shall nonetheless pay an amount
equal to each Rent payment at the time and in the manner that such payment
would become due and payable hereunder if this Lease had not been terminated.
Section 20. Notices.
Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices provided for herein shall be in writing
or by a telecommunications device capable of creating a written record, and any
such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by express mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by any of the methods set forth in clauses
(a) or (b) above or this clause (c), in each case addressed to each party
hereto at its address set forth below or, in the case of any such party hereto,
at such other address as such party may from time to time designate by written
notice to the other parties hereto:
<PAGE> 35
31
If to the Lessee: Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma
Attention: Assistant Treasurer
Telephone:
Facsimile:
Confirmation No.:
If to the Owner
Trustee: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Telephone:
Facsimile:
Confirmation No.:
with a copy to: the Owner Participant at the address set
forth below
If to the Owner
Participant:
Attn: Vice President, Leveraged Leasing
Phone:
Fax:
With a copy to:
Attn: Vice President, Leveraged Leasing
Phone:
Fax:
If to the Indenture
Trustee or the Pass
Through Trustee: Shawmut Bank Connecticut, National
Association, ABA No. 011900445,
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
(Phillips Trust No. 94-__)
Telephone:
Facsimile:
Confirmation No.:
Section 21. (Intentionally Omitted.)
Section 22. Purchase Options; Renewal Options.
<PAGE> 36
32
22.1 Election to Retain or Return Equipment. Not less than
120 days prior to the end of the Basic Term or any applicable Renewal Term with
respect to any Unit of Equipment, Lessee shall give Lessor irrevocable notice
of its decision to return or retain such Unit of Equipment. If Lessee elects
to retain such Unit of Equipment, Lessee shall comply with Section 22.2 and/or
22.3 hereof, as it may elect in accordance with the provisions thereof
including the notice requirements stated therein, and if Lessee elects to
retain such Unit of Equipment but fails to comply with the notice requirements
of Section 22.2 or 22.3 hereof, Lessee shall be deemed to have irrevocably
elected to renew the Lease for a Fair Market Renewal Term of one year and
Section 22.3(b) (other than the notice provisions thereof) shall be applicable
to such renewal. If Lessee fails to give the 120 days' notice required by this
Section 22.1, Lessee shall be deemed to have irrevocably elected to return such
Unit of Equipment at the end of the Basic Term or any applicable Renewal Term,
as the case may be, in accordance with Section 6.
22.2 Purchase Option. So long as no Payment Event of Default
shall have occurred and be continuing and Lessee shall have duly given notice
with respect to any Unit pursuant to Section 22.1 and the next succeeding
sentence of this Section 22.2, Lessee shall have the right at its option to
purchase such Unit of Equipment at the expiration of the Basic Term or at the
expiration of any Renewal Term then in effect, at a price equal to the Fair
Market Sales Value of such Unit (as determined pursuant to Section 22.4).
Lessee shall give Lessor irrevocable written notice not less than 60 days prior
to the end of the Basic Term or any Renewal Term then in effect for such Unit
of its election to exercise the purchase option in respect of such Unit
provided for in this Section 22.2. Upon payment of the purchase price for any
such Unit, together with all other amounts due and owing by Lessee under the
Operative Agreements, Lessor shall deliver a bill of sale transferring and
assigning to Lessee all right, title and interest of Lessor in and to such Unit
on an "as-is" "where-is" basis and containing a warranty against Lessor's
Liens. Lessor shall not be required to make any other representation or
warranty as to the condition of the Units or any other matters, and may
specifically disclaim any such representations or warranties.
22.3 Renewal Options. (a) So long as no Lease Default or
Lease Event of Default shall have occurred and be continuing and Lessee shall
have duly given notice with respect to any Unit of Equipment pursuant to
Section 22.1 and by the next succeeding sentence of this Section 22.3(a), and
subject to the last sentence of this Section 22.3(a) Lessee shall have the
right at its option to renew the Lease with respect to such Unit of Equipment
upon the expiration of the Basic Term for such Unit for a period of at least
one year (such period, the "Fixed Rate Renewal Term") in accordance with this
Section 22.3; provided that the aggregate length of the Fixed Rate Renewal Term
for any Unit shall not exceed four years. Lessee shall give Lessor irrevocable
written notice of the length of the proposed Fixed
<PAGE> 37
33
Rate Renewal Term not less than 60 days prior to the end of the Basic Term or
any Fixed Rate Renewal Term then in effect for such Unit. The Basic Rent for
such Unit during any Fixed Rate Renewal Term shall be 50% of the average of the
semi-annual Basic Rent installments payable hereunder for such Unit during the
Basic Term payable semi-annually in arrears. Notwithstanding anything herein
to the contrary, Lessee shall be only entitled to renew the Lease with respect
to a Unit for a proposed Fixed Rate Renewal Term if Lessor has received an
appraisal pursuant to Section 22.4 in form reasonably acceptable to Lessor
confirming that:
(x) the elapsed time measured from the Closing Date to
the end of the proposed Fixed Rate Renewal Term does not exceed 80% of
the reappraised estimate economic useful life of such Unit, as
determined pursuant to Section 22.4; and
(y) at the end of the proposed Fixed Rate Renewal Term
the reasonably anticipated Fair Market Sales Value of such Unit,
(without giving the effect of inflation or deflation) is not less than
20% of the Equipment Cost of such Unit, as determined pursuant to
Section 22.4.
(b) So long as no Lease Default shall have occurred and
be continuing and Lessee shall have duly given notice with respect to any Unit
pursuant to Section 22.1 and the next succeeding sentence of this Section
22.3(b), Lessee shall have the right to renew this Lease with respect to such
Unit upon the expiration of the Basic Term or any Renewal Term then in effect
for such Unit for a period of at least one year (such period, a "Fair Market
Renewal Term"). Lessee shall give Lessor irrevocable written notice of the
length of the proposed Fair Market Renewal Term not less than 60 days prior to
the end of the Basic Term or any Renewal Term then in effect for such Unit.
The Basic Rent for a Unit leased during the Fair Market Renewal Term shall be
the Fair Market Rental Value thereof, as determined pursuant to Section 22.4,
payable semi-annually in arrears.
(c) The aggregate length of the Renewal Terms for each
Unit shall in no event exceed eight years.
22.4 Appraisal. At least 60 days prior to the date Lessee is
required to notify Lessor of its election of any purchase option pursuant to
Section 22.2 or renewal option pursuant to Section 22.3 with respect to any
Unit of Equipment, Lessee will notify Lessor of its preliminary intent to
exercise one of such options with respect to such Unit and propose an appraiser
(the "Appraiser") to conduct an appraisal of such Unit in order to establish
(a) the Fair Market Sales Value of such Unit at the commencement of and the
expiration of the proposed Renewal Term, (b) the Fair Market Rental Value of
such Unit during the proposed Renewal Term and (c) the remaining useful life of
such Unit and the maximum length of a renewal term for such Unit such that (i)
the elapsed time measured from the Closing Date to the end of such renewal term
does not exceed 80%
<PAGE> 38
34
of the remaining useful life of such Unit and (ii) at the end of such renewal
term, the reasonably anticipated Fair Market Sales Value of such Unit is not
less than 20% of the Equipment Cost for such Unit (without giving effect to
inflation or deflation); provided that if Lessee irrevocably notifies Lessor
that Lessee will not elect the fixed rate renewal option with respect to such
Unit pursuant to Section 22.3(a), the Appraiser shall not establish the matters
set forth in clause (c) above. Lessee will consult with Lessor prior to
selecting the Appraiser with the intent of selecting a mutually acceptable
Appraiser. If no such agreement is reached within 10 days from the date Lessee
notifies Lessor of its intent to select the Appraiser, Lessee will retain the
Appraiser, and Lessor will retain an appraiser (the "Lessor Appraiser") within
20 days of the date Lessee notifies Lessor of its intent to select the
Appraiser. Lessee will pay all fees and expenses of the Appraiser, and Lessor
will pay all fees and expenses of Lessor Appraiser. The Appraiser and the
Lessor Appraiser will consult for a period of not more than 10 days with the
intent of selecting a consensus appraiser (whose fees and expenses will be
shared equally by Lessee and Lessor) to complete the appraisal within 20 days
of such selection. If the Appraiser and Lessor Appraiser cannot agree within
the allotted time period, appraisal values and amounts will be determined by
binding arbitration pursuant to the rules of the American Arbitration
Association, the costs of which will be shared equally by Lessee and Lessor.
22.5 Stipulated Loss Value and Termination Value During
Renewal Term. All of the provisions of this Lease, other than Section 10,
shall be applicable during any renewal term of a Unit, except as specified in
the next succeeding sentence. During any Renewal Term, the Stipulated Loss
Value and Termination Value of such Unit shall be determined on the basis of
the Fair Market Sales Value of such Unit as of the first day of such Renewal
Term, reduced in equal monthly increments to the Fair Market Sales Value of
such Unit as of the last day of such Renewal Term; provided that in no event
during any Fixed Rate Renewal Term shall the Stipulated Loss Value or
Termination Value of any Unit be less than 20% of the Equipment Cost of such
Unit.
22.6 Early Buy-Out Purchase Option. (a) So long as no
Payment Event of Default shall have occurred and be continuing, on the Early
Buyout Date, Lessee shall have the right, at its option, to purchase any or all
of the Units of Equipment. In order to exercise such option to purchase such
Units of Equipment Lessee shall provide Lessor with a revocable written notice
not less than 90 days prior to the Early Buyout Date therefor, and if such
notice is not revoked at least 30 days prior to such Early Buyout Date, such
notice shall become irrevocable.
(b) In the event that Lessee shall have elected to purchase
Units of Equipment pursuant to Section 22.6(a), Lessee at its option shall on
the related Early Buyout Date either:
<PAGE> 39
35
(i) pay to Lessor (1) all unpaid Basic Rent with respect
to such Units due and payable on or prior to such Early Buyout Date
(other than the Basic Rent payable in "advance" on such date), (2) an
amount equal to the Early Buyout Price for such Units, (3) an amount
equal to any Make-Whole Amount in respect of the principal amount of
the Equipment Notes to be prepaid in accordance with Section 2.10(a)
of the Indenture, (4) applicable transfer taxes, if any, and (5) other
reasonable costs and expenses incurred by Lessor and the Owner
Participant in connection with Lessee's election,provided that so long
as no Lease Default or Lease Event of Default shall have occurred and
be continuing, Lessee may elect to pay the Early Buyout Price in
installments (but in no event over a period greater than 12 months
from the date of exercise) as Supplemental Rent, secured as provided
herein in which case, Lessee shall pay to Lessor, on each EBO
Installment Payment Date for such Units, the EBO Installment Payment
Amount in respect of such Units for such date; or
(ii) assume all of the rights and obligations of Lessor
under the Indenture in respect of the principal amount of the
outstanding Equipment Notes (excluding any obligations or liabilities
of Owner Trustee in its individual capacity incurred on or prior to
such Early Buyout Date, which obligations and liabilities shall remain
the sole responsibility of the Owner Trustee in its individual
capacity) in accordance with Section 10.3 of the Participation
Agreement and Article VII of the Indenture and simultaneously shall
pay to Lessor (1) all unpaid Basic Rent with respect to such Units
due and payable on or before such Early Buyout Date (other than Basic
Rent payable in "advance" on such date) and (2) the amount of the
excess, if any, of such Early Buyout Price over an amount equal to the
principal of the outstanding Equipment Notes so assumed on such Early
Buyout Date, after taking into account any payments of principal made
in respect of such outstanding Equipment Notes on such Early Buyout
Date, provided that so long as no Lease Default or Lease Event of
Default shall have occurred and be continuing, Lessee may by notice to
Lessor concurrently with notice of its election to assume such
obligations of the Owner Trustee, elect to pay the amount calculated
pursuant to clause (ii)(2) above in installments as Supplemental Rent,
in which case, Lessee shall pay to Lessor on the first EBO Installment
Payment Date for such Unit, the excess, if any, of (x) the EBO
Installment Payment Amount in respect of such Unit for such date over
(y) the principal amount of the outstanding Equipment Notes to be
assumed on account of such Units on such date, and shall pay to Lessor
on each subsequent EBO Installment Payment Date for such Unit, the EBO
Installment Payment Amount in respect of such Unit for such date.
(c) If Lessee elects to pay the Early Buyout Price for a Unit
in full on the Early Buyout Date for such Unit or in
<PAGE> 40
36
installments commencing on the Early Buyout Date for such Unit, but, in
connection therewith, does not elect to assume the obligations of the Owner
Trustee in respect of any Equipment Notes in accordance with Section 10.3 of
the Participation Agreement and Article VII of the Indenture, upon payment in
full of all amounts payable in accordance with the immediately preceding
sentence (including, in the case of an election by Lessee to pay such Early
Buyout Price in installments, payment in full of all such installments), Lessor
will convey to Lessee or its designee all right, title and interest of Lessor
in and to such Unit, "as is", "where is", without recourse or warranty, except
for a warranty against Lessor's Liens, and shall execute and deliver to Lessee
or its designee such bills of sale and other documents and instruments as
Lessee or its designee may reasonably request to evidence such conveyance.
(d) If Lessee elects to pay the Early Buyout Price for a Unit
in installments (and shall have paid in full the installment thereof due on
such Early Buyout Date), the following provisions shall also be applicable: (i)
this Lease shall be terminated with respect to such Unit and no Basic Rent in
respect of such Unit shall be payable after such Early Buyout Date, (ii) if
Lessee elects to assume the obligations of the Owner Trustee in respect of any
Equipment Notes as partial payment of the Early Buyout Price for such Unit, the
provisions of Section 10.3 of the Participation Agreement and Article VII of
the Indenture shall also be applicable, (iii) Lessor and Lessee shall enter
into a conditional sale agreement with respect to such Unit, with the purchase
price therefor equal to the remaining unpaid portion of the Early Buyout Price
for such Unit (such purchase price to be payable in installments on the
remaining EBO Installment Payment Dates for such Unit), (iv) upon payment in
full of all amounts payable pursuant to clause (iii), Lessor will convey to
Lessee or its designee all right, title and interest of Lessor in and to such
Unit, "as is", "where is", without recourse or warranty, except for a warranty
against Lessor's Liens, and shall execute and deliver to Lessee or its designee
such bills of sale and other documents and instruments as Lessee or its
designee may reasonably request to evidence such conveyance and (v) the Lessee
shall execute and deliver such agreements and instruments of further assurance
as the Lessor shall reasonably request, all at the expense of the Lessee.
Section 23. Limitation of Lessor's Liability.
It is expressly agreed and understood that all
representations, warranties and undertakings of Lessor hereunder (except as
expressly provided herein) shall be binding upon Lessor only in its capacity as
Owner Trustee under the Trust Agreement and in no case shall Wilmington Trust
Company be personally liable for or on account of, any statements,
representations, warranties, covenants or obligations stated to be those of
Lessor hereunder, except that Lessor (or any successor Owner Trustee) shall be
personally liable for its gross negligence or willful misconduct and for its
breach of its
<PAGE> 41
37
covenants, representations and warranties contained herein to the extent
covenanted or made in its individual capacity.
Section 24. Miscellaneous.
24.1 Governing Law; Severability. This Lease, and any
extensions, amendments, modifications, renewals or supplements hereto shall be
governed by and construed in accordance with the internal laws and decisions of
the State of New York; provided, however, that the parties shall be entitled to
all rights conferred by any applicable Federal statute, rule or regulation.
Whenever possible, each provision of this Lease shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Lease shall be prohibited by or invalid under the laws of any
jurisdiction, such provision, as to such jurisdiction, shall be, to the extent
permitted by law, ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Lease in any other jurisdiction.
24.2 Execution in Counterparts. This Lease may be executed
in any number of counterparts, each executed counterpart constituting an
original and in each case such counterparts shall constitute but one and the
same instrument; provided, however, that to the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code) no security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page
hereof, which counterpart shall constitute the only "original" hereof for
purposes of the Uniform Commercial Code.
24.3 Headings and Table of Contents: Section References. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this
Lease.
24.4 Successors and Assigns. This Lease shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective permitted successors and assigns.
24.5 True Lease. It is the intent of the parties to this
Lease that it will be a true lease and not a "conditional sale," and that
Lessor shall at all times be considered to be the owner of each Unit which is
the subject of this Lease for the purposes of all Federal, state, city and
local income taxes or for franchise taxes measured by income, and that this
Lease conveys to Lessee no right, title or interest in any Unit except as
lessee. Nothing contained in this Section 24.5 shall be
<PAGE> 42
38
construed to limit Lessee's use or operation of any Unit or constitute a
representation, warranty or covenant by Lessee as to tax consequences.
24.6 Amendments and Waivers. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
24.7 Business Days. If any payment is to be made hereunder
or any action is to be taken hereunder on any date that is not a Business Day,
such payment or action otherwise required to be made or taken on such date
shall be made or taken on the immediately succeeding Business Day with the same
force and effect as if made or taken on such scheduled date and as to any
payment (provided any such payment is made on such succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business
Day.
24.8 Directly or Indirectly. Where any provision in this
Lease refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
24.9 Incorporation by Reference. (a) The payment
obligations set forth in Sections 7.1 and 7.2 of the Participation Agreement
are hereby incorporated by reference.
(b) Any provision of any other Operative Agreement stated
herein to be incorporated by reference shall be construed as having been
incorporated herein with the same effect as if such provision had been set
forth in this Lease in full, and shall survive any termination of the Operative
Agreement from which such provision is incorporated.
SECTION 25. TRUTH IN LEASING CLAUSE. DURING THE 12 MONTHS
PRECEDING THE EXECUTION OF THIS LEASE EACH OF THE AIRCRAFT HAVE BEEN MAINTAINED
AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS. DURING THE
TERM OF THIS LEASE EACH OF THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER
PART 91 OF THE FEDERAL AVIATION REGULATIONS WHILE THE AIRCRAFT ARE LEASED TO
PHILLIPS PETROLEUM COMPANY OF FOURTH AND KEELER, BARTLESVILLE, OKLAHOMA. AT
ALL TIMES DURING THE TERM OF THIS LEASE, LESSEE WILL BE IN OPERATIONAL CONTROL
OF EACH OF THE AIRCRAFT UNLESS ANY AIRCRAFT ARE UNDER SUBLEASE, IN WHICH CASE,
THE SUBLESSEE WILL BE IN OPERATIONAL CONTROL OF SUCH AIRCRAFT. LESSEE HEREBY
CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR THE OPERATIONAL CONTROL
OF EACH OF THE AIRCRAFT. LESSEE AND LESSOR UNDERSTAND THAT AN EXPLANATION OF
FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION
REGULATIONS MAY BE OBTAINED FROM THE
<PAGE> 43
39
NEAREST FEDERAL AVIATION ADMINISTRATION FLIGHT STANDARDS DISTRICT OFFICE OR
GENERAL AVIATION DISTRICT OFFICE.
<PAGE> 44
40
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
to be duly executed and delivered on the day and year first above written.
LESSOR:
WILMINGTON TRUST COMPANY,
not in its individual capacity
except as otherwise expressly
provided but solely as Owner
Trustee
By ___________________________
Name:
Title:
LESSEE:
PHILLIPS PETROLEUM COMPANY
By ___________________________
Name:
Title:
<PAGE> 45
EXHIBIT A
EQUIPMENT LEASE AGREEMENT
(PHILLIPS TRUST NO. 94-__)
________________________________________________________________________________
FORM OF
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. ___
Dated as of ______________, 19__
between
WILMINGTON TRUST COMPANY,
Lessor
and
PHILLIPS PETROLEUM COMPANY,
Lessee
________________________________________________________________________________
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO
THIS LEASE SUPPLEMENT, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO
BECOME DUE UNDER THE LEASE HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND
ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE
TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT (PHILLIPS TRUST NO.
94-__), DATED AS OF ___________, 1994, BETWEEN SAID INDENTURE TRUSTEE, AS
SECURED PARTY, AND LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY
INTEREST MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN
SECTION 20 OF THE LEASE. SEE SECTION 24.2 OF THE LEASE FOR INFORMATION
CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS
COUNTERPARTS HEREOF.
<PAGE> 46
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. ___
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. __ dated
____________, 19__ (this "Lease Supplement") between WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner Trustee ("Lessor") under the
Trust Agreement, and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Lessee");
W I T N E S S E T H:
Lessor and Lessee have heretofore entered into that certain
Equipment Lease Agreement (Phillips Trust No. 94-__) dated as of ___________,
1994 (the "Lease"). The Lease provides for the execution and delivery of a
Lease Supplement substantially in the form hereof for the purpose of confirming
the acceptance and lease of the Units under the Lease as and when delivered by
Lessor to Lessee in accordance with the terms thereof. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings specified
in Appendix A to the Lease;
(1/The Lease relates to the Units 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 FAA as one document.)
(2/The Lease relates to the Units described below, and a
counterpart of the Lease, attached and made a part of Lease Supplement No. 1,
dated ______________ __, 1994, to the Lease, has been recorded by the FAA on
_______ __, 1994, as one document and assigned Conveyance No. _______.)
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee hereby acknowledges and confirms that it has
approved the Units identified on Schedule 1 hereto at the time and on the date
set forth in the Certificate of Acceptance.
2. Lessor hereby confirms delivery and lease to Lessee,
and Lessee hereby confirms acceptance and lease from Lessor, under the Lease as
hereby supplemented, the Units listed on Schedule 1 hereto.
__________________________________
1/ This language is to be used for Lease Supplement No. 1.
2/ This language is to be used for subsequent Lease Supplements.
<PAGE> 47
2
3. Lessee hereby represents and warrants that no Event
of Loss has occurred with respect to the Units set forth on Schedule 1 hereto
as of the date hereof.
4. The aggregate Equipment Cost of the Units leased
hereunder is $_______________. The Stipulated Loss Values and Termination
Values applicable in respect of the Units are set forth, respectively, on
Schedules 4 and 5 to the Participation Agreement.
5. The Early Buyout Date, the Early Buyout Price, the
EBO Installment Payment Dates and the EBO Installment Payment Amounts for the
Aircraft are set forth on Schedule 6 to the Participation Agreement.
6. The Units set forth in Schedule 1 hereto (together
with any Replacement Units therefor) constitute the Equipment known as
Aircraft.
7. The Basic Term Expiration Date for (i) the Aircraft
is ________________ .
8. Lessee hereby confirms its agreement, in accordance
with the Lease as supplemented by this Lease Supplement to pay Rent to Lessor
for each Unit leased hereunder as provided for in the Lease.
9. The execution and delivery of this Lease Supplement
will in no way relieve or decrease the responsibility of any manufacturer for
the warranties it has made with respect to any Unit.
10. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Lease Supplement may refer to the "Equipment Lease Agreement, dated as of
___________, 1994", the "Lease Agreement, dated as of ___________, 1994," or
the "Lease, dated as of ___________, 1994," or may identify the Lease in any
other respect without making specific reference to this Lease Supplement, but
nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
11. This Lease Supplement shall be construed in
connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease shall be and remain in full force and effect.
12. This Lease Supplement may be executed in any number
of counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
13. This Lease Supplement shall in all respects be
governed by, and construed in accordance with, the laws of the
<PAGE> 48
3
State of New York, including all matters of construction, validity and
performance.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered on the day and year first above
written.
LESSOR:
WILMINGTON TRUST COMPANY,
not in its individual
capacity, but solely as Owner
Trustee
By: _________________________
Name:
Title:
LESSEE:
PHILLIPS PETROLEUM COMPANY
By: _________________________
Name:
Title:
<PAGE> 49
Schedule 1 to
Lease Supplement No. __
(Phillips Trust No. 94- )
the Aircraft
( 1. one Falcon ____ airframe with FAA Registration Mark _____ and
manufacturer's serial number _______; two _________ model _________ engines
bearing manufacturer's serial numbers __________ and ____________,
respectively, together with any and all parts incorporated in, installed on or
attached thereto.
2. one Falcon ____ airframe with FAA Registration Mark _____ and
manufacturer's serial number _______; two _________ model _________ engines
bearing manufacturer's serial numbers __________ and ____________,
respectively, together with any and all parts incorporated in, installed on or
attached thereto.
3. one Falcon ____ airframe with FAA Registration Mark _____ and
manufacturer's serial number _______; two _________ model _________ engines
bearing manufacturer's serial numbers __________ and ____________,
respectively, together with any and all parts incorporated in, installed on or
attached thereto.)
<PAGE> 50
APPENDIX A
Aircraft Lease Agreement
Trust Indenture and Security Agreement
Participation Agreement
PHILLIPS TRUST 1994-
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all
purposes of the Operative Agreements referred to below, unless otherwise
defined in an Operative Agreement or the context thereof shall otherwise
require and such meanings shall be equally applicable to both the singular and
the plural forms of the terms herein defined. In the case of any conflict
between the provisions of this Appendix A and the provisions of the main body
of any Operative Agreement, the provisions of the main body of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to
agreements shall be deemed to mean and include such agreements as the same may
be amended, supplemented and otherwise modified from time to time, and (ii)
references to parties to agreements shall be deemed to include the permitted
successors and assigns of such parties.
Defined Terms
"Additional Storage Period" shall have the meaning specified
in Section 6.3 of the Lease.
"Advance" shall have the meaning specified in Section 3.5 of
the Lease.
"Affiliate" of any Person shall mean any other Person which
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. 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, and the terms "controlling" and "controlled" shall
have meanings correlative to the foregoing.
"Aircraft" shall mean the Airframes to be sold by Lessee to
Lessor pursuant to the Participation Agreement and to be leased (or any
permitted substitute Airframe) under the Lease together with the Engines
installed on such Airframes including any aircraft substituted pursuant to
Section 11 of the Lease.
<PAGE> 51
2
"Airframe" shall mean each of the three Falcon 20F-5 aircraft
(excluding the Engines or engines from time to time installed thereon) leased
by Lessor to Lessee pursuant to the Aircraft Lease and the Lease Supplement
thereto and having the United States FAA Registration Numbers and
manufacturer's serial numbers specified in the Lease Supplement thereto,
including (i) all Parts so long as the same shall be incorporated or installed
in or attached to such Airframes, or until such Parts are replaced in
accordance with the terms of Section 9.3 of the Aircraft Lease, and (ii) any
replacement airframe which may be substituted pursuant to Section 11.2(i) of
the Aircraft Lease.
"Appraisal" shall have the meaning specified in Section 4.3(a)
of the Participation Agreement.
"Approved Insurer" shall mean (i) any insurer on an approved
security list prepared from time to time by a generally recognized insurance
broker at the request of the Lessee and delivered to the Lessor and the
Indenture Trustee, (ii) Oil Insurance Limited, a Bermuda corporation, (iii) Oil
Casualty Insurance Limited, a Bermuda corporation, and (iv) any insurance
company which is an Affiliate of the Lessee (but only to the extent the type
and amount of insurance provided by such insurance company has been approved by
the insurance regulators in the domicile of such insurance company).
"Average Life Date" shall mean, with respect to the prepayment
of an Equipment Note, the date which follows the prepayment date by a period
equal to the Remaining Weighted Average Life of such Equipment Note.
"Bankruptcy Code" shall mean the United States Bankruptcy
Reform Act of 1978, as amended from time to time, 11 U.S.C. Section 101 et
seq., or any successor thereto.
"Basic Rent" shall mean, with respect to any Unit of
Equipment, all rent payable by the Lessee to the Lessor pursuant to Section 3.2
of the Lease for the Basic Term thereunder for such Unit, and all rent payable
pursuant to Section 22.3 of the Lease for any Renewal Term thereunder for such
Unit.
"Basic Term" shall mean, for the Units of any Class of
Equipment, as specified in Section 3.1 of the Lease.
"Basic Term Commencement Date" shall mean __________, 1995,
which, in any event, shall not be more than 6 months less one day from the
commencement of the Interim Term.
"Basic Term Expiration Date" shall mean, for the Units of any
Class of Equipment, the date set forth in the Lease Supplement as the Basic
Term Expiration Date for such Class of Equipment.
"Beneficial Interest" shall mean the interest of the Owner
Participant under the Trust Agreement.
<PAGE> 52
3
"Bills of Sale" shall mean (a) the bill of sale, dated the
Closing Date from Lessee to Owner Trustee covering the Units delivered on the
Closing Date, substantially in the form of Exhibit B to the Participation
Agreement, and (b) the FAA Bill of Sale.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banking institutions are authorized or
required by law, regulation or executive order to be closed in New York, New
York, Bartlesville, Oklahoma, the city and state in which the principal
corporate trust office of the Owner Trustee is located, or, until the Lien of
the Indenture has been discharged, the city and state in which the principal
corporate trust office of the Indenture Trustee is located.
"Certificate of Acceptance" shall have the meaning specified
in Section 2.3(b) of the Participation Agreement.
"Change in Tax Law" shall mean a change, amendment,
modification, addition or deletion (whether proposed, temporary or final) in or
to the Code, any regulation thereunder or any Revenue Ruling, Revenue Procedure
or other published administrative determination or judicial proceeding, in each
case after the execution and delivery of the Participation Agreement.
"Citizen of the United States" shall mean a citizen of the
United States as defined in Section 101(16) of the FAA Act.
"Closing" shall have the meaning specified in Section 2.3(b)
of the Participation Agreement.
"Closing Date" shall have the meaning specified in Section 2.1
of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
"Commitment" with respect to the Owner Participant, shall have
the meaning specified in Section 2.2(a) to the Participation Agreement and with
respect to the initial Loan Participant, shall have the meaning specified in
Section 2.2(b) to the Participation Agreement.
"Debt Amortization" with respect to any Equipment Note shall
mean the amortization schedule of principal payments applicable thereto.
"Debt Rate" shall mean as of the date of determination, a rate
equal to the rate of interest per annum borne by the Equipment Notes then
outstanding (computed on the basis of a 360-day year of twelve 30-day months).
"Determination Date" shall mean the _____ day of any calendar
month.
<PAGE> 53
4
"Early Buyout Date" shall mean, for any Unit, the date set
forth in Schedule 6 to the Participation Agreement.
"Early Buyout Price" shall mean, with respect to any Unit, the
amount equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit.
"EBO Installment Payment Amount" shall mean, with respect to
any Unit on an EBO Installment Payment Date, the amount equal to the product of
the percentage set forth in Schedule 6 to the Participation Agreement and the
Equipment Cost for such Unit, provided that in no event shall such installment
payment dates extend for a period in excess of one year.
"EBO Installment Payment Dates" shall mean, with respect to
any Unit, the dates set forth in Schedule 6 to the Participation Agreement for
such Unit.
"Engine" shall mean each of the engines listed by its
manufacturer's serial number in the initial Lease Supplement to the Lease and
leased pursuant to the Lease, and any Replacement Engine which may from time to
time be substituted for an Engine pursuant to Section 11.6 of the Lease,
together with all Parts incorporated or installed in or attached to any such
Engine and all Parts removed from any such Engine or until such Parts are
replaced in accordance with the terms of Section 9.3 of the Lease. Except as
otherwise provided, at such time as a Replacement Engine shall be so
substituted and the Engine for which the substitution is made shall be released
from the lien of the Indenture, such replaced Engine shall cease to be an
"Engine" under the Aircraft Lease. The term "Engines" means, as of any date of
determination after the Closing Date, all Engines then leased to Lessee
pursuant to the Lease.
"Equipment" shall mean the Aircraft.
"Equipment Cost" shall mean, for each Unit, the purchase price
therefor paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit.
"Equipment Notes" shall mean the Equipment Notes, each to be
substantially in the form therefor required by the Indenture, issued by the
Owner Trustee pursuant to Section 2.02 of the Indenture, and authenticated by
the Indenture Trustee, in principal amounts and bearing interest at the rates
and payable as provided in the Indenture and secured as provided in the
Granting Clause of the Indenture, and shall include any Equipment Notes issued
in exchange therefor or replacement thereof pursuant to Section 2.07 or 2.08 of
the Indenture.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor law.
<PAGE> 54
5
"Event of Loss" shall mean, with respect to a Unit, as
specified in Section 11.1 of the Lease.
"Excepted Property" shall mean (i) all indemnity payments
(including, without limitation, payments pursuant to Section 7 of the
Participation Agreement and payments under the Tax Indemnity Agreement whether
made by adjustment to Basic Rent under the Lease or otherwise) to which the
Owner Participant, the Owner Trustee in its individual capacity or any of their
respective successors, permitted assigns, directors, officers, employees,
servants and agents is entitled pursuant to the Operative Agreements, (ii) any
right, title or interest of the Owner Trustee in its individual capacity or the
Owner Participant to any payment which by the terms of Section 17 of the Lease
or any corresponding payment under Section 3.3 of the Lease shall be payable to
the Owner Trustee in its individual capacity or to the Owner Participant, as
the case may be, (iii) any insurance proceeds payable under insurance
maintained by the Owner Trustee in its individual capacity or the Owner
Participant pursuant to Section 12.3 of the Lease, (iv) any insurance proceeds
payable to the Owner Trustee in its individual capacity or to the Owner
Participant, or their respective successors, permitted assigns, directors,
officers, employees, servants, or agents under any public liability insurance
maintained by Lessee pursuant to Section 12 of the Lease or by any other Person
(or governmental indemnities in lieu thereof or in addition thereto), (v) any
amount payable to the Owner Participant by any Transferee as the purchase price
of the Owner Participant's interest in the Trust Estate in compliance with the
terms of the Participation Agreement and the Trust Agreement, (vi) payments
owing to the Owner Participant, including a return of funds to the Owner
Participant, in the event the Closing does not occur, (vii) all right, title
and interest of the Owner Trustee and Owner Participant to retain amounts that
shall have been distributed to them as provided in Article III of the Indenture
and such other rights as are specifically reserved or granted to the Owner
Participant and the Owner Trustee under the Indenture, (viii) the respective
rights of the Owner Trustee in its individual capacity or the Owner Participant
to the proceeds of the foregoing and (ix) any rights of the Owner Participant
or the Owner Trustee in its individual capacity to demand, collect, sue for, or
otherwise receive and enforce payment of the foregoing amounts.
"FAA" means the Federal Aviation Administration or any
successor agency or agencies thereto.
"FAA Act" means the Federal Aviation Act of 1958, as amended
and in effect, on the date of the Lease or as subsequently amended, or any
successor or substituted legislation at the time in effect and applicable, and
the regulations promulgated pursuant thereto.
"FAA Bill of Sale" means the bills of sale for the Airframes
on AC Form 8050-2, or such other form as may be approved by the FAA reasonably
required to be executed by the Lessee in favor of the Lessor and dated the
Closing Date.
<PAGE> 55
6
"FAA Counsel" shall mean Crowe & Dunlevy.
"Fair Market Renewal Term" shall mean, for any Unit of
Equipment, as specified in Section 22.3 of the Lease.
"Fair Market Rental Value" shall mean, with respect to a Unit
of Equipment, the rental value of such Unit of Equipment that would be obtained
in an arm's length transaction between an informed and willing lessee under no
compulsion to lease and an informed and willing lessor under no compulsion to
lease, assuming such Unit of Equipment is in the condition required by the
Lease.
"Fair Market Sales Value" shall mean, with respect to a Unit
of Equipment, the sales value of such Unit of Equipment, that would be obtained
in an arm's length transaction between an informed and willing buyer under no
compulsion to buy and an informed and willing seller under no compulsion to
sell, assuming such Unit of Equipment is in the condition required by the
Lease.
"Fixed Rate Renewal Term" shall mean, for any Unit, as
specified in Section 22.3 of the Lease.
"Holders" shall mean as of any particular time, the persons in
whose names one or more Pass Through Certificates shall be registered.
"Indemnified Person" shall have the meaning specified in
Section 7.2(b) of the Participation Agreement.
"Indenture" or "Trust Indenture" shall mean the Trust
Indenture and Security Agreement (Phillips Trust No. 94-__), dated as of
____________, 1994 between the Owner Trustee, in the capacities described
therein, and the Indenture Trustee, as amended, supplemented or otherwise
modified from time to time, including supplementation by each Indenture
Supplement pursuant thereto.
"Indenture Default" shall mean an event which with notice or
the lapse of time or both would become an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified in the
Granting Clause of the Indenture.
"Indenture Event of Default" shall have the meaning specified
in Section 4.01 of the Indenture.
"Indenture Investment" shall mean any obligation issued or
guaranteed by the United States of America or any of its agencies for the
payment of which the full faith and credit of the United States of America is
pledged.
"Indenture Supplement" shall mean an Indenture Supplement
dated the Closing Date or the date that any Replacement Unit is subjected to
the lien and security interest
<PAGE> 56
7
of the Indenture, substantially in the form of Exhibit A to the Indenture,
between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee, covering the Units delivered on the Closing Date or such
Replacement Unit, as the case may be.
"Indenture Trustee" shall mean Shawmut Bank Connecticut,
National Association, a national banking association, as trustee under the
Indenture and its successors thereunder.
"Indenture Trustee Agreements" shall mean the Operative
Agreements to which the Indenture Trustee is or will be a party.
"Inflation Index" shall mean the Gross National Product
Implicit Price Deflator as published from time to time in the United States
Department of Commerce Bureau of Economic Analysis publication entitled "Survey
of Current Business"; provided that if such Gross National Implicit Price
Deflator is no longer published or otherwise available, the "Inflation Index"
shall mean an index selected by Lessee and reasonably acceptable to the Owner
Participant.
"Initial Lease Period Interest" shall have the meaning
specified in Section 2.2(c) of the Participation Agreement.
"Interim Indenture Supplement" shall mean the Interim Trust
Indenture Supplement (Phillips Trust No. 94-__) dated as of _____________,
1994, between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee.
"Interim Lease Supplement" shall mean the Interim Lease
Supplement (Phillips Trust No. 94-___) dated as of ___________, 1994, between
the Lessor and the Lessee.
"Interim Loan Participant" shall mean ________________, a
______________ banking corporation, and its permitted successors and assigns.
"Interim Term" shall have the meaning specified in Section 3.1
of the Lease.
"Investment Banker" shall mean an independent investment
banking institution of national standing appointed by Lessee.
"Investment Grade Rating" shall mean in respect of any Person
as of any date of determination, a rating on the long-term unsecured
indebtedness issued by such Person of "BBB-" or better by Moody's Investors
Service, Inc. or "Baa3" or better by Standard & Poor's Corporation.
"Late Rate" shall mean (i) with respect to the portion of any
payment of Rent that would be required to be distributed to the holders of the
Equipment Notes pursuant to the terms of the Indenture, the lesser of 2% over
the Debt Rate and the maximum interest rate from time to time permitted by law,
and
<PAGE> 57
8
(ii) with respect to the portion of any payment of Rent that would be required
to be distributed to Lessor pursuant to the terms of the Indenture or would be
payable directly to Lessor, the Owner Participant or the Owner Trustee in its
individual capacity, the lesser of 2% over the Prime Rate and the maximum
interest rate from time to time permitted by law.
"Lease" shall mean the Equipment Lease Agreement (Phillips
Trust No.94-_), relating to the Aircraft, dated as of ________________, 1994,
between the Lessor, and the Lessee, as amended, modified or supplemented from
time to time.
"Lease Default" shall mean an event which with notice or lapse
of time or both would become a Lease Event of Default thereunder.
"Lease Event of Default" and "Event of Default" shall mean an
Event of Default as specified in Section 14 of the Lease.
"Lease Supplement" shall mean a Lease Supplement (Phillips
Trust No. 94-_), dated the Closing Date or the date that any Replacement Unit
is subjected to the Lease, substantially in the form of Exhibit A to the Lease,
between the Lessor and the Lessee, covering the Units delivered on the Closing
Date or such Replacement Unit, as the case may be.
"Lease Term" shall mean, with respect to any Unit, the Interim
Term applicable to such Unit, the Basic Term applicable to such Unit and all
Renewal Terms applicable to such Unit.
"Lessee" shall mean Phillips Petroleum Company, a Delaware
corporation, and any corporation which succeeds thereto by merger or
consolidation or which acquires all or substantially all of the assets thereof
in accordance with the terms of Section 6.7 of the Participation Agreement.
"Lessee Agreements" shall mean the Operative Agreements to
which Lessee is a party.
"Lessor" shall have the meaning specified in the recitals to
the Lease.
"Lessor's Liens" means any Lien affecting, on or in respect of
the Equipment, the Lease or the Trust Estate arising as a result of (i) claims
against Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, not related to the transactions contemplated by the Operative
Agreements, or (ii) acts or omissions of the Lessor (in its individual capacity
or as Owner Trustee) or the Owner Participant, not related to the transactions
contemplated by the Operative Agreements or in breach of any covenant or
agreement of such Person set forth in any of the Operative Agreements, or (iii)
taxes imposed against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant or the Trust Estate which are not indemnified
against by the Lessee pursuant to the Participation Agreement or under the Tax
<PAGE> 58
9
Indemnity Agreement, except to the extent not due and payable or the amount or
validity of which is being contested in good faith by appropriate proceedings
so long as there is no material risk of the impairment of the Lien of the
Indenture or the loss of the benefit of the Equipment to Lessee under the Lease
or (iv) claims against the Lessor or the Owner Participant arising out of the
transfer (whether voluntary or involuntary) by the Lessor or the Owner
Participant (without the consent of the Lessee, the Indenture Trustee and the
Loan Participants) of all or any portion of their respective interests in the
Equipment, the Trust Estate or the Operative Agreements, other than a transfer
pursuant to Sections 10, 11, 12, 15 or 22 of the Lease.
"Lien" shall mean any mortgage, pledge, security interest,
lien, encumbrance, or disposition of title.
"Loan Participant" shall mean and include each registered
holder from time to time of an Equipment Note issued under the Indenture,
including, so long as it holds any Equipment Notes issued thereunder, the
Interim Loan Participant, and, after the Refinancing Date, so long as it holds
any Equipment Notes issued thereunder, the Pass Through Trustee under one or
more Pass Through Trust Agreements.
"Majority In Interest" as of a particular date of
determination shall mean with respect to any action or decision of the holders
of the Equipment Notes, the holders of more than 50% in aggregate principal
unpaid amount of the Equipment Notes, if any, then outstanding which are
affected by such decision or action, excluding any Equipment Notes held by the
Owner Participant or an Affiliate of the Owner Participant unless all Equipment
Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal
amount of any Equipment Note to be prepaid on any prepayment date, the amount
which the Investment Banker determines as of the third Business Day prior to
such prepayment date to equal the product obtained by multiplying (a) the
excess, if any, of (i) the sum of the present values of all the remaining
scheduled payments of principal and interest from the prepayment date to
maturity of such Equipment Note, discounted semi-annually on each ____________
and ______________ at a rate equal to the Treasury Rate based on a 360-day year
of twelve 30-day months, over (ii) the aggregate unpaid principal amount of
such Equipment Note plus any accrued but unpaid interest thereon by (b) a
fraction the numerator of which shall be the principal amount of such Equipment
Note to be prepaid on such prepayment date and the denominator of which shall
be the aggregate unpaid principal amount of such Equipment Note; provided that
the aggregate unpaid principal amount of such Equipment Note for the purposes
of clause (a)(ii) and (b) of this definition shall be determined after
deducting the principal installment, if any, due on such prepayment date.
"Net Economic Return" shall mean both the net after-tax yield
and total after-tax cash flow and the timing thereof
<PAGE> 59
10
expected by the original Owner Participant with respect to the Equipment,
utilizing the multiple investment sinking fund method of analysis and the same
assumptions as used by such Owner Participant in making the computations of
Basic Rent, Stipulated Loss Value and Termination Value initially set forth in
Schedules 3, 4 and 5 to the Participation Agreement.
"Notice of Delivery" shall have the meaning specified in
Section 2.3(a) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate signed (i) in
the case of a corporation by the Chairman of the Board of Directors, President,
any Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of such corporation, (ii) in the case of a partnership by
the Chairman of the Board of Directors, the President or any Vice President,
the Treasurer or an Assistant Treasurer of a corporate general partner, and
(iii) in the case of a commercial bank or trust company, the Chairman or Vice
Chairman of the Executive Committee or the Treasurer, any Trust Officer, any
Vice President, any Executive or Senior or Second or Assistant Vice President,
or any other officer or assistant officer customarily performing the 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 the particular subject.
"Operative Agreements" shall mean the Participation Agreement,
the Bills of Sale, the Trust Agreement, each Pass Through Trust Agreement, the
Equipment Notes, the Lease, each Lease Supplement, the Indenture, each
Indenture Supplement, the Owner Participant Guaranty and the Tax Indemnity
Agreement.
"Optional Modification" shall mean, for any Unit, as specified
in Section 9.2 of the Lease.
"Overall Transaction" shall mean the sale/leaseback and
financing transactions contemplated by the Operative Agreements and the
Underwriting Agreement.
"Owner Participant" shall mean ______________, a
______________ corporation and its permitted successors and assigns.
"Owner Participant Agreements" shall mean the Operative
Agreements to which the Owner Participant is or will be a party.
"Owner Participant Guarantor" shall mean __________________, a
national banking association and its permitted successors and assigns.
"Owner Participant Guaranty" shall mean the Guaranty (Phillips
Trust No. 94-__) dated as of ______________, 1994, by the Owner Participant
Guarantor in favor of the Lessee and the Trustees.
<PAGE> 60
11
"Owner Trust" or "Trust" shall mean the trust created by the
Trust Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement and its successors thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements
to which the Owner Trustee, either in its individual or fiduciary capacity, is
or will be a party.
"Participants" shall mean the Loan Participant and the Owner
Participant.
"Participation Agreement" shall mean the Participation
Agreement (Phillips Trust No. 94-__) dated as of _____________, 1994, among the
Lessee, the Interim Loan Participant, the Owner Participant, the Owner Trustee
and the Indenture Trustee.
"Participation Agreement Supplement" shall mean the
Supplement to the Participation Agreement, substantially in the form of Exhibit
F to the Participation Agreement, to be executed pursuant to Section 10.2(e) of
the Participation Agreement by the Pass Through Trustee.
"Parts" shall mean all appliances, parts, components,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature (other than complete Engines) which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or until
replaced, if not so incorporated or installed, in accordance with the terms of
Section 9.3 of the Lease.
"Pass Through Certificates" shall mean the Pass Through
Certificates issued pursuant to any Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean any Pass Through
Trust Agreement, substantially in the form of Exhibit H to the Participation
Agreement, to be executed pursuant to section 10.2 (e) of the Participation
Agreement by the Lessee and the Pass Through Trustee.
"Pass Through Trustee" shall mean Shawmut Bank Connecticut,
National Association, a national banking association in its capacity as trustee
under one or more Pass Through Trust Agreements, and each other person which
may from time to time be acting as successor trustee under any Pass Through
Trust Agreement.
"Payment Date" shall have the meaning specified in Section 6.8
of Participation Agreement.
"Payment Event of Default" shall mean with respect to each
Lease, an Event of Default arising under Section 14(a), 14(b), 14(d) or 14(e)
of the Lease.
<PAGE> 61
12
"Permitted Investments" shall mean (i) direct obligations of
the United States of America and agencies thereof for which the full faith and
credit of the United States is pledged, (ii) obligations fully guaranteed by
the United States of America, (iii) certificates of deposit issued by, or
bankers, acceptances of, or time deposits 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 $500,000,000 (including
the Indenture Trustee and the Owner Trustee if such conditions are met) and
having a rating assigned to the long-term unsecured debt of such institutions
by Standard & Poor's Corporation and Moody's Investors Service, Inc. at least
equal to AA and Aa2, respectively, (iv) commercial paper of companies, banks,
trust companies or national banking associations incorporated or doing business
under the laws of the United States of America or one of the States thereof and
in each case having a rating assigned to such commercial paper by Standard &
Poor's Corporation or Moody's Investors Service, Inc. (or, if neither such
organization shall rate such commercial paper at any time, by any nationally
recognized rating organization in the United States of America) equal to the
highest rating assigned by such organization and (v) a money market fund
registered under the Investment Company Act of 1940, as amended, the portfolio
of which is limited to United States government obligations and United States
agency obligations; provided 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 (iii) above; and provided further that no
investment shall be eligible as a "Permitted Investment" unless the final
maturity or date of return of such investment is 90 days or less from the date
of purchase thereof.
"Permitted Liens" with respect to the Equipment and each Unit
thereof, shall mean: (i) the interests of the Lessee and the Owner Trustee
under the Leases and the Lease Supplements; (ii) the interest of the Lessee and
any sublessee as provided in any sublease permitted pursuant to Section 8.3 of
the Lease; (iii) any Liens thereon for taxes, assessments, levies, fees and
other governmental and similar charges not due and payable or the amount or
validity of which is being contested in good faith by appropriate proceedings
so long as there exists no material risk of sale, forfeiture, loss, or loss of
or interference with use or possession of, any Unit or impairment of the Lien
of the Indenture thereon, criminal sanctions arising therefrom or interference
with the payment of Rent and appropriate reserves with respect thereto are
maintained in accordance with generally accepted accounting principles; (iv)
any Liens of mechanics, suppliers, materialmen, laborers, employees, repairmen
and other like Liens arising in the ordinary course of Lessee's (or if a
sublease is then in effect, any sublessee's) business securing obligations
which are not due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of any Unit or impairment of the Lien of the Indenture
<PAGE> 62
13
thereon, criminal sanctions arising therefrom or interference with the payment
of Rent; (v) the Lien and security interest granted to the Indenture Trustee
under and pursuant to the Indenture, if any, and the respective rights of the
Loan Participants, the Indenture Trustee, the Owner Participant and the Owner
Trustee under the Operative Agreements; (vi) Liens arising out of any judgment
or award against the Lessee (or any sublessee permitted pursuant to Section 8.3
of the Lease) with respect to which an appeal or proceeding for review being
prosecuted in good faith and for the payment of which adequate reserves have
been provided as required by generally accepted accounting principles or other
appropriate provisions have been made and with respect to which there shall
have been secured a stay of execution pending such appeal or proceeding for
review and there exists no material risk of sale, forfeiture, loss, or loss of
or interference with the use or possession of any Unit or any interest therein
or impairment of the Lien of the Indenture thereon or interference with the
payment of Rent; (vii) salvage rights of insurers under insurance policies
maintained pursuant to Section 12 of each Lease; and (viii) other Liens bonded
to the reasonable satisfaction of the Owner Participant and the Indenture
Trustee.
"Permitted Subleases" shall have the meaning specified in
Section 8.3 of the Lease.
"Person" shall mean an individual, partnership, corporation,
trust, limited liability company, association or unincorporated organization,
and a government or agency or political subdivision thereof.
"Prime Rate" shall mean the rate announced from time to time
by Chemical Bank, as its prime commercial lending rate at its principal office
in New York City.
"Registration Statement" shall mean the Form S-3 Registration
Statement (Registration No. 33-54987) filed by the Lessee on August 10, 1994,
as amended from time to time, in connection with the offering of the Pass
Through Certificates.
"Remaining Weighted Average Life" shall mean, with respect to
prepayment of an Equipment Note, the number of days equal to the quotient
obtained by dividing (a) the sum of the products obtained by multiplying (1)
the amount of each remaining principal payment on such Equipment Note by (2)
the number of days from and including the prepayment date to but excluding the
scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term
in respect of which the Lessee shall have exercised its option to renew the
Lease for such Unit pursuant to Section 22.3 thereof, including any Fixed Rate
Renewal Term or Fair Market Renewal Term with respect to such Unit.
<PAGE> 63
14
"Rent" shall mean, for any Unit, all Basic Rent and
Supplemental Rent therefor.
"Rent Payment Date" or "Payment Date" shall mean each
____________ and _____________ of each year occurring during the Lease Term of
the Lease, commencing _____________, 1995, provided that if any such date shall
not be a Business Day, then "Rent Payment Date" or "Payment Date" shall mean
the next succeeding Business Day.
"Replacement Engine" shall mean an engine of the same make,
model and manufacturer as the engine being replaced and suitable for
installation and use on the relevant Airframe which engine shall have been made
subject to the Aircraft Lease pursuant to Section 11.6 thereof, provided, that
if such an engine is no longer manufactured and parts for such engine are no
longer reasonably available, such engine need not be of the same make, model
and manufacturer as the Engine being replaced but shall be suitable for use
with the other Engine on the Airframe.
"Replacement Unit" shall mean a Unit of Equipment which shall
have been leased under the Lease pursuant to Section 11 thereof.
"Required Modification" shall mean, for any Unit, as specified
in Section 9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject
matter of any covenant, agreement or obligation of any party contained in any
Operative Agreement, the Chairman of the Board of Directors, the President, or
any Vice President, Treasurer, Assistant Treasurer or other officer, who in the
normal performance of his operational responsibility would have knowledge of
such matters and the requirements with respect thereto.
"Return Date" shall mean, for any Unit of Equipment as
specified in Section 6.1 of the Lease.
"Scheduled Closing Date" shall have the meaning specified in
Section 2.7 of the Participation Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act.
"Severable Modification" shall mean, for any Unit, as
specified in Section 9.2 of the Lease.
"Stipulated Loss Value" for any Unit as of any date of
determination shall mean the amount (as adjusted pursuant to Section 2.6 of the
Participation Agreement and Section 3.4 of the Lease) determined by multiplying
the Equipment Cost for such Unit by the percentage set forth in Schedule 4 to
the Participation
<PAGE> 64
15
Agreement opposite the Determination Date on which such Stipulated Loss Value
is being determined; provided that during any Renewal Term, "Stipulated Loss
Value" shall be determined as provided in Section 22.5 of the Lease.
"Storage Period" shall mean, for any Unit of Equipment as
specified in Section 6.3 of the Lease.
"Subsidiary" of any Person shall mean any corporation,
association, or other business entity of which more than 50% (by number of
votes) of the voting stock at the time outstanding shall at the time be owned,
directly or indirectly, by such Person or by any other corporation, association
or trust which is itself a Subsidiary within the meaning of this definition, or
collectively by such Person and any one or more such Subsidiaries.
"Supplemental Rent" shall mean, for any Lease, all amounts,
liabilities and obligations (other than Basic Rent thereunder) which the Lessee
is obligated to pay under the Operative Agreements to or on behalf of any of
the other parties thereto, including, but not limited to, Termination Value and
Stipulated Loss Value payments thereunder.
"Tax Indemnity Agreement" shall mean the Tax Indemnity
Agreement (Phillips Trust No. 94-__) dated as of _____________, 1994 between
the Lessee and the Owner Participant.
"Taxes" shall have the meaning specified in Section 7.1(b) of
the Participation Agreement.
"Term Sheet" shall mean the commitment letter and accompanying
term sheet dated ______________, 1994 between the Lessee, the Owner Participant
and the other owner participants relating to the Overall Transaction.
"Terminated Unit" shall mean, for any Unit, as specified in
Section 10.1 of the Lease.
"Termination Date" shall mean, for any Unit, as specified in
Section 10.1 of the Lease.
"Termination Value" for any Unit as of any date of
determination shall mean the amount (as adjusted pursuant to Section 2.6 of the
Participation Agreement and Section 3.4 of the Lease) determined by multiplying
the Equipment Cost for such Unit by the percentage set forth in Schedule 5 to
the Participation Agreement opposite the Determination Date on which such
Termination Value is being determined; provided that during any Renewal Term,
"Termination Value" shall be determined as provided in Section 22.5 of the
Lease.
"Total Equipment Cost" shall mean the sum of the Equipment
Costs for all Units.
<PAGE> 65
16
"Transaction Costs" shall have the meaning specified in
Section 2.5(a) of the Participation Agreement.
"Transferee" shall have the meaning specified in Section
6.1(b) of the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each
Equipment Note, a per annum rate (expressed as a semiannual equivalent and as a
decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield), determined to be the per annum rate equal to the semiannual
yield to maturity for United States Treasury securities maturing on the
Average Life Date of such Equipment Note, as determined by interpolation
between the most recent weekly average yields to maturity for two series of
United States Treasury securities, (A) one maturing as close as possible to,
but earlier than, the Average Life Date of such Equipment Note and (B) the
other maturing as close as possible to, but later than, the Average Life Date
of such Equipment Note, in each case as published in the most recent H.15(519)
(or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
in the most recent H.15(519), as published in H.15(519)). H.15(519) means
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, published by the Board of Governors of the Federal Reserve System.
The most recent H.15(519) means the latest H.15(519) which is published prior
to the close of business on the third Business Day preceding the scheduled
prepayment date.
"Trust Agreement" shall mean that certain Trust Agreement
(Phillips Trust No. 94-___), dated as of _____________, 1994, between the
Owner Participant and Wilmington Trust Company, as amended, supplemented or
otherwise modified from time to time.
"Trust Estate" shall have the meaning set forth in Section 1.1
of the Trust Agreement.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.
"Trustees" shall mean the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee.
"Underwriter" shall mean Chemical Securities, Inc.
"Underwriting Agreement" shall mean the agreement
substantially in the form of Exhibit G to the Participation Agreement, to be
executed pursuant to Section 10.2(e) of the Participation Agreement the Lessee
and the Underwriter, relating to the purchase by such Underwriter of the Pass
Through Certificates.
"Unit" shall mean each unit or item of Equipment.
<PAGE> 1
EXHIBIT 4(e)(3)
________________________________________________________________________________
EQUIPMENT LEASE AGREEMENT
(Phillips Trust No. 94-__)
Dated as of _____________, 1994
Between
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as expressly provided herein but
solely as Owner Trustee,
Lessor
and
PHILLIPS PETROLEUM COMPANY,
Lessee
Vehicles
________________________________________________________________________________
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO
THIS LEASE, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE
HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A
SECURITY INTEREST IN FAVOR OF, SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE AND SECURITY AGREEMENT (PHILLIPS TRUST NO. 94-__), DATED AS OF
________, 1994 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED PARTY, AND LESSOR, AS
DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM THE
INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN SECTION 20 OF THIS LEASE. SEE
SECTION 24.2 FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND
THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Acceptance and Leasing of Equipment . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.1 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Adjustment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Manner of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Ownership and Equipment Identification . . . . . . . . . . . . . . . . . . . . . 4
4.1 Retention of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Equipment Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Certain Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Ownership Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6. Return of Equipment; Storage . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Return; Holdover Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 8. Maintenance; Operation; Possession; Compliance with Laws . . . . . . . . . . . . 8
8.1 Maintenance and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Possession and Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.4 Vehicle Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Required Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Optional Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.3 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Retention of Equipment by Lessor . . . . . . . . . . . . . . . . . . . . . . . 13
10.4 Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 11. Loss, Destruction, Requisition, Etc. . . . . . . . . . . . . . . . . . . . . . 14
11.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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11.2 Replacement or Payment upon Event of Loss . . . . . . . . . . . . . . . . . . . 15
11.3 Rent Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.4 Disposition of Equipment; Replacement of Unit . . . . . . . . . . . . . . . . . 16
11.5 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.6 Lease Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.1 Property Damage and Public Liability Insurance . . . . . . . . . . . . . . . . 18
12.2 Proceeds of Property Insurance . . . . . . . . . . . . . . . . . . . . . . . . 19
12.3 Additional Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. Lessor's Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.2 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.3 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.4 Lessee's Duty to Return Equipment Upon an Event of Default . . . . . . . . . . 25
15.5 Fair Market Sales Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 17. Lessor's Right to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.1 Assignment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.2 Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.3 Sublessee's Performance and Rights . . . . . . . . . . . . . . . . . . . . . . 27
Section 19. Net Lease, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 21. (Intentionally Omitted.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 22. Purchase Options; Renewal Options . . . . . . . . . . . . . . . . . . . . . . . 29
22.1 Election to Retain or Return Equipment . . . . . . . . . . . . . . . . . . . . 30
22.2 Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.3 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.4 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22.5 Stipulated Loss Value and Termination Value During Renewal Term . . . . . . . . 32
22.6 Early Buy-Out Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 23. Limitation of Lessor's Liability . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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Section 24. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
24.1 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 34
24.2 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.3 Headings and Table of Contents: Section References . . . . . . . . . . . . . . 35
24.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.5 True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.7 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.8 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
24.9 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
Attachments to Equipment Lease:
Exhibit A Form of Lease Supplement
Exhibit B Form of Sublease Amendment
Appendix A Definitions
- iii -
<PAGE> 5
EQUIPMENT LEASE AGREEMENT
(Phillips Trust No. 94-__)
This EQUIPMENT LEASE AGREEMENT (Phillips Trust No. 94-__), dated
as of ___________ , 1994 (the "Lease"), between WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee under the Trustee
Agreement ("Lessor"), and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Lessee").
W I T N E S S E T H :
Section 1. Definitions.
Unless the context otherwise requires, all capitalized terms used
herein without definition shall have the respective meanings set forth in
Appendix A hereto for all purposes of this Lease.
Section 2. Acceptance and Leasing of Equipment. Lessor hereby
agrees (subject to satisfaction or waiver of the conditions set forth in
Section 4.1 and 4.3 of the Participation Agreement), simultaneously with the
delivery of each Unit from Lessee to Lessor and acceptance thereof by Lessor,
to accept delivery of such Unit from Lessee, as evidenced by the execution and
delivery by Lessor of a Certificate of Acceptance with respect to such Unit and
thereafter to lease such Unit to Lessee hereunder, and Lessee hereby agrees
(subject to satisfaction or waiver of the conditions set forth in Section 4.4
of the Participation Agreement) to lease from Lessor hereunder, such Unit, as
evidenced by the execution and delivery by Lessee and Lessor of a Lease
Supplement covering such Unit. Lessor hereby authorizes one or more employees
of Lessee, designated by Lessee, to act on behalf of Lessor as its authorized
representative or representatives to accept delivery of each Unit, to execute
and deliver such Certificate of Acceptance, all in accordance with Section
2.3(b) of the Participation Agreement. Lessee hereby agrees that such
acceptance of delivery by such authorized representative or representatives on
behalf of Lessor shall, without further act, irrevocably constitute acceptance
by Lessee of such Unit for all purposes of this Lease.
Section 3. Term and Rent.
3.1 Lease Term. The interim term of this Lease (the "Interim
Term") for each Unit shall commence on the Closing Date and shall terminate the
day before the Basic Term Commencement Date. The basic term of this Lease (the
"Basic Term") for each Unit shall commence on the Basic Term Commencement Date
and, subject to earlier termination pursuant to Sections 10, 11, 15 and 22.6
shall expire at 11:59 P.M. (New York City time) on the
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Basic Term Expiration Date for such Unit. Subject and pursuant to Section
22.3, Lessee may elect one or more Renewal Terms for any Unit.
3.2 Basic Rent. Lessee hereby agrees to pay Lessor as Basic Rent
for each Unit throughout the Basic Term applicable thereto Basic Rent in
consecutive semi-annual installments payable on each Rent Payment Date during
the Basic Term. Subject to Section 3.5, each such semi-annual payment of Basic
Rent shall be in an amount equal to the product of the Equipment Cost for such
Unit multiplied by the Basic Rent percentage for such Unit set forth opposite
such Rent Payment Date on Schedule 3 to the Participation Agreement (as such
Schedule 3 shall be adjusted pursuant to Section 2.6 of the Participation
Agreement). Basic Rent shall be payable in advance on certain Rent Payment
Dates and in arrears on certain Rent Payment Dates, as specified in Schedule 3
to the Participation Agreement, as so adjusted from time to time. Such
Schedule 3, as so adjusted from time to time, is incorporated herein by
reference.
3.3 Supplemental Rent. Lessee also agrees to pay to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent,
promptly as the same shall become due and owing, or where no due date is
specified, promptly after demand by the Person entitled thereto, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise as in the case of nonpayment of Basic Rent. Lessee will
also pay, as Supplemental Rent, (i) on demand, to the extent permitted by
applicable law, an amount equal to interest at the applicable Late Rate on any
part of any installment of Basic 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 or demanded, as the case may be, for the period from such due
date or demand until the same shall be paid, (ii) in the case of a prepayment
of the Equipment Notes as a result of the termination of this Lease with
respect to any Unit pursuant to Section 10, on the date of such prepayment, an
amount equal to the Make-Whole Amount, if any, payable in respect of the
principal amount of each Equipment Note being prepaid as a result of such
termination, (iii) in the case of any refinancing of the Equipment Notes
pursuant to Section 10.2 of the Participation Agreement, on the date of such
refinancing, an amount equal to the Make-Whole Amount, if any, payable in
respect of the principal amount of each Equipment Note being prepaid in
connection with such refinancing and (iv) in the case of a prepayment of the
Equipment Notes as a result of the exercise of the early buyout option pursuant
to Section 22.6, on the date of such prepayment, an amount equal to the
Make-Whole Amount, if any, payable in respect of the principal amount of each
Equipment Note being prepaid as a result of such exercise.
3.4 Adjustment of Rent. Lessee and Lessor agree that the Basic
Rent, Stipulated Loss Value, the Early Buyout Price and Termination Value
percentages shall be subject to adjustment
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pursuant to Section 2.6 of the Participation Agreement. Such Section 2.6 of
the Participation Agreement is incorporated herein by reference.
3.5 Advances. If and to the extent that the Indenture Trustee on
the Refinancing Date (but only if the Refinancing Date occurs prior to the
Basic Term Commencement Date) or the Basic Term Commencement Date shall not
have received funds from the Owner Trustee sufficient for the payment in full
of the interest then due and owing on the Equipment Notes on such applicable
date, Lessee shall pay as Supplemental Rent, on such date, an amount equal to
such deficiency (such payment being referred to herein as an "Advance"). In
the event Lessee makes any Advance pursuant to this Section 3.5 and is not
promptly reimbursed therefor by the Owner Participant after demand for such
reimbursement in the manner set forth in Section 20, and so long as no Lease
Event of Default has occurred and is continuing, Lessee, without otherwise
limiting its rights against the Owner Participant, shall be entitled, subject
to Section 6.8 of the Participation Agreement, to offset and deduct (without
duplication) against each succeeding payment or portion thereof of Basic Rent,
Supplemental Rent, Stipulated Loss Value, Termination Value or any other amount
due from Lessee to Persons other than the holders of the Equipment Notes, the
Indenture Trustee, and the Owner Trustee in its individual capacity, an amount
equal to such Advance plus interest on such amount at the Late Rate until
Lessee has been fully reimbursed for such Advance plus such interest and in
each such case, such offset shall be deemed to constitute a reduction in the
amount of such Advance so payable; provided that no such offset or deduction
shall be made against any amount required pursuant to the Indenture to be paid
to the Indenture Trustee except to the extent that, under the circumstances
prevailing at the time such payment is to be made, such payment would then be
distributable by the Indenture Trustee to the Owner Participant (or to the
Lessor for distribution to the Owner Participant).
3.6 Manner of Payments. All Rent (other than Supplemental Rent
payable to Persons other than Lessor, which shall be payable to such other
Persons in accordance with written instructions furnished to Lessee by such
Persons, as otherwise provided in any of the Operative Agreements or as
required by law) shall be paid by Lessee to Lessor at its office at 1100 North
Market Street, Rodney Square North, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration (Phillips Trust No. 94-__). All Rent shall be
paid by Lessee in funds consisting of lawful currency of the United States of
America, which shall be immediately available to the recipient not later than
1:00 P.M. (New York City time) on the date of such payment. Notwithstanding
the foregoing, so long as the Indenture shall not have been discharged pursuant
to the terms thereof, Lessor hereby directs, and Lessee agrees, that all Rent
(excluding Excepted Property) payable to Lessor and assigned to the Indenture
Trustee shall be paid directly to the Indenture Trustee at the times and in
funds of the type specified in this Section 3.6 at the office
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of the Indenture Trustee, Shawmut Bank Connecticut, National Association, ABA
No.011900445, 777 Main Street, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration (Phillips Trust No. 94-__), or at such other
location in the United States of America as the Indenture Trustee may otherwise
direct.
3.7 Minimum Rent. Section 6.8 of the Participation Agreement is
incorporated herein by reference.
Section 4. Ownership and Equipment Identification.
4.1 Retention of Title. Lessor shall and hereby does retain full
legal title to and beneficial ownership of the Equipment notwithstanding the
delivery to and possession and use of the Equipment by Lessee hereunder or any
sublessee under any sublease permitted hereby.
4.2 Equipment Identification. Lessee will cause each Unit of
Equipment and each component thereof to be kept numbered with the
manufacturer's vehicle identification number and each component of each such
Unit with its serial numbers, as set forth in the related Lease Supplement, and
will not change the manufacturer's vehicle identification numbers of any Unit
or the serial number of any such component.
4.3 Certain Designations. Lessee may cause the Units of
Equipment to be lettered with the names or initials or other insignia
customarily used by Lessee or any permitted sublessees or any of their
respective Affiliates for convenience of identification of the right of any
such Person to use the Units of Equipment.
4.4 Ownership Identification. On or prior to the Closing Date or
as soon thereafter as practicable (but in no event later than 60 days after the
Closing Date), Lessee will cause to be affixed to, and maintained on, each Unit
of Equipment in a clearly visible location a plate or sticker of reasonable
size bearing the following legend:
"Leased from
Wilmington Trust Company,
as Trustee, Owner and Lessor"
and while the Lien of the Trust Indenture is in effect shall bear the following
additional legend:
"Mortgaged to
Shawmut Bank Connecticut, National Association,
as Indenture Trustee and Mortgagee"
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Section 5. Disclaimer of Warranties.
5.1 Disclaimer of Warranties. Without waiving any claim Lessee
may have against any seller, supplier or manufacturer, LESSEE ACKNOWLEDGES AND
AGREES THAT, (i) EACH UNIT OF EQUIPMENT IS OF A SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT
EACH UNIT OF EQUIPMENT IS SUITABLE FOR ITS PURPOSES, (iii) NEITHER LESSOR NOR
THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND,
(iv) EACH UNIT OF EQUIPMENT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS
AND GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR
LEASES AND LESSEE TAKES EACH UNIT OF EQUIPMENT "AS-IS", "WHERE-IS" AND "WITH
ALL FAULTS", IN WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT
NEITHER LESSOR, AS LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR THE OWNER
PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY
DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS EITHER
EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR
PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF ANY
UNIT OF EQUIPMENT, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR
TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR
NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WHATSOEVER WITH RESPECT THERETO, except that Lessor, in its individual
capacity, represents and warrants that on the Closing Date, Lessor shall have
received whatever title to the Equipment as was conveyed to Lessor by Lessee
and each Unit of Equipment will be free of Lessor's Liens attributable to
Lessor in its individual capacity and provided that the foregoing disclaimer in
clause (v) shall not extend to any of the Owner Participant's representations
and warranties contained in the Participation Agreement. Lessor hereby
appoints and constitutes Lessee its agent and attorney-in-fact during the Lease
Term to assert and enforce, from time to time, in the name and for the account
of Lessor and Lessee, as their interests may appear, but in all cases at the
sole cost and expense of Lessee, whatever claims and rights Lessor may have as
owner of the Equipment against the manufacturers or any prior owner thereof;
provided, however, that if at any time an Event of Default shall have occurred
and be continuing, at Lessor's option, such power of attorney shall terminate,
and Lessor may assert and enforce, at Lessee's sole cost and expense, such
claims and rights. Lessee's delivery of a Lease Supplement shall be conclusive
evidence as between Lessee and Lessor that all Units described therein are in
all the foregoing respects satisfactory to Lessee.
Section 6. Return of Equipment; Storage.
6.1 Return; Holdover Rent. (a) Within 45 days of the expiration
of the Lease Term with respect to any Unit of Equipment which has not been
purchased by Lessee, Lessee will, at its own cost and expense, deliver
possession of such Unit in the
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condition required by Section 6.2 to Lessor at any storage location selected by
Lessee, provided that the Units shall be returned at any such location in
groups of at least 10 (or such lesser number which constitutes the remaining
number of Units which have not been previously returned and which have the same
Lease Term expiration date, provided that such remaining Units shall be
returned to a location where other Units have been returned and remain located
at such time) (the date of return of any such group of Units in material
compliance with the provisions of Section 6.2 being the "Return Date" for such
Units) provided, further, that there shall be no more than a total of four such
return locations, each of which shall be located in the continental United
States (excluding Alaska). Lessee will notify Lessor in writing of the return
location for each Unit at least 60 days before the date of return of such Unit
and shall notify Lessor promptly of the Return Date for such Unit. Subject to
Section 6.1(b), upon expiration of the Lease Term with respect to such Unit and
compliance with this Section 6.1(a) and Section 6.2 and the payment of all Rent
then due and payable, this Lease and the obligation to pay Basic Rent for such
Unit accruing subsequent to the expiration of the Lease Term with respect to
such Unit shall terminate. If Lessor does not require storage of the Units
pursuant to Section 6.3, Lessee's obligation with respect to the return of
Units upon expiration of the Lease Term shall solely be as set forth in this
Section 6.1 and in Section 6.2.
(b) All amounts earned in respect of a Unit of Equipment after
the date of expiration of the Lease Term with respect to such Unit and prior to
the return of the Unit hereunder shall belong to Lessee and, if received by
Lessor, shall be promptly turned over to Lessee, provided that if a Lease Event
of Default shall have occurred and be continuing at such time, any such amounts
which are received by the Lessor shall be held as collateral security by Lessor
subject to the provisions of Section 11.6. In the event any Unit of Equipment
is not returned to Lessor on the last day of the Lease Term for such Unit, on
the Return Date for such Unit, Lessee shall pay to Lessor for each day from and
including the expiration date of the Lease Term to and through the Return Date
for such Unit an amount equal to the per diem equivalent of Basic Rent payable
on account of such Unit during the last semi-annual period of the Lease Term
for such Unit. In the event any Unit shall not have been so returned to Lessor
by the 45th day following the expiration of the Lease Term for such Unit,
Lessee shall on such 45th day pay to Lessor the greater of the applicable
Termination Value for such Unit determined as of the last Rent Payment Date for
such Unit or the Fair Market Sales Value thereof as of such last Rent Payment
Date plus the rent payable pursuant to this sentence for such 45-day period,
and Lessor shall thereupon transfer to Lessee all of Lessor's right, title and
interest in any such Unit on an "as-is", "where-is" basis without
representation or warranty, express or implied, except as to the absence of
Lessor's Liens.
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6.2 Condition of Equipment. Each Unit when returned to Lessor
pursuant to Section 6.1 shall be (i) free from accumulations or deposits from
the commodities transported in or on the Unit during the Lease Term and be in a
state of cleanliness consistent with Lessee's customary and reasonable
practices, (ii) in the condition required by Section 8.1, and (iii) free and
clear of all Liens except Lessor Liens. All logs, records, books and other
materials relating to the maintenance of such Unit shall be made available to
Lessor or its designee upon the return of such Unit. Lessor shall have the
right to inspect any Unit that is returned pursuant to Section 6.1 to ensure
that such Unit is in compliance with the conditions set forth in this Section
6.2, at Lessor's sole cost, expense and risk (including, without limitation,
the risk of personal injury or death), by its authorized representatives,
during Lessee's normal business hours and upon reasonable prior notice to
Lessee; provided, however, that Lessee shall not be liable for any injury to,
or the death of, any Person exercising, on behalf of Lessor, the rights of
inspection granted under this Section 6.2 unless caused by Lessee's gross
negligence or wilful misconduct. No inspection pursuant to this Section 6.2
shall interfere with the normal conduct of Lessee's business, and Lessee shall
not be required to undertake or incur any additional liabilities in connection
therewith. A Unit shall not be deemed to have been returned to Lessor for
purposes of this Lease unless and until it is in compliance with the conditions
set forth in this Section 6.2.
6.3 Storage. Unless Lessor otherwise advises Lessee in writing,
Lessee shall permit Lessor to store such Unit, free of charge, at a permitted
return location used by Lessee for the storage of vehicles for a period (the
"Initial Storage Period") beginning on the Return Date for such Unit and ending
not more than 60 days thereafter. During the Initial Storage Period, Lessee
shall be responsible for any storage or parking fees in respect of the stored
Units and shall maintain insurance in respect thereof in accordance with
Section 12. Following the expiration of the Initial Storage Period, Lessee
shall permit Lessor, at the sole risk and expense of Lessor, to store the
Equipment for up to an additional 60 days (the "Additional Storage Period";
collectively with the Initial Storage Period, the "Storage Period") at such
location. During the Storage Period, Lessee will permit Lessor or any person
designated by it, including the authorized representative or representatives of
any prospective purchaser or user of such Unit, to inspect the same during
Lessee's normal business hours upon at least one Business Day's prior
telephonic notice; provided, however, that such inspection shall be arranged at
a mutually convenient time (not unduly delayed from the time requested by
Lessor) so as not to materially interfere with the normal conduct of Lessee's
business and such person shall be insured to the reasonable satisfaction of
Lessee with respect to any risks incurred in connection with any such
inspections and Lessee (except in the case of Lessee's gross negligence or
willful misconduct) shall not be liable for any injury to, or the death of, any
person exercising, either on behalf of Lessor or any prospective purchaser or
user, the rights
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of inspection granted pursuant hereto. Lessee shall not be required to store
the Equipment after the Storage Period.
Section 7. Liens.
Lessee will not directly or indirectly create, incur, assume,
permit or suffer to exist any Lien on or with respect to any Units or Lessee's
leasehold interest therein under this Lease, except Permitted Liens, Lessor's
Liens and Liens described in Section 6.4(a) and 6.4(b) of the Participation
Agreement, and Lessee shall promptly, at its own expense, take such action or
cause such action to be taken as may be necessary to duly discharge (by bonding
or otherwise) any such Lien not excepted above if the same shall arise at any
time.
Section 8. Maintenance; Operation; Possession; Compliance with
Laws.
8.1 Maintenance and Operation. Lessee, at its own cost and
expense, shall maintain, repair and keep each Unit, and shall operate each Unit
(i) in good working order and repair, ordinary wear and tear excepted, and in a
manner consistent with maintenance practices used by Lessee in respect of
equipment owned or leased by Lessee similar in type to such Unit and in a
manner not less favorable than the maintenance practices of Lessee during the
year immediately preceding the Closing Date, (ii) in accordance with all
insurance policies required to be maintained pursuant to Section 12 hereof,
(iii) in compliance with all applicable laws, rules and regulations (including,
without limitation, the Uniform Fire Code Part IV, Article 24 (1982 Edition)
and applicable state and local fire codes, NFPA 407, 385 and 410, FAA Advisory
Circular No. 150/5230-4, API Publication No. 1500, ATA Specification No. 103
and NSC Aviation Ground Operation Safety Handbook and the operations manual
provided with such Unit) and (iv) if such Unit has the benefit of manufacturer
warranties, in a manner consistent with the manufacturer's requirements in
order to maintain such warranties; provided, however, that Lessee may, in good
faith and by appropriate proceedings diligently conducted, contest the validity
or application of any such law, regulation, requirement or rule in any
reasonable manner which does not impair the Lien of the Indenture or create any
material risk or danger of (A) the sale, forfeiture or loss of, or interference
with the use or possession of, any Unit of Equipment, or interference with the
payment of Rent or (B) the imposition of criminal liability or unindemnified
material civil liability on the Lessor, the Owner Participant, the Indenture
Trustee or the Pass Through Trustee, or (C) extending the ultimate imposition
of such law, rule or regulation beyond the expiration or termination of this
Lease solely with respect to Equipment leased hereunder, or (D) the release of
the Lessee from the obligation to return the Equipment in compliance with the
provisions of Section 6.2. In no event shall Lessee discriminate as to the use
or maintenance of any Unit (including the periodicity of maintenance or
recordkeeping in respect of such Unit) as compared to equipment of a similar
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nature which Lessee owns or leases. Lessee will maintain all records, logs and
other materials required by relevant industry standards or any governmental
authority having jurisdiction over the Units required to be maintained in
respect of any Unit, all as if Lessee were the owner of such Units, regardless
of whether any such requirements, by their terms, are nominally imposed on
Lessee, Lessor or the Owner Participant.
8.2 Possession and Use. Lessee shall be entitled to the
possession of the Equipment and to the use of the Equipment by it or any
Affiliate, in the United States only in the manner for which it was designed
and intended and so as to subject it only to ordinary wear and tear. In no
event shall Lessee make use of any Equipment in any jurisdiction not included
in the insurance coverage required by Section 12. In the event that Lessee
changes the location of any Unit of Equipment from the location of such Unit of
Equipment set forth in the initial Lease Supplement, Lessee shall provide
Lessor with prior written notice of such change of location, and, at the
direction of Lessor and in accordance with its obligation under Section 16.1,
Lessee shall file appropriate UCC financing statements with respect to any new
location of Equipment if not covered by a prior filing or filings.
8.3 Sublease. Lessee shall be entitled to sublease any Unit of
Equipment to a business entity which is not subject to any bankruptcy,
insolvency or similar proceedings (leases to such sublessees being herein
referred to as "Permitted Subleases"); provided that (a) with respect to any
sublease entered into prior to the commencement of the Lease Term and which
does not expire prior to the first anniversary of the Closing Date, such
sublease shall only be a Permitted Sublease if Lessee and the sublessee
thereunder enter into an amendment to such sublease substantially in the form
of Exhibit B on or prior to the date which is the earlier of (x) the date any
such sublease is renewed (whether by automatic renewal in the absence of notice
or otherwise) or (y) the first anniversary of the Closing Date, and (b) with
respect to any sublease entered into after the commencement of the Lease Term,
such sublease shall only be a Permitted Sublease if at the time Lessee enters
into such sublease, the following conditions shall have been satisfied:
(i) no Lease Default or Lease Event of Default shall have occurred
and be continuing;
(ii) Lessee shall remain primarily liable for performance of all of
its obligations under this Lease;
(iii) such sublease, and the rights and interest of any sublessee
thereunder, shall in all events be expressly subject and
subordinate to this Lease
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and the rights and interest of Lessor and its respective
successors and assigns hereunder;
(iv) such sublease shall not be for a term which extends beyond the
Basic Term and any agreed upon Renewal Term:
(v) such sublease shall not contain any option to purchase or
retain possession of the Unit at the end of the term of such
sublease (other than pursuant to a renewal of the term of such
sublease); and
(vi) such sublease shall not include any term or provision which
would require or permit the sublessee thereunder to take any
actions inconsistent with this Lease or the other Operative
Agreements.
Lessee shall make, or cause to be made, in a timely fashion all filings with
respect to any such Permitted Sublease necessary to protect the rights of
Lessor in the Unit subject to such Permitted Sublease and the lien of the
Indenture thereon. With respect to each Permitted Sublease described in clause
(a) of the proviso to the first sentence of this Section 8.3, Lessee hereby
grants to Lessor a security interest in the rentals of such Permitted
Subleases, provided that on the date an amendment, substantially in the form of
Exhibit B, is executed with respect to any such sublease, the security interest
in the rentals of such sublease shall automatically be terminated and released
without the necessity for further action by any party.
8.4 Vehicle Registration. Lessee shall forthwith upon the
delivery of the Vehicles cause the Vehicles to be duly titled and registered in
the name of Lessor and to remain titled and registered in the name of Lessor
under the laws of the State of Oklahoma, provided that Lessor shall execute and
deliver all such documents as Lessee may reasonably request for the purpose of
effecting and continuing such titling and registration.
Section 9. Modifications.
9.1 Required Modifications. In the event any United States,
state or local governmental agency or other governmental authority having
jurisdiction over any Unit requires that such Unit be altered, replaced or
modified (a "Required Modification"), Lessee agrees to promptly (but in any
event within the time period by which the Required Modification is required to
be made) make such Required Modification at its own expense; provided, however,
that Lessee may, in good faith and by appropriate proceedings diligently
conducted, contest the validity or application of any such law, regulation,
requirement or rule in any reasonable manner which complies with the
requirements set forth in the proviso to the first sentence of Section 8.1
provided further, that with respect to any such
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contest conducted after the expiration of the Lease Term, such contest shall be
conducted in a manner mutually satisfactory to Lessee and Lessor. Title to any
Required Modification shall immediately vest in Lessor.
9.2 Optional Modifications. In addition to making Required
Modifications, Lessee at any time may otherwise modify, alter or improve any
Unit (an "Optional Modification"); provided that no Optional Modification shall
materially diminish the fair market value, utility, or remaining economic
useful life of such Unit below the value, utility, or remaining economic useful
life of such Unit immediately prior to such Optional Modification, assuming
such Unit was then in the condition required to be maintained by the terms of
this Lease. Title to any Optional Modification which is not readily removable
without causing material damage to a Unit shall immediately vest in Lessor, and
title to any other Optional Modification (a "Severable Modification") shall
remain with Lessee. If Lessee shall at its cost cause such Severable
Modifications to be made to any Unit, Lessor shall have the right, prior to the
return of such Unit to Lessor hereunder, to purchase such Severable
Modifications (other than Severable Modifications consisting of proprietary
equipment) at their then Fair Market Sales Value. If Lessor does not elect to
purchase such Severable Modifications, Lessee may remove (and, at Lessor's
direction, will remove) such Severable Modifications at Lessee's cost and
expense. If Lessee does not elect to remove (or is not directed by Lessor to
remove) such Severable Modifications pursuant to the immediately preceding
sentence, Lessor shall return such Unit with such Severable Modifications
intact, in which case such Severable Modifications shall be deemed to be a part
of the Equipment and title thereto shall vest in Lessor without further act or
payment.
9.3 Replacement of Parts. Lessee will replace or cause to be
replaced as promptly as practicable, and at its own cost and expense, all Parts
of any Unit 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 herein.
All replacement parts shall be free and clear of all Liens (except in the case
of replacement parts temporarily installed on an emergency basis and Permitted
Liens) and shall be in at least as good operating condition and have at least
the same value and utility as the Part being replaced. All such replacement
parts (except in the case of replacement parts temporarily installed on an
emergency basis) shall become the property of the Lessor, shall constitute
Parts hereunder and shall immediately become subject to this Lease and shall be
deemed part of the Unit to which such Part is attached for all purposes hereof
to the same extent as the Parts originally comprising, or installed on, such
Unit. The Parts replaced thereby shall become Lessee's or its designee's
property.
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Section 10. Voluntary Termination.
10.1 Right of Termination. Lessee shall have the right, at its
option at any time or from time to time to terminate the Lease Term with
respect to not less than 5 nor more than 25 Units (each such Unit, a
"Terminated Unit") if Lessee determines in good faith that such Units have
become obsolete, surplus or operationally uneconomic to Lessee's requirements,
by delivering at least 90 days' prior written notice to Lessor and the
Indenture Trustee specifying a proposed date of termination for such Units (the
"Termination Date"), which date shall be a Rent Payment Date, any such
termination to be effective on the Termination Date. Except as expressly
provided herein, there will be no conditions to Lessee's right to terminate
this Lease with respect to any Terminated Unit pursuant to this Section 10.1.
Lessee may withdraw the termination notice referred to above at any time at
least 30 days prior to the Termination Date, whereupon this Lease shall
continue in full force and effect; provided that Lessee may not exercise its
right to withdraw such a termination notice more than two times with respect to
a Unit plus one additional time with respect to a Unit if the sale thereof
pursuant to Section 10.2 shall not be consummated through no fault of the
Lessee (any such failure to consummate such termination shall be deemed to be a
withdrawal of a termination notice unless such failure is attributable solely
or jointly to Lessor and/or the Owner Participant). The Lessee agrees that,
without limiting Section 2.5(b) of the Participation Agreement, it will
reimburse the Lessor, the Owner Participant, the Indenture Trustee and the Loan
Participants for all reasonable out-of-pocket costs and expenses (including
transfer taxes) incurred by each such party in connection with the proposed
termination or the termination of this Lease with respect to any Units, except
that Owner Participant shall pay for all reasonable out-of-pocket costs and
expenses of Lessee, Lessor, the Indenture Trustee and the Loan Participants in
connection with the exercise by Lessor of its retention rights under Section
10.3.
10.2 Sale of Equipment. During the period from the date of such
notice given pursuant to Section 10.1 to the Termination Date, Lessee, as agent
for Lessor and at Lessee's sole cost and expense, shall use reasonable best
efforts to obtain bids from Persons other than Lessee or Affiliates thereof for
the cash purchase of a Terminated Unit, and Lessee shall promptly, and in any
event at least five Business Days prior to the proposed date of sale, certify
to Lessor in writing the amount and terms of each such bid, the proposed date
of such sale and the name and address of the party submitting such bid. Lessor
shall have the right (but not the obligation) to obtain bids for the purchase
of such Terminated Unit, either directly or through agents other than Lessee,
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 arranging such
sale. Unless Lessor shall have elected to retain such Terminated Unit in
accordance with Section 10.3, on the Termination Date: (i) Lessee shall,
subject to receipt (x) by Lessor of all amounts
<PAGE> 17
13
owing to Lessor pursuant to the next sentence, and (y) by the Persons
(including, without limitation, Lessor) entitled thereto of all unpaid
Supplemental Rent due on or before the Termination Date, deliver such
Terminated Unit to the bidder (which shall not be Lessee or any Affiliate
thereof), if any, which shall have submitted the highest cash bid prior to such
date (or to such other bidder as Lessee and Lessor shall agree), in the same
manner and condition as if delivery were made to Lessor pursuant to Section 6
and (ii) Lessor shall, without recourse or warranty (except as to the absence
of any Lessor's Lien attributable to Lessor) simultaneously therewith sell such
Terminated Unit to such bidder, provided that if Lessee shall have previously
exercised all of its rights of withdrawal of termination notices pursuant to
Section 10.1, and Lessee is unable to obtain any bids for such Units, Lessee
shall effect the sale of such Units to any bidder identified by Lessor. The
total selling price realized at such sale shall be paid to and retained by
Lessor and, in addition, on the Termination Date, Lessee shall pay to Lessor,
(A) all unpaid Basic Rent with respect to such Terminated Unit due and payable
on or prior to such Termination Date (other than Basic Rent payable with
respect to such Terminated Unit in "advance" on such date), (B) the excess, if
any, of (1) the Termination Value for such Terminated Unit computed as of the
related Termination Date, over (2) the net cash sales proceeds (after the
deduction of all reasonable costs and expenses of Lessor and the Owner
Participant in connection with such sale (including, without limitation,
transfer and other taxes (other than on net income of the Owner Participant))
of such Terminated Unit and (C) an amount equal to any Make-Whole Amount in
respect of the principal amount of the Equipment Notes to be prepaid in
accordance with Section 2.10(a) of the Indenture. If no sale shall have
occurred, this Lease shall continue in full force and effect with respect to
such Unit. If Lessor elects not to exercise its right to retain such
Terminated Unit as provided in Section 10.3, Lessee, in acting as agent for
Lessor, shall have no liability to Lessor for failure to obtain the best price,
shall act in its sole discretion and shall be under no duty to solicit bids
publicly or in any particular market. Lessee's sole interest in acting as
agent shall be to use its reasonable best efforts to sell the Units at the
highest price then obtainable consistent with the terms of this Lease.
10.3 Retention of Equipment by Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, no later than 30 days after receipt of Lessee's notice of
termination, not to sell a Terminated Unit on the Termination Date therefor,
whereupon Lessee shall (i) deliver such Terminated Unit to Lessor in the same
manner and condition as if delivery were made to Lessor pursuant to Section 6
(but Lessor shall have no storage rights pursuant to Section 6.3), treating the
Termination Date as the termination date of the Lease Term with respect to such
Terminated Unit, and (ii) pay to Lessor (A) all unpaid Basic Rent payable on or
prior to the related Termination Date (other than Basic Rent payable with
respect to such Terminated Unit in
<PAGE> 18
14
"advance" on such date) and (B) an amount equal to any Make-Whole Amount in
respect of the principal amount of the Equipment Notes to be prepaid in
accordance with Section 2.10(a) of the Indenture and (iii) pay to the Persons
entitled thereto all other unpaid Supplemental Rent due on or before the
Termination Date. If Lessor elects not to sell a Terminated Unit as provided
in this Section 10.3, then Lessor shall pay, or cause to be paid, to the
Indenture Trustee in funds of the type and in an amount equal to the
outstanding principal amount of the Equipment Notes to be prepaid on account of
such Terminated Unit pursuant to Section 2.10(a) of the Indenture, all accrued
interest to the date of prepayment of such Equipment Notes on such Termination
Date and an amount equal to the Make-Whole Amount, if any, in respect of the
principal amount of the Equipment Notes to be prepaid. If Lessor shall fail to
perform any of its obligations pursuant to this Section 10.3, this Lease shall
not be terminated with respect to any Terminated Unit on a proposed Termination
Date, Lessor shall thereafter no longer be entitled to exercise its election to
retain any Terminated Unit and Lessee may at its option at any time thereafter
submit a new termination notice pursuant to Section 10.1 with respect to a
Terminated Unit specifying a proposed Termination Date occurring not earlier
than five Business Days from the date of such notice.
10.4 Termination of Lease. In the event of (x) any such sale of
a Terminated Unit and receipt by Lessor and the Indenture Trustee of all of the
amounts provided in Section 10.2 or (y) retention of a Terminated Unit by
Lessor in compliance with Section 10.3 (including receipt by the Indenture
Trustee of all amounts provided in Section 10.3), and upon compliance by Lessee
with the other provisions of this Section 10, the obligation of Lessee to pay
Basic Rent hereunder for such Terminated Unit shall cease and the Lease Term
for and Lessee's other obligations in respect of such Terminated Unit shall
end.
Section 11. Loss, Destruction, Requisition, Etc.
11.1 Event of Loss. In the event that any Unit (i) shall suffer
damage or contamination which, in Lessee's opinion (as evidenced by an
Officers' Certificate to such effect), makes repair uneconomic or renders such
Unit permanently unfit for normal use for any reason whatsoever other than
obsolescence, (ii) shall suffer an actual or constructive total loss, (iii)
shall be permanently returned to the manufacturer pursuant to any patent
indemnity provisions, (iv) shall suffer theft or disappearance, (v) shall have
title thereto taken or appropriated by any governmental authority under the
power of eminent domain or otherwise or (vi) shall be taken or requisitioned
for use by any governmental authority under the power of eminent domain or
otherwise, and, in the case any such theft, disappearance, taking,
appropriation or requisition under clause (iv) or (vi), the period thereof
exceeds the lesser of (x) 90 days or (y) the remaining Basic Term and any
agreed upon Renewal Term for such Unit (any such occurrence being hereinafter
called an "Event of Loss"), Lessee, in accordance with the terms of Section
11.2,
<PAGE> 19
15
shall inform Lessor and the Indenture Trustee of such Event of Loss.
11.2 Replacement or Payment upon Event of Loss. Upon the
occurrence of an Event of Loss pursuant to Section 9.1 with respect to any
Unit, Lessee shall within 90 days of such occurrence give Lessor and the
Indenture Trustee notice of such occurrence and of its election to perform one
of the following options and the contemplated date of performance of such
option (it being agreed that if Lessee shall not have given notice of such
election within 90 days after such occurrence, Lessee shall be deemed to have
elected to perform the option set forth in the following paragraph (ii)):
(i) within 180 days of such occurrence, Lessee shall comply with
Section 11.4(b) and shall convey or cause to be conveyed to Lessor a
Replacement Unit to be leased to Lessee hereunder, such Replacement Unit
to be free and clear of all Liens (other than Permitted Liens) and to
have a value, utility, capacity and remaining economic useful life at
least equal to the Unit so replaced (assuming such Unit was in the
condition required to be maintained by the terms of this Lease); provided
that, if Lessee shall not perform its obligation to effect such
replacement under this paragraph (i) during the period of time provided
herein, then Lessee shall pay on the next succeeding Determination Date
that is at least 30 days after the end of such period to Lessor the
amounts specified in paragraph (ii) below, provided, further, that if a
Payment Event of Default shall have occurred and be continuing, Lessee
shall be precluded from electing to perform the option set forth in this
paragraph (i); or
(ii) on a Determination Date within 180 days of such occurrence,
Lessee shall pay or cause to be paid (1) to Lessor (a) an amount equal to
the Stipulated Loss Value of each such Unit suffering such occurrence
determined as of such Determination Date and (b) if such Determination
Date is also a Rent Payment Date, all Basic Rent payable on such date in
respect of such Unit (other than Basic Rent payable in "advance" on such
date) or if such Determination Date is not a Rent Payment Date, all Basic
Rent accrued to such date in respect of such Unit then due and payable
and (2) to the Persons (including, without limitation, Lessor) entitled
thereto all other unpaid Supplemental Rent in respect of such Unit due on
or before such Determination Date (including any transfer taxes arising
in connection with such termination); it being understood that until such
Stipulated Loss Value is paid, there shall be no abatement or reduction
of Basic Rent.
11.3 Rent Termination. Upon the replacement of any Unit in
compliance with Section 11.2(i) or upon the payment of all sums required to be
paid pursuant to Section 11.2(ii) in respect of any Unit for which Lessee has
elected to pay (or
<PAGE> 20
16
deemed to have elected to pay pursuant to the first proviso to Section 11.2(i))
the amounts specified in paragraph 11.2(ii), the Lease Term with respect to
such Unit and the obligation to pay Rent for such Unit accruing subsequent to
the date of conveyance of such Replacement Unit pursuant to Section 11.2(i) or
the date of payment of all amounts due pursuant to Section 11.2(ii), as the
case may be, shall terminate; provided that Lessee shall be obligated to pay
all Rent in respect of such Unit which has accrued up to and including the date
of conveyance of such Replacement Unit pursuant to Section 11.2(i) or the date
of payment of all amounts due pursuant to Section 11.2(ii), as the case may be.
11.4 Disposition of Equipment; Replacement of Unit.
(a) Upon the payment of all sums required to be paid pursuant to
Section 11.2 in respect of any Unit, Lessor will convey to Lessee or its
designee all right, title and interest of Lessor in and to such Unit, "as is",
"where is", without recourse or warranty, except for a warranty against
Lessor's Liens, and shall execute and deliver to Lessee or its designee such
bills of sale and other documents and instruments as Lessee or its designee may
reasonably request to evidence such conveyance. As to each separate Unit so
disposed of, Lessee or its designee shall be entitled to any amounts arising
from such disposition, plus any awards, insurance or other proceeds and damages
received by Lessee, Lessor or the Indenture Trustee by reason of such Event of
Loss after having paid the Stipulated Loss Value attributable thereto and all
other amounts of Rent then due and payable in respect thereof, provided that if
a Lease of Event of Default shall have occurred and be continuing, the amounts
referred to in this sentence which are payable to Lessee shall be paid to
Lessor, and Lessor shall hold such amounts received as security for Lessee's
obligations hereunder subject to the provisions of Section 11.6.
(b) At the time of or prior to any replacement of any Unit,
Lessee, at its own expense, will (A) furnish Lessor with a bill of sale with
respect to the Replacement Unit, (B) cause a Lease Supplement substantially in
the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease,
and duly executed by Lessee, to be delivered to Lessor for execution and, upon
such execution, to be filed for recordation in the same manner as provided for
the original Lease Supplement in Section 16.1, (C) so long as the Indenture
shall not have been satisfied and discharged, cause an Indenture Supplement
substantially in the form of Exhibit A to the Indenture for such Replacement
Unit, to be delivered to Lessor and to the Indenture Trustee for execution and,
upon such execution, to be filed for recordation in the same manner as provided
for the original Indenture Supplement in Section 16.1, (D) furnish Lessor and
the Indenture Trustee with an opinion of Lessee's counsel (which may be
in-house counsel), to the effect that (x) the bill of sale referred to in
clause (A) above constitutes an effective instrument for the conveyance of
title to the Replacement Unit to Lessor, (y) legal and beneficial
<PAGE> 21
17
title to the Replacement Unit has been delivered to Lessor, free and clear of
all Liens except Liens described in clauses (i), (ii) and (v) of the definition
of "Permitted Liens" and Liens described in clauses (iii) and (iv) of such
definition for amounts which are not due and payable, and (z) all filings,
recordings, notations on certificates of title and other action necessary or
appropriate to perfect and protect Lessor's interests in and Indenture
Trustee's Lien on the Replacement Unit have been accomplished, (E) furnish to
the Owner Participant an acknowledgement by Lessee, in form and substance
reasonably satisfactory to the Owner Participant, that Lessee will indemnify
the Owner Participant for any adverse tax consequences resulting from such
replacement consistent with the provisions of the Tax Indemnity Agreement, and
(F) furnish such other documents and evidence as the Owner Participant, Lessor
or Indenture Trustee, or their respective counsel, may reasonably request in
order to establish the consummation of the transactions contemplated by this
Section 11.4. For all purposes hereof, upon passage of title thereto to Lessor
the Replacement Unit shall be deemed part of the property leased hereunder and
the Replacement Unit shall be deemed a "Unit" of Equipment as defined herein.
Upon such passage of title, Lessor will transfer to Lessee, without recourse or
warranty (except as to Lessor's Liens), all Lessor's right, title and interest
in and to the replaced Unit, and upon such transfer, Lessor will request in
writing that the Indenture Trustee execute and deliver to Lessee an appropriate
instrument releasing such replaced Unit from the lien of the Indenture.
11.5 Eminent Domain. In the event that during the Lease Term the
use of any Unit is requisitioned or taken by any governmental authority under
the power of eminent domain or otherwise, the Lessee's obligation to pay Basic
Rent shall continue unless and until such requisition or taking constitutes an
Event of Loss and such obligation shall be terminated in accordance with
Section 11.3. Subject to the last sentence of this Section 11.5, the Lessee
shall be entitled to receive and retain for its own account all sums payable
for any such period by such governmental authority as compensation for
requisition or taking of possession. Subject to the last sentence of this
Section 11.5, the Lessor and/or the Indenture Trustee immediately will pay to
the Lessee any amounts received by them in respect of any such acquisition or
taking of possession other than amounts received from Lessee. If a Lease Event
of Default shall have occurred and be continuing, any amounts payable to Lessee
pursuant to this Section 11.5 shall be paid to or retained by Lessor, as the
case may be, and Lessor shall hold such amounts as security for Lessee's
obligations hereunder subject to the provisions of Section 11.6.
11.6 Lease Event of Default. Any amount referred to in Section
6.1(b), 11.4(a), 11.5 or 12.2 which is to be held by Lessor subject to the
provisions of this Section 11.6 shall be held by the Lessor (or, so long as the
Lien of the Indenture has not been discharged, the Indenture Trustee) as
security for the obligations of the Lessee under this Lease, and at such time
as
<PAGE> 22
18
there shall not be continuing any such Lease Event of Default, such amount
(unless theretofore otherwise applied to the obligations of the Lessee
hereunder) shall be paid over to the Lessee provided that no such amount shall
be so held as collateral security for more than 365 days unless Lessor shall
have commenced the exercise of remedies within such period.
Section 12. Insurance.
12.1 Property Damage and Public Liability Insurance.
(a) Lessee will, at all times prior to the return of the Units to
Lessor and, if applicable, during the Initial Storage Period, at its own
expense, cause to be carried and maintained with Approved Insurers (i) physical
damage insurance in respect of each Unit in an amount at any time not less than
the Termination Value for such Unit at such time and (ii) public liability
insurance for such Units with respect to third-party personal injury and
property damage (including sudden and accidental pollution liability insurance)
and Lessee will continue to carry such insurance in such amounts and for such
risks not less comprehensive in amounts and against risks customarily insured
against by Lessee in respect of equipment owned or leased by it similar in type
to the Equipment. Any policies of insurance carried in accordance with this
Section 12.1 and any policies taken out in substitution or replacement for any
of such policies (A) shall provide that, if any such insurance is cancelled,
materially modified or terminated (other than upon normal policy expiration)
for any reason whatsoever, Lessor, Indenture Trustee and Owner Participant
shall receive 30 days' prior notice of such cancellation, material modification
or termination, and no such cancellation, material modification or termination
shall be effective against such party until receipt of such notice, (B) with
respect to insurance policies provided by insurers identified in clause (iv) of
the definition of "Approved Insurer", shall name the Owner Participant, Lessor,
as Lessor of the Equipment and in its individual capacity, and the Indenture
Trustee as additional insureds and loss payees as their interests may appear,
but only with respect to liability for which Lessee would have an indemnity
obligation under the Participant Agreement, (C) shall provide that neither the
Owner Participant, Lessor, as lessor of the Equipment and in its individual
capacity, or the Indenture Trustee shall have any responsibility for any
insurance premiums, whether for coverage before or after cancellation or
termination of any such policies as to Lessee, (D) as to the public liability
insurance referred to in this paragraph 12.1(a) shall provide that in as much
as such policies cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exceptions of limits of liability and
liability for premiums, commissions, assessments or calls (which shall be
solely a liability of Lessee), shall operate in the same manner as if there
were a separate policy or policies covering each insured, (E) shall waive any
rights of subrogation of the insurers against the Owner Participant, Lessor, as
lessor of the Equipment and in its
<PAGE> 23
19
individual capacity, and the Indenture Trustee, (F) shall provide that the
coverage of such policies shall not be invalidated because of any action or
inaction of Lessee or any other Person (other than the Owner Participant,
Lessor or the Indenture Trustee, but only in respect of their respective
coverages) and (G) shall be primary without the right of contribution. Lessee
shall, at its own expense, be entitled to make all proofs of loss and take all
other steps necessary to collect the proceeds of the insurance required
hereunder.
(b) Lessee shall, prior to the Closing Date and not less than
annually thereafter, furnish the Owner Participant, Lessor and the Indenture
Trustee with a certificate signed by the insurer or an independent insurance
broker evidencing each policy of insurance carried in accordance with this
Section 12.1.
(c) It is understood and agreed that the insurance required
hereunder may be part of the Lessee's world-wide corporate insurance program,
including with respect to risk retention and deductible limits, and, at any
time during the Lease Term Lessee may alter its insurance program in any manner
with respect to the risks (including liability) associated with the use,
possession and operation of the Equipment and similar equipment owned or leased
by Lessee, provided that any provision of this Section 12 to the contrary
notwithstanding: (1) the aggregate amount of the deductible limits of the
insurance policies carried by Lessee pursuant clauses (i) and (ii) of Section
12.1(a) at any time shall not exceed (x) $__________ (as such amount shall be
increased by escalating such amount annually in ______________, 1994 dollars by
the Inflation Index) if Lessee has an Investment Grade Rating at such time or
(y) $__________ (as such amount shall be increased by escalating such amount
annually in _____________, 1994 dollars by the Inflation Index) if Lessee does
not have an Investment Grade Rating at such time and (2) subject to such
insurance being reasonably and economically available to Lessee as measured by
prevailing domestic oil industry practice, Lessee shall carry insurance
pursuant to clause (ii) of Section 12.1(a) in respect of the Equipment
(including sudden and accidental pollution coverage) in an amount not less than
$___________________, and to the extent such amounts are not reasonably and
economically available as measured by prevailing domestic oil industry
practice, then such lesser amounts as are reasonably and economically available
as measured by prevailing domestic oil industry practice and otherwise
consistent with the terms of this Section 12.1.
12.2 Proceeds of Property Insurance. So long as no Lease Event
of Default shall have occurred and be continuing, the entire proceeds of any
property insurance or third party payments for damages to any Unit received by
Lessor or the Indenture Trustee shall be paid over to Lessee; provided that if
the proceeds received in respect of any Unit exceed $___________, such proceeds
shall be paid over to and held by Lessor and shall thereafter be released to
Lessee in order to pay the costs and expenses of the repair of such Unit, and
in any event shall be
<PAGE> 24
20
released in full to Lessee upon the completion of the repair of such Unit,
provided, further, that if such damages constitute an Event of Loss with
respect to such Unit, such proceeds shall be released in full to Lessee upon
Lessee's replacement of such Unit pursuant to Section 11.2(i) or, if such Unit
is not replaced pursuant to Section 11.2(i), shall be applied towards the
satisfaction of Lessee's payment obligations pursuant to Section 11.2(ii).
Anything to the contrary in the preceding sentence notwithstanding, if a Lease
Event of Default shall have occurred and be continuing, such proceeds shall be
paid to Lessor, and Lessor shall hold such proceeds as security for Lessee's
obligations hereunder subject to the provisions of Section 11.6.
12.3 Additional Insurance. At any time Lessor (either directly
or in the name of the Owner Participant) may at its own expense carry insurance
with respect to its interest in the Units, provided that such insurance does
not interfere with Lessee's ability to insure the Equipment as required by this
Section 12 or adversely affect Lessee's insurance or the cost thereof, it being
understood that all salvage rights to each Unit shall remain with Lessee's
insurers at all times. Any insurance payments received from policies
maintained by Lessor pursuant to the previous sentence shall be retained by
Lessor without reducing or otherwise affecting Lessee's obligations hereunder.
Section 13. Lessor's Inspection Rights. Lessor shall have the
right, but not the obligation, at its sole cost, expense and risk (including,
without limitation, the risk of personal injury or death), by its authorized
representatives, to inspect the Equipment and Lessee's records with respect
thereto during Lessee's normal business hours and upon reasonable prior notice
to Lessee; provided, however, that Lessee shall not be liable for any injury
to, or the death of, any Person exercising, either on behalf of Lessor or any
prospective user, the rights of inspection granted under this Section 13 unless
caused by Lessee's gross negligence or wilful misconduct. No inspection
pursuant to this Section 13 shall interfere with the use, operation or
maintenance of the Equipment or the normal conduct of Lessee's business, and
Lessee shall not be required to undertake or incur any additional liabilities
in connection therewith. Lessor's inspection rights under this Section 13
shall be limited to once per calendar year prior to the last 360 days of the
Lease Term and shall be limited to no more than three times during the last 360
days of such Lease Term; provided that if a Lease Default or Lease Event of
Default shall have occurred and be continuing, the limitation as to the
frequency of the Lessor's inspection rights contained in this sentence shall
not be applicable.
Section 14. Events of Default.
The following events shall constitute Events of Default hereunder
(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
<PAGE> 25
21
of any court or any order, rule or regulation of any administrative or
governmental body) and each such Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have been remedied in
accordance with the express terms hereof:
(a) Lessee shall fail to make any payment of Basic Rent,
Stipulated Loss Value or Termination Value within 10 Business Days after
the same shall have become due; or
(b) Lessee shall fail to make any payment of Supplemental Rent,
including indemnity or tax indemnity payments (but excluding Stipulated
Loss Value or Termination Value, which are subject to clause (a) above)
after the same shall have become due and such failure shall continue
unremedied for 15 Business Days after receipt by Lessee of written notice
of such failure from the Owner Participant, Lessor or the Indenture
Trustee; or
(c) any representation or warranty made by Lessee in any
Operative Agreement (other than the Tax Indemnity Agreement) to which
Lessee is a party or any certificate or document delivered in connection
with the transactions contemplated by the Operative Agreements shall
prove to be untrue or incorrect in any material respect when made and
such untruth or incorrectness (if subject to cure) shall continue to be
material and unremedied for a period of 30 days after receipt by Lessee
of written notice thereof from Lessor or the Indenture Trustee; or
(d) Lessee shall commence a voluntary case in the United States
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of Lessee or
of any substantial part of its property, or shall make any general
assignment for the benefit of creditors or shall fail generally to pay
its debts as they become due; or
(e) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee in an involuntary case in
the United States under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Lessee or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs and such decree or
order shall remain unstayed and in effect for a period of 90 consecutive
days; or
<PAGE> 26
22
(f) Lessee shall fail to observe or perform any other of the
covenants or agreements to be observed or performed by Lessee under any
Lessee Agreement (other than the Tax Indemnity Agreement) and such
failure shall continue unremedied for 60 days after notice from Lessor,
the Owner Participant or the Indenture Trustee to Lessee, specifying the
failure and demanding the same to be remedied; provided that, if such
failure is capable of being remedied, no such failure shall constitute an
Event of Default hereunder for a period of 360 days after receipt of such
notice so long as Lessee is diligently proceeding to remedy such failure;
provided that, notwithstanding anything to the contrary contained in this
Lease, any failure of Lessee to perform or observe any covenant or agreement
herein shall not constitute an Event of Default under paragraph (f) above if
such failure is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as Lessee is continuing to comply with
the applicable terms of Section 11 and 12.
Section 15. Remedies.
15.1 Remedies. Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, Lessor may, at
its option, declare this Lease to be in default by a written notice to Lessee;
and at any time thereafter, so long as Lessee shall not have remedied all
outstanding Events of Default, Lessor may do one or more of the following 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:
(a) proceed by appropriate court action or actions, either at law
or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, Lessor may demand that
Lessee, and Lessee shall, upon written demand of Lessor and at Lessee's
expense forthwith return any or all Units of the Equipment to Lessor or
its order in the manner and condition required by, and otherwise in
accordance with all of the provisions of Section 6.2 and Section 15.4; or
Lessor with only such notice as is reasonably required to comply with
Lessee's standard and customary safety practices (but in no event no more
than 1 Business Day) may by Lessor or its agents enter upon the premises
of Lessee or other premises where any of the Equipment may be located and
take possession of and remove all or any of the Units and thenceforth
hold, use, operate, sublease, possess and enjoy the same free from any
right of Lessee, or its sublessees and successors or assigns, to use such
Units for any purpose whatever and without any duty to account to Lessee
with respect to the proceeds thereof (except to the extent provided in
paragraph (e) below);
<PAGE> 27
23
(c) with or without taking possession sell any Unit at public or
private sale, as Lessor may determine, with not less than 10 Business
Days prior notice to Lessee but free and clear of any rights of Lessee
and without any duty to account to Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (e)
below), in which event Lessee's obligation to pay Basic Rent with respect
to such Unit hereunder due for any periods subsequent to the date of such
sale shall terminate (except to the extent that Basic Rent is to be
included in computations under paragraph (d) or (e) below if Lessor
elects to exercise its rights under either of said paragraphs);
(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 any Unit, Lessor, by written notice to
Lessee specifying a payment date (which date shall be a Determination
Date) which shall be not earlier than 30 days after the date of such
notice, may demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the Basic
Rent for such Unit due after the payment date specified in such notice),
all Rent due and payable (other than Basic Rent payable in "advance" on
such payment date), or accrued, for such Unit as of the payment date
specified in such notice plus an amount equal to the excess, if any, of
the Stipulated Loss Value for such Unit computed as of the payment date
specified in such notice over the fair market sales value (as determined
pursuant to Section 15.5) of such Unit as of the payment date specified
in such notice;
(e) if Lessor shall have sold any Unit pursuant to paragraph (c)
above, Lessor, in lieu of exercising its rights under paragraph (d) above
with respect to such Unit may, if it shall so elect, demand that Lessee
pay to Lessor, and Lessee shall pay to Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for
such Unit due subsequent to the Rent Payment Date next preceding such
sale), any accrued and unpaid Rent for such Unit as of the date of such
sale and, if that date is a Rent Payment Date, the Basic Rent due on that
date (other than Basic Rent payable in "advance" on such date), plus the
amount, if any, by which the Stipulated Loss Value of such Unit computed
as of the Rent Payment Date next preceding the date of such sale or, if
such sale occurs on a Rent Payment Date, then computed as of such Rent
Payment Date, exceeds the net proceeds of such sale;
(f) in lieu of exercising its rights pursuant to paragraph (b),
(c), (d) or (e) above with respect to such Unit, Lessor by written notice
to Lessee specifying a payment date (which date shall be a Determination
Date)
<PAGE> 28
24
which shall not be earlier than 30 days after the date of such notice,
may demand that Lessee pay to Lessor, and Lessee shall pay Lessor, on the
payment date specified in such notice, as liquidated damages for loss of
a bargain and not as a penalty (in lieu of the Basic Rent for such Unit
due after the payment date specified in such notice) the sum of (A) all
Rent due and payable (other than Basic Rent payable in "advance" on such
date), or accrued, for such Unit as of the payment date specified in such
notice plus (B) an amount equal to the Stipulated Loss Value for such
Unit computed as of the payment date specified in such notice; and upon
such payment of liquidated damages and all transfer taxes which are
payable Lessor will transfer to Lessee, without recourse or warranty
(except as to Lessor's Liens), all Lessor's right, title and interest in
and to such Unit and upon such transfer, Lessor will request in writing
that the Indenture Trustee execute and deliver to Lessee an appropriate
instrument releasing such Unit from the lien of the Indenture; and/or
(g) Lessor may rescind or terminate this Lease or may exercise
any other right or remedy that may be available to it under applicable
law.
In addition, Lessee shall be liable, except as otherwise provided
above, for any and all unpaid Supplemental Rent due hereunder before or during
the exercise of any of the foregoing remedies, and for reasonable legal fees
and other reasonable costs and expenses incurred by reason of the occurrence of
any Event of Default or the exercise of Lessor's remedies with respect thereto,
including without limitation the repayment in full of any costs and expenses
necessary to be expended in repairing any Unit in order to cause it to be in
compliance with all maintenance and regulatory standards imposed by this Lease
and expenses, including reasonable legal fees, involved in any appearance by
Lessor or the Indenture Trustee in any bankruptcy or insolvency proceeding with
respect to Lessee.
15.2 Cumulative Remedies. The remedies in this Lease provided in
favor of Lessor shall not be deemed exclusive, but shall be cumulative and
shall be in addition to all other remedies in its favor existing at law or in
equity. Lessee hereby waives any mandatory requirements of law, now or
hereafter in effect, which might limit or modify any of the remedies herein
provided, to the extent that such waiver is permitted by law.
15.3 No Waiver. No delay or omission to exercise any right,
power or remedy accruing to Lessor upon any breach or default by Lessee under
this Lease shall impair any such right, power or remedy of Lessor, nor shall
any such delay or omission be construed as a waiver of any breach or default,
or of any similar breach or default hereafter occurring; nor shall any waiver
of a single breach or default be deemed a waiver of any subsequent breach or
default.
<PAGE> 29
25
15.4 Lessee's Duty to Return Equipment Upon an Event of Default.
If Lessor or any assignee of Lessor shall terminate this Lease pursuant to
Section 15 hereof, Lessee shall forthwith deliver possession of the Equipment
to Lessor. For the purpose of delivering possession of any Unit to Lessor as
above required, Lessee shall at its own cost, expense and risk (except as
hereinafter stated):
(a) forthwith place such Equipment upon such storage areas of
Lessee, at the expense of Lessee, as Lessor may designate or, in the
absence of such designation, as Lessee may select with prior written
notification to Lessor; and
(b) permit Lessor to store such Equipment on such storage areas
without charge for insurance, rent or storage until the earlier of (x) 60
days after the date such storage begins, or (y) the date on which such
Equipment has been sold, leased or otherwise disposed of by Lessor, and
during such period of storage Lessee shall continue to maintain all
insurance required by Section 12.1 hereof.
All Equipment returned shall be in the condition required by Section 6.2
hereof.
15.5 Fair Market Sales Value. For purposes of Section 15.1(d),
the "fair market sales value" of a Unit of Equipment shall be the sales value
that would be obtained in an arm's length transaction between an informed and
willing buyer under no compulsion to buy and an informed and willing seller
under no compulsion to sell, based upon the actual condition and location of
the Unit of Equipment in question, which value shall be determined by an
appraiser selected by Lessor and reasonably acceptable to Lessee.
Section 16. Further Assurances.
16.1 Further Assurances. Lessee will duly execute and deliver to
Lessor and the Indenture Trustee such further documents and assurances and take
such further action as may be required under applicable law in order to
effectively establish and protect the rights and remedies created in favor of
Lessor, the Owner Participant and the Indenture Trustee hereunder and under the
Indenture, including, without limitation, the execution and delivery of
applications for certificates of title, supplements or amendments hereto and to
the Indenture, in recordable form, subjecting to this Lease and to the
Indenture any Replacement Unit and the recording or filing of counterparts
hereof or thereof in accordance with the laws of such jurisdiction within the
United States and UCC financing statements as required to maintain the right,
title and interest of Lessor in and to the Equipment and the remainder of the
Trust Estate and to maintain the validity and perfection of the Lien of the
Indenture on the Indenture Estate or as Lessor or the Indenture Trustee may
from time to time deem advisable; provided
<PAGE> 30
26
that in connection with the foregoing Lessee shall also take such further
action as is reasonably requested by Lessor.
16.2 Expenses. Lessee will pay all costs, charges and expenses
(including, without limitation, reasonable attorneys fees and expenses)
incident to any such filing, refiling, recording and rerecording or depositing
and redepositing of any such instruments, UCC filings or incident to the taking
of such action.
Section 17. Lessor's Right to Perform.
If Lessee fails to make any payment required to be made by it
hereunder or fails to perform or comply with any of its other agreements
contained herein which requires the payment of money, Lessor may itself make
such payment or perform or comply with such agreement which requires the
payment of money, after giving prior written notice thereof to Lessee, but
shall not be obligated hereunder to do so, and the amount of such payment,
together with interest thereon at the Late Rate, to the extent permitted by
applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.
Section 18. Assignment.
18.1 Assignment by Lessor. Lessee and Lessor hereby confirm that
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to the Indenture Trustee the Indenture, which is intended to
assign as collateral security and grant a lien and security interest in favor
of the Indenture Trustee in, to and under the Equipment, this Lease and the
Rent payable hereunder (excluding Excepted Property), all as more explicitly
set forth in the Indenture. Lessor agrees that it shall not otherwise assign
or convey its right, title and interest in and to this Lease, the Equipment or
any Unit, except (i) as expressly permitted by and subject to the provisions of
the Participation Agreement, the Trust Agreement and the Indenture or (ii)
following completion of foreclosure or similar proceedings pursuant to the
Indenture or deed in lieu thereof. The Lessee hereby consents to such
assignment and to the creation of such lien and security interest and consents
to the terms and provisions thereof. The Lessee (a) acknowledges that the
Indenture provides for the exercise by the Indenture Trustee of all rights of
the Lessor hereunder to give any consents, approvals, waivers, notices or the
like, to make any elections, demands or the like, or to take any other
discretionary action hereunder, except as specifically set forth in the
Indenture, (b) acknowledges receipt of an executed counterpart of the Indenture
as in effect on the date hereof and consents to all of the provisions thereof
and (c) agrees that, to the extent provided in the Indenture, the Indenture
Trustee shall have all the rights of the Lessor hereunder as if the Indenture
Trustee had originally been named as the Lessor herein, to the extent provided
in the Indenture. Notwithstanding any provision of this Lease or any other
Operative Agreement but without prejudice to the Lessor's
<PAGE> 31
27
and the Owner Participant's rights expressly provided for in the Indenture, so
long as the Lessor's interest in this Lease or the Equipment is subject to the
Lien of the Indenture, the Lessee shall make all payments of Rent, and all
other amounts payable hereunder to the Lessor, other than Excepted Property, to
the Indenture Trustee as provided in Section 3.6, and the obligation of Lessee
to make all such payments shall not be subject to any defense, counterclaim,
setoff or other right or claim of any kind which the Lessee may be able to
assert against the Lessor or the Owner Participant in an action brought by
either thereof on this Lease.
18.2 Assignment by Lessee. Except in the case of any requisition
for use by an agency or instrumentality of the United States government
referred to in Section 11.1, Lessee will not, without the prior written consent
of Lessor, assign any of its rights hereunder, except as permitted in the
Participation Agreement, provided that Lessee may assign its rights and/or
obligations hereunder to any corporation controlled by, controlling or under
common control with Lessee, so long as Lessee remains primarily liable
hereunder. Any sublease in accordance with Section 8.3 shall not be construed
as an assignment of Lessee's rights hereunder.
18.3 Sublessee's Performance and Rights. Any obligation imposed
on Lessee in this Lease shall require only that Lessee perform or cause to be
performed such obligation, even if stated herein as a direct obligation, and
the performance of any such obligation by any permitted assignee, sublessee or
transferee under an assignment, sublease or transfer agreement then in effect
and permitted by the terms of this Lease shall constitute performance by Lessee
and discharge such obligation by Lessee. Except as otherwise expressly
provided herein, any right granted to Lessee in this Lease shall grant Lessee
the right to exercise such right or permit such right to be exercised by any
such assignee, sublessee or transferee, provided that Lessee's purchase and
renewal options set forth in Section 22 may be exercised only by Lessee. The
inclusion of specific references to obligations or rights of any such assignee,
sublessee or transferee in certain provisions of this Lease shall not in any
way prevent or diminish the application of the provisions of the immediately
preceding two sentences with respect to obligations or rights in respect of
which specific reference to any such assignee, sublessee or transferee has not
been made in this Lease.
Section 19. Net Lease, Etc.
This Lease is a net lease and Lessee's obligation to pay all Rent
payable hereunder shall, subject to Section 3.5, be absolute, unconditional and
irrevocable and shall not be affected by any circumstance of any character
including, without limitation, (i) any set-off, abatement, counterclaim,
suspension, recoupment, reduction, rescission, defense or other right that
Lessee may have (other than pursuant to Section 3.5) against
<PAGE> 32
28
Lessor, the Owner Participant, the Indenture Trustee or any holder of an
Equipment Note, any vendor or manufacturer of any Unit, or any other Person for
any reason whatsoever, (ii) any defect in or failure of title, merchantability,
condition, design, compliance with specifications, operation or fitness for use
of all or any part of any Unit, or any interruption or cessation in or
prohibition of the use or possession of any Unit for any reason whatsoever,
(iii) any damage to, or removal, abandonment, requisition, taking,
condemnation, loss, theft or destruction of all or any part of any Unit or any
interference, interruption, restriction, curtailment or cessation in the use or
possession of any Unit by Lessee or any other Person for any reason whatsoever
or of whatever duration, (iv) any insolvency, bankruptcy, reorganization or
similar proceeding by or against Lessee, Lessor or any other Person, (v) the
invalidity, illegality or unenforceability of this Lease, any other Operative
Agreement, or any other instrument referred to herein or therein or any other
infirmity herein or therein or any lack of right, power or authority of Lessee
to enter into this Lease or any other Operative Agreement to which it is a
party or to perform the obligations hereunder or thereunder or consummate the
transactions contemplated hereby or thereby or any doctrine of force majeure,
impossibility, frustration or failure of consideration, or (vi) any other
circumstance or happening whatsoever, foreseeable or unforeseeable, whether or
not similar to any of the foregoing. To the extent permitted by applicable
law, Lessee hereby waives any and all rights which it may now have or which at
any time thereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease with respect to any Unit,
except in accordance with the express terms hereof. Each payment of Rent made
by Lessee hereunder shall be final and Lessee shall not seek or have any right
to recover all or any part of such payment from Lessor or any Person for any
reason whatsoever. Nothing contained herein shall be construed to waive any
claim which Lessee might have under any of the Operative Agreements or
otherwise or to limit the right of Lessee to make any claim it might have
against Lessor or any other Person or to pursue such claim in such manner as
Lessee shall deem appropriate, except as provided above. If for any reason
whatsoever this Lease shall be terminated by operation of law or otherwise
except as expressly provided herein, the Lessee shall nonetheless pay an amount
equal to each Rent payment at the time and in the manner that such payment
would become due and payable hereunder if this Lease had not been terminated.
Section 20. Notices.
Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices provided for herein shall be in writing
or by a telecommunications device capable of creating a written record, and any
such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by express mail or courier service, (b) in the
case of notice by United States mail, certified or
<PAGE> 33
29
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly confirmed by any
of the methods set forth in clauses (a) or (b) above or this clause (c), in
each case addressed to each party hereto at its address set forth below or, in
the case of any such party hereto, at such other address as such party may from
time to time designate by written notice to the other parties hereto:
If to the Lessee: Phillips Petroleum Company
3 A3 Phillips Building
Bartlesville, Oklahoma
Attention: Assistant Treasurer
Telephone:
Facsimile:
Confirmation No.:
If to the Owner Trustee: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Telephone:
Facsimile:
Confirmation No.:
with a copy to: the Owner Participant at the address set
forth below
If to the Owner
Participant:
Attention:
Telephone:
Facsimile:
If to the Indenture
Trustee or the Pass
Through Trustee: Shawmut Bank Connecticut, National
Association, ABA No. 011900445
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
(Phillips Trust No. 94-__)
Telephone:
Facsimile:
Confirmation No.:
Section 21. (Intentionally Omitted.)
Section 22. Purchase Options; Renewal Options.
<PAGE> 34
30
22.1 Election to Retain or Return Equipment. Not less than 120
days prior to the end of the Basic Term or any applicable Renewal Term with
respect to any Unit of Equipment, Lessee shall give Lessor irrevocable notice
of its decision to return or retain such Unit of Equipment. If Lessee elects
to retain such Unit of Equipment, Lessee shall comply with Section 22.2 and/or
22.3 hereof, as it may elect in accordance with the provisions thereof
including the notice requirements stated therein, and if Lessee elects to
retain such Unit of Equipment but fails to comply with the notice requirements
of Section 22.2 or 22.3 hereof, Lessee shall be deemed to have irrevocably
elected to renew the Lease for a Fair Market Renewal Term of one year and
Section 22.3(b) (other than the notice provisions thereof) shall be applicable
to such renewal. If Lessee fails to give the 120 days' notice required by this
Section 22.1, Lessee shall be deemed to have irrevocably elected to return such
Unit of Equipment at the end of the Basic Term or any applicable Renewal Term,
as the case may be, in accordance with Section 6.
22.2 Purchase Option. So long as no Payment Event of Default
shall have occurred and be continuing and Lessee shall have duly given notice
with respect to not less than 10 Units of Equipment pursuant to Section 22.1
and the next succeeding sentence of this Section 22.2, Lessee shall have the
right at its option to purchase such Units of Equipment at the expiration of
the Basic Term or any Renewal Term then in effect, at a price equal to the Fair
Market Sales Value of such Units (as determined pursuant to Section 22.4).
Lessee shall give Lessor irrevocable written notice not less than 60 days prior
to the end of the Basic Term or any Renewal Term then in effect for such Units
of its election to exercise the purchase option in respect of such Units
provided for in this Section 22.2. Upon payment of the purchase price for any
such Unit, together with all other amounts due and owing by Lessee under the
Operative Agreements, Lessor shall deliver a bill of sale transferring and
assigning to Lessee all right, title and interest of Lessor in and to such Unit
on an "as-is" "where-is" basis and containing a warranty against Lessor's
Liens. Lessor shall not be required to make any other representation or
warranty as to the condition of the Units or any other matters, and may
specifically disclaim any such representations or warranties.
22.3 Renewal Options. (a) So long as no Lease Default or Lease
Event of Default shall have occurred and be continuing and Lessee shall have
duly given notice with respect to any Unit of Equipment pursuant to Section
22.1 and the next succeeding sentence of this Section 22.3(a), and subject to
the last sentence of this Section 22.3(a), Lessee shall have the right at its
option to renew the Lease with respect to such Unit of Equipment upon the
expiration of the Basic Term for such Unit for a period of at least one year
(such period, the "Fixed Rate Renewal Term") in accordance with this Section
22.3. Lessee shall give Lessor irrevocable written notice of the length of the
proposed Fixed Rate Renewal Term not less than 60 days prior to the end of the
Basic Term or any Fixed Rate Renewal Term then in
<PAGE> 35
31
effect for such Unit. The Basic Rent for such Unit during any Fixed Rate
Renewal Term shall be 50% of the average of the semi-annual Basic Rent
installments payable hereunder for such Unit during the Basic Term payable
semi-annually in arrears. Notwithstanding anything herein to the contrary,
Lessee shall be only entitled to renew the Lease with respect to a Unit for a
proposed Fixed Rate Renewal Term if Lessor has received an appraisal pursuant
to Section 22.4 in form reasonably acceptable to Lessor confirming that:
(x) the elapsed time measured from the Closing Date to the end of
the proposed Fixed Rate Renewal Term does not exceed 80% of the
reappraised estimate economic useful life of such Unit, as determined
pursuant to Section 22.4; and
(y) at the end of the proposed Fixed Rate Renewal Term the
reasonably anticipated Fair Market Sales Value of such Unit, (without
giving the effect of inflation or deflation) is not less than 20% of the
Equipment Cost of such Unit, as determined pursuant to Section 22.4.
(b) So long as no Lease Default or Lease Event of Default shall
have occurred and be continuing and Lessee shall have duly given notice with
respect to any Unit pursuant to Section 22.1 and by the next succeeding
sentence of this Section 22.3(b), Lessee shall have the right to renew this
Lease with respect to such Unit upon the expiration of the Basic Term or any
Renewal Term then in effect for such Unit for a period of at least one year
(such period, a "Fair Market Renewal Term"). Lessee shall give Lessor
irrevocable written notice of the length of the proposed Fair Market Renewal
Term not less than 60 days prior to the end of the Basic Term or any Renewal
Term then in effect for such Unit. The Basic Rent for a Unit leased during the
Fair Market Renewal Term shall be the Fair Market Rental Value thereof, as
determined pursuant to Section 22.4, payable semi-annually in arrears.
(c) The aggregate length of the Renewal Terms for each Unit shall
not exceed eight years.
22.4 Appraisal. At least 60 days prior to the date Lessee is
required to notify Lessor of its election of any purchase option pursuant to
Section 22.2 or renewal option pursuant to Section 22.3 with respect to any
Unit of Equipment, Lessee will notify Lessor of its preliminary intent to
exercise one of such options with respect to such Unit and propose an appraiser
(the "Appraiser") to conduct an appraisal of such Unit in order to establish
(a) the Fair Market Sales Value of such Unit at the commencement of and the
expiration of the proposed Renewal Term, (b) the Fair Market Rental Value of
such Unit during the proposed Renewal Term and (c) the remaining useful life of
such Unit and the maximum length of a renewal term for such Unit such that (i)
the elapsed time measured from the Closing Date to the end of such renewal term
does not exceed 80% of the remaining useful life of such Unit and (ii) at the
end of
<PAGE> 36
32
such renewal term, the reasonably anticipated Fair Market Sales Value of such
Unit is not less than 20% of the Equipment Cost for such Unit (without giving
effect to inflation or deflation); provided that if Lessee irrevocably notifies
Lessor that Lessee will not elect the fixed rate renewal option with respect to
such Unit pursuant to Section 22.3(a), the Appraiser shall not establish the
matters set forth in clause (c) above. Lessee will consult with Lessor prior
to selecting the Appraiser with the intent of selecting a mutually acceptable
Appraiser. If no such agreement is reached within 10 days from the date Lessee
notifies Lessor of its intent to select the Appraiser, Lessee will retain the
Appraiser, and Lessor will retain an appraiser (the "Lessor Appraiser") within
20 days of the date Lessee notifies Lessor of its intent to select the
Appraiser. Lessee will pay all fees and expenses of the Appraiser, and Lessor
will pay all fees and expenses of Lessor Appraiser. The Appraiser and the
Lessor Appraiser will consult for a period of not more than 10 days with the
intent of selecting a consensus appraiser (whose fees and expenses will be
shared equally by Lessee and Lessor) to complete the appraisal within 20 days
of such selection. If the Appraiser and Lessor Appraiser cannot agree within
the allotted time period, appraisal values and amounts will be determined by
binding arbitration pursuant to the rules of the American Arbitration
Association, the costs of which will be shared equally by Lessee and Lessor.
22.5 Stipulated Loss Value and Termination Value During Renewal
Term. All of the provisions of this Lease, other than Section 10, shall be
applicable during any renewal term of a Unit, except as specified in the next
succeeding sentence. During any Renewal Term, the Stipulated Loss Value and
Termination Value of such Unit shall be determined on the basis of the Fair
Market Sales Value of such Unit as of the first day of such Renewal Term,
reduced in equal monthly increments to the Fair Market Sales Value of such Unit
as of the last day of such Renewal Term; provided that in no event during any
Fixed Rate Renewal Term shall the Stipulated Loss Value or Termination Value of
any Unit be less than 20% of the Equipment Cost of such Unit.
22.6 Early Buy-Out Purchase Option.
(a) So long as no Payment Event of Default shall have occurred
and be continuing, on the Early Buyout Date, Lessee shall have the right, at
its option, to purchase any or all Units of Equipment (but in no event less
than 10 Units). In order to exercise such option to purchase such Units of
Equipment Lessee shall provide Lessor with a revocable written notice not less
than 90 days prior to the Early Buyout Date therefor, and if such notice is not
revoked at least 30 days prior to such Early Buyout Date, such notice shall
become irrevocable.
(b) In the event that Lessee shall have elected to purchase Units
of Equipment pursuant to Section 22.6(a), Lessee at its option shall on the
related Early Buyout Date either:
<PAGE> 37
33
(i) pay to Lessor (1) all unpaid Basic Rent with respect to such
Units due and payable on or prior to such Early Buyout Date (other than
the Basic Rent payable in "advance" on such date), (2) an amount equal to
the Early Buyout Price for such Units, (3) an amount equal to any
Make-Whole Amount in respect of the principal amount of the Equipment
Notes to be prepaid in accordance with Section 2.10(a) of the Indenture,
(4) applicable transfer taxes, if any, and (5) other reasonable costs and
expenses incurred by Lessor and the Owner Participant in connection with
Lessee's election, provided that so long as no Lease Default or Lease
Event of Default shall have occurred and be continuing, Lessee may elect
to pay the Early Buyout Price in installments (but in no event over a
period greater than 12 months from the date of exercise) as Supplemental
Rent, secured as provided herein in which case, Lessee shall pay to
Lessor, on each EBO Installment Payment Date for such Units, the EBO
Installment Payment Amount in respect of such Units for such date; or
(ii) assume all of the rights and obligations of Lessor under the
Indenture in respect of the principal amount of the outstanding Equipment
Notes (excluding any obligations or liabilities of Owner Trustee in its
individual capacity incurred on or prior to such Early Buyout Date, which
obligations and liabilities shall remain the sole responsibility of the
Owner Trustee in its individual capacity) in accordance with Section 10.3
of the Participation Agreement and Article VII of the Indenture and
simultaneously shall pay to Lessor (1) all unpaid Basic Rent with
respect to such Units due and payable on or before such Early Buyout Date
(other than Basic Rent payable in "advance" on such date) and (2) the
amount of the excess, if any, of such Early Buyout Price over an amount
equal to the principal of the outstanding Equipment Notes so assumed on
such Early Buyout Date, after taking into account any payments of
principal made in respect of such outstanding Equipment Notes on such
Early Buyout Date, provided that so long as no Lease Default or Lease
Event of Default shall have occurred and be continuing, Lessee may by
notice to Lessor concurrently with notice of its election to assume such
obligations of the Owner Trustee, elect to pay the amount calculated
pursuant to clause (ii)(2) above in installments as Supplemental Rent, in
which case, Lessee shall pay to Lessor on the first EBO Installment
Payment Date for such Unit, the excess, if any, of (x) the EBO
Installment Payment Amount in respect of such Unit for such date over (y)
the principal amount of the outstanding Equipment Notes to be assumed on
account of such Units on such date, and shall pay to Lessor on each
subsequent EBO Installment Payment Date for such Unit, the EBO
Installment Payment Amount in respect of such Unit for such date.
(c) If Lessee elects to pay the Early Buyout Price for a Unit in
full on the Early Buyout Date for such Unit or in
<PAGE> 38
34
installments commencing on the Early Buyout Date for such Unit, but, in
connection therewith, does not elect to assume the obligations of the Owner
Trustee in respect of any Equipment Notes in accordance with Section 10.3 of
the Participation Agreement and Article VII of the Indenture, upon payment in
full of all amounts payable in accordance with the immediately preceding
sentence (including, in the case of an election by Lessee to pay such Early
Buyout Price in installments, payment in full of all such installments), Lessor
will convey to Lessee or its designee all right, title and interest of Lessor
in and to such Unit, "as is", "where is", without recourse or warranty, except
for a warranty against Lessor's Liens, and shall execute and deliver to Lessee
or its designee such bills of sale and other documents and instruments as
Lessee or its designee may reasonably request to evidence such conveyance.
(d) If Lessee elects to pay the Early Buyout Price for a Unit in
installments (and shall have paid in full the installment thereof due on such
Early Buyout Date), the following provisions shall also be applicable: (i) no
Basic Rent in respect of such Unit shall be payable after such Early Buyout
Date, (ii) the Stipulated Loss Value of such Unit determined at any time after
such Early Buyout Date shall be equal to the aggregate amount of the
installments of such Early Buyout Price which have not been paid at the time of
such determination and (iii) such installments, at the option of the Lessor,
shall, subject to Section 10.3 of the Participation Agreement, be secured by a
security interest in such Units, and the Lessee shall execute and deliver such
security agreement and instruments of further assurance as the Lessor shall
reasonably request, all at the expense of the Lessee.
Section 23. Limitation of Lessor's Liability.
It is expressly agreed and understood that all representations,
warranties and undertakings of Lessor hereunder (except as expressly provided
herein) shall be binding upon Lessor only in its capacity as Owner Trustee
under the Trust Agreement and in no case shall Wilmington Trust Company be
personally liable for or on account of, any statements, representations,
warranties, covenants or obligations stated to be those of Lessor hereunder,
except that Lessor (or any successor Owner Trustee) shall be personally liable
for its gross negligence or willful misconduct and for its breach of its
covenants, representations and warranties contained herein to the extent
covenanted or made in its individual capacity.
Section 24. Miscellaneous.
24.1 Governing Law; Severability. This Lease, and any
extensions, amendments, modifications, renewals or supplements hereto shall be
governed by and construed in accordance with the internal laws and decisions of
the State of New York; provided, however, that the parties shall be entitled to
all rights conferred by any applicable Federal statute, rule or regulation.
<PAGE> 39
35
Whenever possible, each provision of this Lease shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Lease shall be prohibited by or invalid under the laws of any
jurisdiction, such provision, as to such jurisdiction, shall be, to the extent
permitted by law, ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Lease in any other jurisdiction.
24.2 Execution in Counterparts. This Lease may be executed in
any number of counterparts, each executed counterpart constituting an original
and in each case such counterparts shall constitute but one and the same
instrument; provided, however, that to the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code) no
security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page
hereof, which counterpart shall constitute the only "original" hereof for
purposes of the Uniform Commercial Code.
24.3 Headings and Table of Contents: Section References. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this
Lease.
24.4 Successors and Assigns. This Lease shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective permitted successors and assigns.
24.5 True Lease. It is the intent of the parties to this Lease
that it will be a true lease and not a "conditional sale," and that Lessor
shall at all times be considered to be the owner of each Unit which is the
subject of this Lease for the purposes of all Federal, state, city and local
income taxes or for franchise taxes measured by income, and that this Lease
conveys to Lessee no right, title or interest in any Unit except as lessee.
Nothing contained in this Section 24.5 shall be construed to limit Lessee's use
or operation of any Unit or constitute a representation, warranty or covenant
by Lessee as to tax consequences.
24.6 Amendments and Waivers. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
<PAGE> 40
36
24.7 Business Days. If any payment is to be made hereunder or
any action is to be taken hereunder on any date that is not a Business Day,
such payment or action otherwise required to be made or taken on such date
shall be made or taken on the immediately succeeding Business Day with the same
force and effect as if made or taken on such scheduled date and as to any
payment (provided any such payment is made on such succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business
Day.
24.8 Directly or Indirectly. Where any provision in this Lease
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
24.9 Incorporation by Reference. (a) The payment obligations
set forth in Sections 7.1 and 7.2 of the Participation Agreement are hereby
incorporated by reference.
(b) Any provision of any other Operative Agreement stated herein
to be incorporated by reference shall be construed as having been incorporated
herein with the same effect as if such provision had been set forth in this
Lease in full, and shall survive any termination of the Operative Agreement
from which such provision is incorporated.
<PAGE> 41
37
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be
duly executed and delivered on the day and year first above written.
LESSOR:
WILMINGTON TRUST COMPANY,
not in its individual capacity
except as otherwise expressly
provided but solely as Owner
Trustee
By:________________________
Name:
Title:
LESSEE:
PHILLIPS PETROLEUM COMPANY
By:________________________
Name:
Title:
* Receipt of the original counterpart of the foregoing Lease is
hereby acknowledged on this ___ day of __________, 1994.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Indenture Trustee
By:________________________
Name:
Title:
__________________________________
* This acknowledgment executed in the original counterpart only.
<PAGE> 42
EXHIBIT A
EQUIPMENT LEASE AGREEMENT
(PHILLIPS TRUST NO. 94-__)
________________________________________________________________________________
FORM OF
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. ___
Dated as of ______________, 19__
between
WILMINGTON TRUST COMPANY,
Lessor
and
PHILLIPS PETROLEUM COMPANY,
Lessee
________________________________________________________________________________
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS
LEASE SUPPLEMENT, THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME
DUE UNDER THE LEASE HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE
SUBJECT TO A SECURITY INTEREST IN FAVOR OF, SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE
UNDER A TRUST INDENTURE AND SECURITY AGREEMENT (PHILLIPS TRUST NO. 94-__),
DATED AS OF ____________, 1994, BETWEEN SAID INDENTURE TRUSTEE, AS SECURED
PARTY, AND LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST
MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN SECTION
20 OF THE LEASE. SEE SECTION 24.2 OF THE LEASE FOR INFORMATION CONCERNING THE
RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
________________________________________________________________________________
<PAGE> 43
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. ___
LEASE SUPPLEMENT (Phillips Trust No. 94-__) NO. __ dated
____________, 19__ (this "Lease Supplement") between WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner Trustee ("Lessor") under the
Trust Agreement, and PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Lessee");
W I T N E S S E T H:
Lessor and Lessee have heretofore entered into that certain
Equipment Lease Agreement (Phillips Trust No. 94-__) dated as of
_______________, 1994 (the "Lease"). The Lease provides for the execution and
delivery of a Lease Supplement substantially in the form hereof for the purpose
of confirming the acceptance and lease of the Units under the Lease as and when
delivered by Lessor to Lessee in accordance with the terms thereof. Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
specified in Appendix A to the Lease;
NOW, THEREFORE, in consideration of the premises and other good
and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee hereby acknowledges and confirms that it has approved
the Units identified on Schedule 1 hereto at the time and on the date set forth
in the Certificate of Acceptance.
2. Lessor hereby confirms delivery and lease to Lessee, and
Lessee hereby confirms acceptance and lease from Lessor, under the Lease as
hereby supplemented, the Units listed on Schedule 1 hereto.
3. Lessee hereby represents and warrants that no Event of Loss
has occurred with respect to the Units set forth on Schedule 1 hereto as of the
date hereof.
4. The aggregate Equipment Cost of and Basic Rent for the Units
leased hereunder is set forth in Schedule 3 to the Participation Agreement.
The Stipulated Loss Values and Termination Values applicable in respect of the
Units are set forth, respectively, on Schedules 4 and 5 to the Participation
Agreement.
5. The Early Buyout Date, the Early Buyout Price, the EBO
Installment Payment Dates and the EBO Installment Payment Amounts for the
Vehicles are set forth on Schedule 6 to the Participation Agreement.
<PAGE> 44
2
6. The Units set forth in Schedule 1 hereto (together with any
Replacement Units therefor) constitute the Equipment known as Vehicles.
7. The Basic Term Expiration Date for the Vehicles is
_________________.
8. Lessee hereby confirms its agreement, in accordance with the
Lease as supplemented by this Lease Supplement to pay Rent to Lessor for each
Unit leased hereunder as provided for in the Lease.
9. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Lease Supplement may refer to the "Equipment Lease Agreement, dated as of
____________, 1994", the "Lease Agreement, dated as of ___________ , 1994," or
the "Lease, dated as of ____________, 1994," or may identify the Lease in any
other respect without making specific reference to this Lease Supplement, but
nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
10. This Lease Supplement shall be construed in connection with and
as part of the Lease, and all terms, conditions and covenants contained in the
Lease shall be and remain in full force and effect.
11. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
12. This Lease Supplement shall in all respects be governed by, and
construed in accordance with, the laws of the State of New York, including all
matters of construction, validity and performance.
<PAGE> 45
3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered on the day and year first above
written.
LESSOR:
WILMINGTON TRUST COMPANY,
not in its individual
capacity, but solely as Owner
Trustee
By: _________________________
Name:
Title:
LESSEE:
PHILLIPS PETROLEUM COMPANY
By: _________________________
Name:
Title:
<PAGE> 46
Schedule 1 to
Lease Supplement No. __
(Phillips Trust No. 94-___)
Vehicles
<TABLE>
<CAPTION>
No. of Units Description Serial Numbers
- ------------ ----------- --------------
<S> <C> <C>
(MANUFACTURER,
MODEL, YEAR)
</TABLE>
<PAGE> 47
APPENDIX A
Vehicle Lease Agreement
Trust Indenture and Security Agreement
Participation Agreement
PHILLIPS TRUST 1994-
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all
purposes of the Operative Agreements referred to below, unless otherwise
defined in an Operative Agreement or the context thereof shall otherwise
require and such meanings shall be equally applicable to both the singular and
the plural forms of the terms herein defined. In the case of any conflict
between the provisions of this Appendix A and the provisions of the main body
of any Operative Agreement, the provisions of the main body of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to
agreements shall be deemed to mean and include such agreements as the same may
be amended, supplemented and otherwise modified from time to time, and (ii)
references to parties to agreements shall be deemed to include the permitted
successors and assigns of such parties.
Defined Terms
"Additional Storage Period" shall have the meaning specified
in Section 6.3 of the Lease.
"Advance" shall have the meaning specified in Section 3.5 of
the Lease.
"Affiliate" of any Person shall mean any other Person which
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. 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, and the terms "controlling" and "controlled" shall
have meanings correlative to the foregoing.
"API" shall mean the American Petroleum Institute.
"Appraisal" shall have the meaning specified in Section 4.3(a)
of the Participation Agreement.
"Approved Insurer" shall mean (i) any insurer on an approved
security list prepared from time to time by a generally
<PAGE> 48
2
recognized insurance broker at the request of the Lessee and delivered to the
Lessor and the Indenture Trustee, (ii) Oil Insurance Limited, a Bermuda
corporation, (iii) Oil Casualty Insurance Limited, a Bermuda corporation, and
(iv) any insurance company which is an Affiliate of the Lessee (but only to the
extent the type and amount of insurance provided by such insurance company has
been approved by the insurance regulators in the domicile of such insurance
company).
"ATA" shall mean the American Transportation Association.
"Average Life Date" shall mean, with respect to the prepayment
of an Equipment Note, the date which follows the prepayment date by a period
equal to the Remaining Weighted Average Life of such Equipment Note.
"Bankruptcy Code" shall mean the United States Bankruptcy
Reform Act of 1978, as amended from time to time, 11 U.S.C. Section 101 et
seq., or any successor thereto.
"Basic Rent" shall mean, with respect to any Unit of
Equipment, all rent payable by the Lessee to the Lessor pursuant to Section 3.2
of the Lease for the Basic Term thereunder for such Unit, and all rent payable
pursuant to Section 22.3 of the Lease for any Renewal Term thereunder for such
Unit.
"Basic Term" shall mean, for the Units of any Class of
Equipment, as specified in Section 3.1 of the Lease.
"Basic Term Commencement Date" shall mean __________, 1995,
which, in any event, shall not be more than 6 months less one day from the
commencement of the Interim Term.
"Basic Term Expiration Date" shall mean, for the Units of any
Class of Equipment, the date set forth in the Lease Supplement as the Basic
Term Expiration Date for such Class of Equipment.
"Beneficial Interest" shall mean the interest of the Owner
Participant under the Trust Agreement.
"Bill of Sale" shall mean the bill of sale, dated the Closing
Date from Lessee to Owner Trustee covering the Units delivered on the Closing
Date.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banking institutions are authorized or
required by law, regulation or executive order to be closed in New York, New
York, Bartlesville, Oklahoma, the city and state in which the principal
corporate trust office of the Owner Trustee is located, or, until the Lien of
the Indenture has been discharged, the city and state in which the principal
corporate trust office of the Indenture Trustee is located.
<PAGE> 49
3
"Certificate of Acceptance" shall have the meaning specified
in Section 2.3(b) of the Participation Agreement.
"Change in Tax Law" shall mean a change, amendment,
modification, addition or deletion (whether proposed, temporary or final) in or
to the Code, any regulation thereunder or any Revenue Ruling, Revenue Procedure
or other published administrative determination or judicial proceeding, in each
case after the execution and delivery of the Participation Agreement.
"Closing" shall have the meaning specified in Section 2.3(b)
of the Participation Agreement.
"Closing Date" shall have the meaning specified in Section 2.1
of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
"Commitment" with respect to the Owner Participant, shall have
the meaning specified in Section 2.2(a) to the Participation Agreement and with
respect to the initial Loan Participant, shall have the meaning specified in
Section 2.2(b) to the Participation Agreement.
"Debt Amortization" with respect to any Equipment Note shall
mean the amortization schedule of principal payments applicable thereto.
"Debt Rate" shall mean as of the date of determination, a rate
equal to the rate of interest per annum borne by the Equipment Notes then
outstanding (computed on the basis of a 360-day year of twelve 30-day months).
"Determination Date" shall mean the ____ day of any calendar
month.
"Early Buyout Date" shall mean, for any Unit, the date set
forth in Schedule 6 to the Participation Agreement.
"Early Buyout Price" shall mean, with respect to any Unit, the
amount equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit.
"EBO Installment Payment Amount" shall mean, with respect to
any Unit on an EBO Installment Payment Date, the amount equal to the product of
the percentage set forth in Schedule 6 to the Participation Agreement and the
Equipment Cost for such Unit, provided that in no event shall such installment
payment dates extend for a period in excess of one year.
"EBO Installment Payment Dates" shall mean, with respect to
any Unit, the dates set forth in Schedule 6 to the Participation Agreement for
such Unit provided that in no event
<PAGE> 50
4
shall such installment payment duties extend for a period in excess of one
year.
"Environmental Laws" means any federal, state, county or local
statute, law, regulation, rule, ordinance, code, order, decree, license, or
permit relating to environmental matters, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, or any other federal, state
or local statute, law, ordinance, code, rule, regulation, order, decree,
license or permit regulating, or relating to, or imposing liability for a
standard of conduct concerning the environment, noise or any hazardous, toxic
or dangerous substance, products, materials, wastes, pollutants or
contaminants.
"Equipment" shall mean the Vehicles.
"Equipment Cost" shall mean, for each Unit, the purchase price
therefor paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit.
"Equipment Notes" shall mean the Equipment Notes, each to be
substantially in the form therefor required by the Indenture, issued by the
Owner Trustee pursuant to Section 2.02 of the Indenture, and authenticated by
the Indenture Trustee, in principal amounts and bearing interest at the rates
and payable as provided in the Indenture and secured as provided in the
Granting Clause of the Indenture, and shall include any Equipment Notes issued
in exchange therefor or replacement thereof pursuant to Section 2.07 or 2.08 of
the Indenture.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor law.
"Event of Loss" shall mean, with respect to a Unit, as
specified in Section 11.1 of the Lease.
"Excepted Property" shall mean (i) all indemnity payments
(including, without limitation, payments pursuant to Section 7 of the
Participation Agreement and payments under the Tax Indemnity Agreement whether
made by adjustment to Basic Rent under the Lease or otherwise) to which the
Owner Participant, the Owner Trustee in its individual capacity or any of their
respective successors, permitted assigns, directors, officers, employees,
servants and agents is entitled pursuant to the Operative Agreements, (ii) any
right, title or interest of the Owner Trustee in its individual capacity or the
Owner Participant to any payment which by the terms of Section 17 of the Lease
or any corresponding payment under Section 3.3 of the Lease shall be payable to
the Owner Trustee in its individual capacity or to the Owner Participant, as
the case may be, (iii) any insurance
<PAGE> 51
5
proceeds payable under insurance maintained by the Owner Trustee in its
individual capacity or the Owner Participant pursuant to Section 12.3 of the
Lease, (iv) any insurance proceeds payable to the Owner Trustee in its
individual capacity or to the Owner Participant, or their respective
successors, permitted assigns, directors, officers, employees, servants, or
agents under any public liability insurance maintained by Lessee pursuant to
Section 12 of the Lease or by any other Person (or governmental indemnities in
lieu thereof or in addition thereto), (v) any amount payable to the Owner
Participant by any Transferee as the purchase price of the Owner Participant's
interest in the Trust Estate in compliance with the terms of the Participation
Agreement and the Trust Agreement, (vi) payments owing to the Owner
Participant, including a return of funds to the Owner Participant, in the event
the Closing does not occur, (vii) all rights, title and interest of the Owner
Trustee and Owner Participant to retain amounts that shall have been
distributed to them as provided in Article III of the Indenture and such other
rights as are specifically reserved or granted to the Owner Participant and the
Owner Trustee under the Indenture, (viii) the respective rights of the Owner
Trustee in its individual capacity or the Owner Participant to the proceeds of
the foregoing and (xi) any rights of the Owner Participant or the Owner Trustee
in its individual capacity to demand, collect, sue for, or otherwise receive
and enforce payment of the foregoing amounts.
"Fair Market Renewal Term" shall mean, for any Unit of
Equipment, as specified in Section 22.3 of the Lease.
"Fair Market Rental Value" shall mean, with respect to a Unit
of Equipment, the rental value of such Unit of Equipment that would be obtained
in an arm's length transaction between an informed and willing lessee under no
compulsion to lease and an informed and willing lessor under no compulsion to
lease, assuming such Unit of Equipment is in the condition required by the
Lease.
"Fair Market Sales Value" shall mean, with respect to a Unit
of Equipment, the sales value of such Unit of Equipment, that would be obtained
in an arm's length transaction between an informed and willing buyer under no
compulsion to buy and an informed and willing seller under no compulsion to
sell, assuming such Unit of Equipment is in the condition required by the
Lease.
"Fixed Rate Renewal Term" shall mean, for any Unit, as
specified in Section 22.3 of the Lease.
"Hazardous Materials" means any petroleum, petroleum
by-product, natural or synthetic gas, asbestos, polychlorinated biphenyls or
any other toxic, hazardous, flammable, corrosive or otherwise dangerous
substance, product, material, waste, pollutant or contaminant, the manufacture,
use, handling, storage, disposal or remediation of which is regulated under any
applicable Environmental Law.
<PAGE> 52
6
"Holders" shall mean as of any particular time, the persons in
whose names one or more Pass Through Certificates shall be registered.
"Indemnified Person" shall have the meaning specified in
Section 7.2(b) of the Participation Agreement.
"Indenture" or "Trust Indenture" shall mean the Trust
Indenture and Security Agreement (Phillips Trust No. 94-__), dated as of
_____________, 1994 between the Owner Trustee, in the capacities described
therein, and the Indenture Trustee, as amended, supplemented or otherwise
modified from time to time, including supplementation by each Indenture
Supplement pursuant thereto.
"Indenture Default" shall mean an event which with notice or
the lapse of time or both would become an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified in the
Granting Clause of the Indenture.
"Indenture Event of Default" shall have the meaning specified
in Section 4.01 of the Indenture.
"Indenture Investment" shall mean any obligation issued or
guaranteed by the United States of America or any of its agencies for the
payment of which the full faith and credit of the United States of America is
pledged.
"Indenture Supplement" shall mean an Indenture Supplement
dated the Closing Date or the date that any Replacement Unit is subjected to
the lien and security interest of the Indenture, substantially in the form of
Exhibit A to the Indenture, between the Owner Trustee, in the capacities
described therein, and the Indenture Trustee, covering the Units delivered on
the Closing Date or such Replacement Unit, as the case may be.
"Indenture Trustee" shall mean Shawmut Bank Connecticut,
National Association, a national banking association, as trustee under the
Indenture and its successors thereunder.
"Indenture Trustee Agreements" shall mean the Operative
Agreements to which the Indenture Trustee is or will be a party.
"Inflation Index" shall mean the Gross National Product
Implicit Price Deflator as published from time to time in the United States
Department of Commerce Bureau of Economic Analysis publication entitled "Survey
of Current Business"; provided that if such Gross National Implicit Price
Deflator is no longer published or otherwise available, the "Inflation Index"
shall mean an index selected by Lessee and reasonably acceptable to the Owner
Participant.
"Initial Lease Period Interest" shall have the meaning
specified in Section 2.2(c) of the Participation Agreement.
<PAGE> 53
7
"Initial Storage Period" shall mean, for any Unit, the period
specified in Section 6.3 of the Lease.
"Interim Indenture Supplement" shall mean the Interim Trust
Indenture Supplement (Phillips Trust No. 94-__) dated as of ____________, 1994,
between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee.
"Interim Lease Supplement" shall mean the Interim Lease
Supplement (Phillips Trust No. 94-__) dated as of ______________, 1994, between
the Lessor and the Lessee.
"Interim Loan Participant" shall mean _____________, a New
York banking corporation, and its permitted successors and assigns.
"Interim Term" shall have the meaning specified in Section 3.1
of the Lease.
"Investment Banker" shall mean an independent investment
banking institution of national standing appointed by Lessee.
"Investment Grade Rating" shall mean in respect of any Person
as of any date of determination, a rating on the long-term unsecured
indebtedness issued by such Person of "BBB-" or better by Moody's Investors
Service, Inc. or "Baa3" or better by Standard & Poor's Corporation.
"Late Rate" shall mean (i) with respect to the portion of any
payment of Rent that would be required to be distributed to the holders of the
Equipment Notes pursuant to the terms of the Indenture, the lesser of 2% over
the Debt Rate and the maximum interest rate from time to time permitted by law,
and (ii) with respect to the portion of any payment of Rent that would be
required to be distributed to Lessor pursuant to the terms of the Indenture or
would be payable directly to Lessor, the Owner Participant or the Owner Trustee
in its individual capacity, the lesser of 2% over the Prime Rate and the
maximum interest rate from time to time permitted by law.
"Lease" shall mean the Equipment Lease Agreement (Phillips
Trust No. 94-_), relating to the Vehicles, dated as of ______________, 1994,
between the Owner Trustee, in the capacities described therein, as Lessor, and
the Lessee as amended, supplemented or otherwise modified from time to time.
"Lease Default" shall mean an event which with notice or lapse
of time or both would become a Lease Event of Default thereunder.
"Lease Event of Default" and "Event of Default" shall mean an
Event of Default as specified in Section 14 of the Lease.
"Lease Supplement" shall mean a Lease Supplement (Phillips
Trust No. 94-2), dated the Closing Date or the date
<PAGE> 54
8
that any Replacement Unit is subjected to the Lease, substantially in the form
of Exhibit A to the Lease, between the Lessor and the Lessee, covering the
Units delivered on the Closing Date or such Replacement Unit, as the case may
be.
"Lease Term" shall mean, with respect to any Unit, the Interim
Term applicable to such Unit, the Basic Term applicable to such Unit and all
Renewal Terms applicable to such Unit.
"Lessee" shall mean Phillips Petroleum Company, a Delaware
corporation, and any corporation which succeeds thereto by merger or
consolidation or which acquires all or substantially all of the assets thereof
in accordance with the terms of Section 6.7 of the Participation Agreement.
"Lessee Agreements" shall mean the Operative Agreements to
which Lessee is a party.
"Lessor" shall have the meaning specified in the recitals to
the Lease.
"Lessor's Liens" means any Lien affecting, on or in respect of
the Equipment, the Lease or the Trust Estate arising as a result of (i) claims
against Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, not related to the transactions contemplated by the Operative
Agreements, or (ii) acts or omissions of the Lessor (in its individual capacity
or as Owner Trustee) or the Owner Participant, not related to the transactions
contemplated by the Operative Agreements or in breach of any covenant or
agreement of such Person set forth in any of the Operative Agreements, or (iii)
taxes imposed against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant or the Trust Estate which are not indemnified
against by the Lessee pursuant to the Participation Agreement or under the Tax
Indemnity Agreement, except to the extent not due and payable or the amount or
validity of which is being contested in good faith by appropriate proceedings
so long as there is no material risk of the impairment of the Lien of the
Indenture or the loss of the benefit of the Equipment to Lessee under the Lease
or (iv) claims against the Lessor or the Owner Participant arising out of the
transfer (whether voluntary or involuntary) by the Lessor or the Owner
Participant (without the consent of the Lessee, the Indenture Trustee and the
Loan Participants) of all or any portion of their respective interests in the
Equipment, the Trust Estate or the Operative Agreements, other than a transfer
pursuant to Sections 10, 11, 12, 15 or 22 of the Lease.
"Lien" shall mean any mortgage, pledge, security interest,
lien, encumbrance, or disposition of title.
"Loan Participant" shall mean and include each registered
holder from time to time of an Equipment Note issued under the Indenture,
including, so long as it holds any Equipment Notes issued thereunder, the
Interim Loan Participant, and, after the Refinancing Date, so long as it holds
any Equipment Notes
<PAGE> 55
9
issued thereunder the Pass Through Trustee under one or more Pass Through Trust
Agreements.
"Majority In Interest" as of a particular date of
determination shall mean with respect to any action or decision of the holders
of the Equipment Notes, the holders of more than 50% in aggregate principal
unpaid amount of the Equipment Notes, if any, then outstanding which are
affected by such decision or action, excluding any Equipment Notes held by the
Owner Participant or an Affiliate of the Owner Participant unless all Equipment
Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal
amount of any Equipment Note to be prepaid on any prepayment date, the amount
which the Investment Banker determines as of the third Business Day prior to
such prepayment date to equal the product obtained by multiplying (a) the
excess, if any, of (i) the sum of the present values of all the remaining
scheduled payments of principal and interest from the prepayment date to
maturity of such Equipment Note, discounted semi-annually on each ____________
and ______________ at a rate equal to the Treasury Rate based on a 360-day year
of twelve 30-day months, over (ii) the aggregate unpaid principal amount of
such Equipment Note plus any accrued but unpaid interest thereon by (b) a
fraction the numerator of which shall be the principal amount of such Equipment
Note to be prepaid on such prepayment date and the denominator of which shall
be the aggregate unpaid principal amount of such Equipment Note; provided that
the aggregate unpaid principal amount of such Equipment Note for the purposes
of clause (a)(ii) and (b) of this definition shall be determined after
deducting the principal installment, if any, due on such prepayment date.
"Net Economic Return" shall mean both the net after-tax yield
and total after-tax cash flow and the timing thereof expected by the original
Owner Participant with respect to the Equipment, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant in making the computations of Basic Rent, Stipulated
Loss Value and Termination Value initially set forth in Schedules 3, 4 and 5 to
the Participation Agreement.
"NFPA" shall mean the National Fire Prevention Association.
"Notice of Delivery" shall have the meaning specified in
Section 2.3(a) of the Participation Agreement.
"NSC" shall mean the National Safety Council.
"Officer's Certificate" shall mean a certificate signed (i) in
the case of a corporation by the Chairman of the Board of Directors, President,
any Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of such corporation, (ii) in the case of a partnership by
the Chairman of the Board of Directors, the President or any Vice
<PAGE> 56
10
President, the Treasurer or an Assistant Treasurer of a corporate general
partner, and (iii) in the case of a commercial bank or trust company, the
Chairman or Vice Chairman of the Executive Committee or the Treasurer, any
Trust Officer, any Vice President, any Executive or Senior or Second or
Assistant Vice President, or any other officer or assistant officer customarily
performing the 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 the particular subject.
"Operative Agreements" shall mean the Participation Agreement,
the Bill of Sale, the Trust Agreement, each Pass Through Trust Agreement, the
Equipment Notes, the Lease, the Interim Lease Supplement, each Lease
Supplement, the Indenture, the Interim Indenture Supplement, each Indenture
Supplement and the Tax Indemnity Agreement.
"Optional Modification" shall mean, for any Unit, as specified
in Section 9.2 of the Lease.
"Overall Transaction" shall mean the sale/leaseback and
financing transactions contemplated by the Operative Agreements and the
Underwriting Agreement.
"Owner Participant" shall mean ______________________ Bank, a
national banking association, and its permitted successors and assigns.
"Owner Participant Agreements" shall mean the Operative
Agreements to which the Owner Participant is or will be a party.
"Owner Trust" or "Trust" shall mean the trust created by the
Trust Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement and its successors thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements
to which the Owner Trustee, either in its individual or fiduciary capacity, is
or will be a party.
"Participants" shall mean the Loan Participant and the Owner
Participant.
"Participation Agreement" shall mean the Participation
Agreement (Phillips Trust No. 94-__) dated as of ____________, 1994, among the
Lessee, the Interim Loan Participant, the Owner Participant, the Owner Trustee
and the Indenture Trustee.
"Participation Agreement Supplement" shall mean the Supplement
to the Participation Agreement, substantially in the form of Exhibit F to the
Participation Agreement to be executed pursuant to Section 10.2(e) of the
Participation Agreement.
<PAGE> 57
11
"Parts" shall mean all appliances, parts, components,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature which may from time to time be incorporated or installed in or
attached to a Unit of Equipment or until replaced, if not so incorporated or
installed, in accordance with the terms of Section 9.3 of the Lease.
"Pass Through Certificates" shall mean the Pass Through
Certificates issued pursuant to any Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean any Pass Through
Trust Agreement, substantially in the form of Exhibit H to the Participation
Agreement to be executed pursuant to Section 10.2(e) of the Participation
Agreement between the Lessee and the Pass Through Trustee.
"Pass Through Trustee" shall mean Shawmut Bank Connecticut,
National Association, a national banking association in its capacity as trustee
under one or more Pass Through Trust Agreements, and each other person which
may from time to time be acting as successor trustee under any Pass Through
Trust Agreement.
"Payment Date" shall have the meaning specified in Section 6.8
of Participation Agreement.
"Payment Event of Default" shall mean with respect to each
Lease, an Event of Default arising under Section 14(a), 14(b), 14(d) or 14(e)
of the Lease.
"Permitted Investments" shall mean (i) direct obligations of
the United States of America and agencies thereof for which the full faith and
credit of the United States is pledged, (ii) obligations fully guaranteed by
the United States of America, (iii) certificates of deposit issued by, or
bankers, acceptances of, or time deposits 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 $500,000,000 (including
the Indenture Trustee and the Owner Trustee if such conditions are met) and
having a rating assigned to the long-term unsecured debt of such institutions
by Standard & Poor's Corporation and Moody's Investors Service, Inc. at least
equal to AA and Aa2, respectively, (iv) commercial paper of companies, banks,
trust companies or national banking associations incorporated or doing business
under the laws of the United States of America or one of the States thereof and
in each case having a rating assigned to such commercial paper by Standard &
Poor's Corporation or Moody's Investors Service, Inc. (or, if neither such
organization shall rate such commercial paper at any time, by any nationally
recognized rating organization in the United States of America) equal to the
highest rating assigned by such organization and (v) a money market fund
registered under the Investment Company Act of 1940, as amended, the portfolio
of which is limited to United States government obligations and United States
Agency obligations ;
<PAGE> 58
12
provided 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 (iii) above; and provided further that no investment shall be
eligible as a "Permitted Investment" unless the final maturity or date of
return of such investment is 90 days or less from the date of purchase thereof.
"Permitted Liens" with respect to the Equipment and each Unit
thereof, shall mean: (i) the interests of the Lessee and the Owner Trustee
under the Leases and the Lease Supplements; (ii) the interest of the Lessee and
any sublessee as provided in any sublease permitted pursuant to Section 8.3 of
the Lease; (iii) any Liens thereon for taxes, assessments, levies, fees and
other governmental and similar charges not due and payable or the amount or
validity of which is being contested in good faith by appropriate proceedings
so long as there exists no material risk of sale, forfeiture, loss, or loss of
or interference with use or possession of, any Unit or impairment of the Lien
of the Indenture thereon, criminal sanctions arising therefrom or interference
with the payment of Rent and appropriate reserves with respect thereto are
maintained in accordance with generally accepted accounting principles; (iv)
any Liens of mechanics, suppliers, materialmen, laborers, employees, repairmen
and other like Liens arising in the ordinary course of Lessee's (or if a
sublease is then in effect, any sublessee's) business securing obligations
which are not due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of any Unit or impairment of the Lien of the Indenture thereon,
criminal sanctions arising therefrom or interference with the payment of Rent;
(v) the Lien and security interest granted to the Indenture Trustee under and
pursuant to the Indenture, if any, and the respective rights of the Loan
Participants, the Indenture Trustee, the Owner Participant and the Owner
Trustee under the Operative Agreements; (vi) Liens arising out of any judgment
or award against the Lessee (or any sublessee permitted pursuant to Section 8.3
of the Lease) with respect to which an appeal or proceeding for review being
prosecuted in good faith and for the payment of which adequate reserves have
been provided as required by generally accepted accounting principles or other
appropriate provisions have been made and with respect to which there shall
have been secured a stay of execution pending such appeal or proceeding for
review and there exists no material risk of sale, forfeiture, loss, or loss of
or interference with the use or possession of any Unit or any interest therein
or impairment of the Lien of the Indenture thereon, criminal sanctions arising
therefrom or interference with the payment of Rent; (vii) salvage rights of
insurers under insurance policies maintained pursuant to Section 12 of each
Lease; and (viii) other Liens bonded to the reasonable satisfaction of the
Owner Participant and the Indenture Trustee.
"Permitted Subleases" shall have the meaning specified in
Section 8.3 of the Lease.
<PAGE> 59
13
"Person" shall mean an individual, partnership, corporation,
trust, limited liability company, association or unincorporated organization,
and a government or agency or political subdivision thereof.
"Prime Rate" shall mean the rate announced from time to time
by Chemical Bank, as its prime commercial lending rate at its principal office
in New York City.
"Registration Statement" shall mean the Form S-3 Registration
Statement (Registration No. 33-54987) filed by the Lessee on August 10, 1994,
as amended from time to time, in connection with the offering of the Pass
Through Certificates.
"Remaining Weighted Average Life" shall mean, with respect to
prepayment of an Equipment Note, the number of days equal to the quotient
obtained by dividing (a) the sum of the products obtained by multiplying (1)
the amount of each remaining principal payment on such Equipment Note by (2)
the number of days from and including the prepayment date to but excluding the
scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term
in respect of which the Lessee shall have exercised its option to renew the
Lease for such Unit pursuant to Section 22.3 thereof, including any Fixed Rate
Renewal Term or Fair Market Renewal Term with respect to such Unit.
"Rent" shall mean, for any Unit, all Basic Rent and
Supplemental Rent therefor.
"Rent Payment Date" or "Payment Date" shall mean each
_______________ and _________________ of each year occurring uring the Lease
Term of the Lease, commencing ______________ , 1995, provided that if any such
date shall not be a Business Day, then "Rent Payment Date" or "Payment Date"
shall mean the next succeeding Business Day.
"Replacement Unit" shall mean a Unit of Equipment which shall
have been leased under the Lease pursuant to Section 11 thereof.
"Required Modification" shall mean, for any Unit, as specified
in Section 9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject
matter of any covenant, agreement or obligation of any party contained in any
Operative Agreement, the Chairman of the Board of Directors, the President, or
any Vice President, Treasurer, Assistant Treasurer or other officer, who in the
normal performance of his operational responsibility would have knowledge of
such matters and the requirements with respect thereto.
<PAGE> 60
14
"Return Date" shall mean, for any Unit of Equipment as
specified in Section 6.1 of the Lease.
"Scheduled Closing Date" shall have the meaning specified in
Section 2.7 of the Participation Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act.
"Severable Modification" shall mean, for any Unit, as
specified in Section 9.2 of the Lease.
"Stipulated Loss Value" for any Unit as of any date of
determination shall mean the amount (as adjusted pursuant to Section 2.6 of the
Participation Agreement and Section 3.4 of the Lease) determined by multiplying
the Equipment Cost for such Unit by the percentage set forth in Schedule 4 to
the Participation Agreement opposite the Determination Date on which such
Stipulated Loss Value is being determined; provided that during any Renewal
Term, "Stipulated Loss Value" shall be determined as provided in Section 22.5
of the Lease.
"Storage Period" shall mean, for any Unit of Equipment as
specified in Section 6.3 of the Lease.
"Subsidiary" of any Person shall mean any corporation,
association, or other business entity of which more than 50% (by number of
votes) of the voting stock at the time outstanding shall at the time be owned,
directly or indirectly, by such Person or by any other corporation, association
or trust which is itself a Subsidiary within the meaning of this definition, or
collectively by such Person and any one or more such Subsidiaries.
"Supplemental Rent" shall mean, for any Lease, all amounts,
liabilities and obligations (other than Basic Rent thereunder) which the Lessee
is obligated to pay under the Operative Agreements to or on behalf of any of
the other parties thereto, including, but not limited to, Termination Value and
Stipulated Loss Value payments thereunder.
"Tax Indemnity Agreement" shall mean the Tax Indemnity
Agreement (Phillips Trust No. 94-__) dated as of ______________, 1994 between
the Lessee and the Owner Participant.
"Taxes" shall have the meaning specified in Section 7.1(b) of
the Participation Agreement.
"Term Sheet" shall mean the commitment letter and accompanying
term sheet dated ___________, 1994 between the Lessee, the Owner Participant
and the other owner participants relating to the Overall Transaction.
<PAGE> 61
15
"Terminated Unit" shall mean, for any Unit, as specified in
Section 10.1 of the Lease.
"Termination Date" shall mean, for any Unit, as specified in
Section 10.1 of the Lease.
"Termination Value" for any Unit as of any date of
determination shall mean the amount (as adjusted pursuant to Section 2.6 of the
Participation Agreement and Section 3.4 of the Lease) determined by multiplying
the Equipment Cost for such Unit by the percentage set forth in Schedule 5 to
the Participation Agreement opposite the Determination Date on which such
Termination Value is being determined; provided that during any Renewal Term,
"Termination Value" shall be determined as provided in Section 22.5 of the
Lease.
"Total Equipment Cost" shall mean the sum of the Equipment
Costs for all Units.
"Transaction Costs" shall have the meaning specified in
Section 2.5(a) of the Participation Agreement.
"Transferee" shall have the meaning specified in Section
6.1(b) of the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each
Equipment Note, a per annum rate (expressed as a semiannual equivalent and as a
decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield), determined to be the per annum rate equal to the semiannual
yield to maturity for United States Treasury securities maturing on the
Average Life Date of such Equipment Note, as determined by interpolation
between the most recent weekly average yields to maturity for two series of
United States Treasury securities, (A) one maturing as close as possible to,
but earlier than, the Average Life Date of such Equipment Note and (B) the
other maturing as close as possible to, but later than, the Average Life Date
of such Equipment Note, in each case as published in the most recent H.15(519)
(or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
in the most recent H.15(519), as published in H.15(519)). H.15(519) means
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, published by the Board of Governors of the Federal Reserve System.
The most recent H.15(519) means the latest H.15(519) which is published prior
to the close of business on the third Business Day preceding the scheduled
prepayment date.
"Trust Agreement" shall mean that certain Trust Agreement
(Phillips Trust No. 94-__), dated as of ______________, 1994, between the
Owner Participant and Wilmington Trust Company, as amended, supplemented or
otherwise modified from time to time.
"Trust Estate" shall have the meaning set forth in Section 1.1
of the Trust Agreement.
<PAGE> 62
16
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.
"Trustees" shall mean the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee.
"Underwriter" shall mean Chemical Securities, Inc.
"Underwriting Agreement" shall mean the agreement
substantially in the form of Exhibit G to the Participation Agreement, to be
executed pursuant to Section 10.2 (e) of the Participation Agreement, among the
Lessee and the Underwriter, relating to the purchase by such Underwriter of the
Pass Through Certificates.
"Unit" shall mean each unit or item of Equipment.
"Vehicles" shall mean those refueling vehicles, together with
refueling tanks and filters, to be sold by Lessee to Lessor pursuant to the
Participation Agreement and to be leased under the Lease, as described in the
initial Lease Supplement to the Lease and the initial Indenture Supplement,
together with any and all accessions, additions, attachments, improvements and
replacements from time to time incorporated or installed in any item thereof
which are or become the property of the Owner Trustee pursuant to the terms of
the Lease; all of the foregoing wherever located and however the component
parts are configured into Units.
<PAGE> 1
EXHIBIT 5(a)
(ST&B Letterhead)
September 30, 1994
Phillips Petroleum Company
Phillips Building
Bartlesville, Oklahoma 74004
Dear Sirs:
We have acted as special counsel for Phillips Petroleum Company, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), of a Registration
Statement on Form S-3 (File No. 33-54987) (the "Registration Statement"). The
Registration Statement relates to up to $110,000,000 aggregate amount of Pass
Through Certificates (the "Pass Through Certificates") that may be issued by
the Company in one or more series from time to time on a delayed basis. The
Pass Through Certificates will be issued pursuant to the provisions of one or
more Pass Through Trust Agreements to be entered into between the Company and
Shawmut Bank Connecticut, National Association, as Pass Through Trustee (the
"Pass Through Trustee"), substantially in the form filed as Exhibit 4(a)(1) to
the Registration Statement (each "Pass Through Agreement").
In connection with the opinions expressed below, we have examined
originals, or copies certified to our satisfaction, of such agreements,
documents and
<PAGE> 2
Phillips Petroleum
Company -2- September 30, 1994
certificates of governmental officials and corporate officers as we have deemed
necessary or advisable as a basis for such opinions. In such examination, we
have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity with the originals of
all documents submitted to us as copies. We have also examined the form of Pass
Through Agreement filed with the Commission. Unless otherwise defined herein,
capitalized terms used herein have the meanings assigned thereto in the Pass
Through Agreement.
For purposes of rendering this opinion, we have assumed (i) the due
authorization, execution and delivery of each applicable Pass Through Agreement
by the Pass Through Trustee, (ii) the due authorization, execution, issue,
delivery and authentication by the Pass Through Trustee of each series of Pass
Through Certificates to be issued under each applicable Pass Through Agreement
in accordance with the terms of such Pass Through Agreement and (iii) that the
terms of each series of Pass Through Certificates will be in accordance with
all applicable laws, regulations, instruments and agreements then binding upon
the Pass Through Trustee.
Based on the foregoing, it is our opinion that:
1. Each Pass Through Agreement has been duly authorized by the Company.
2. Each Pass Through Agreement, when duly executed and delivered by
the parties thereto, will constitute a valid and legally binding obligation of
each such party enforceable against such party in accordance with its terms.
<PAGE> 3
Phillips Petroleum
Company -3- September 30, 1994
3. When the Registration Statement has become effective under the
Securities Act and the Pass Through Certificates have been duly executed and
authenticated by the Pass Through Trustee in accordance with the terms of the
applicable Pass Through Agreement and issued and sold against payment therefor
in accordance with the terms of such Pass Through Agreement and as contemplated
by the Registration Statement, the Pass Through Certificates will be valid and
legally binding obligations of the Pass Through Trustee enforceable against the
Pass Through Trustee in accordance with their terms and will be entitled to the
benefits of the applicable Pass Through Agreement.
4. The discussion of certain United States federal income tax
consequences of ownership and disposition of the Pass Through Certificates set
forth under the caption "Federal Income Tax Consequences" in the prospectus
included in the Registration Statement, insofar as it relates to statements of
law or legal conclusions, is accurate in all material respects.
Our opinions set for in paragraphs 2. and 3. above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditor's rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other that the law of the State
of New
<PAGE> 4
Phillips Petroleum
Company -4- September 30, 1994
York, the Delaware General Corporation Law and the federal law of the United
States. Insofar as the matters referred to herein relate to or are dependent
upon the laws of the State of Connecticut, we have relied entirely upon the
opinion of even date herewith of Shipman & Goodwin filed as Exhibit 5(b) to the
Registration Statement and the opinions set forth herein are subject to each of
the assumptions contained in said opinion. In rendering such opinion, Shipman
and Goodwin may rely on this opinion as if this opinion were specifically
addressed to it.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the references to our firm under the
captions "Legal Matters" and "Federal Income Tax Consequences" in the
prospectus relating to the Pass Through Certificates that constitutes part of
the Registration Statement.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE> 1
EXHIBIT 5(b)
SHIPMAN & GOODWIN ONE AMERICAN ROW
COUNSELORS AT LAW HARTFORD, CT
TEL.
September 29, 1994
Phillips Petroleum Company
Phillips Building
Bartlesville, OK 74004
RE: Phillips Petroleum Company
Registration on Form S-3
Pass Through Certificates
Ladies and Gentlemen:
We have acted as special Connecticut counsel for Shawmut Bank
Connecticut, National Association ("Shawmut") in its individual capacity and as
Pass Through Trustee (the "Pass Through Trustee") for trusts (the "Pass Through
Trusts") to be created under separate Pass Through Trust Agreements (the "Pass
Through Agreements") between Phillips Petroleum Company, a Delaware
corporation, ("Phillips") and Shawmut, with respect to the formation from time
to time of separate Pass Through Trusts, and the issuance from time to time of
separate series of Pass Through Certificates (the "Pass Through Certificates"),
representing fractional undivided interests in the respective Trusts. Pursuant
to the Pass Through Agreements, the Pass Through Trustee will issue Pass
Through Certificates in one or more series in an aggregate principal amount of
up to $110,000,000, to be registered under the Securities Act of 1933, as
amended (the "1933 Act"), by a Registration Statement on Form S-3 (File No.
33-54987) (the "Registration Statement").
As such counsel, we have reviewed the form of the Pass Through
Certificates and have examined and relied upon originals, or copies certified
or otherwise identified to our satisfaction, of such documents, corporate
records and other instruments as we have deemed necessary or advisable for the
purposes of this opinion.
The opinions set forth herein are based on and limited to the Federal
laws of the United States and the laws of the States of New York and
Connecticut. Insofar as the matters referred to herein related to the laws of
the State of New York, we have relied entirely upon the opinion of even date
herewith of Simpson Thacher & Bartlett and the opinion set forth herein are
subject to each of the assumptions contained in said opinion. Such firm, in
turn, may rely on this opinion as if this opinion were specifically addressed
to it.
Based on the foregoing, we are of the opinion that:
<PAGE> 2
September 29, 1994
Page 2
1. Upon execution and delivery of the Pass Through Agreements by the
parties thereto, the execution, authentication, issue and delivery by the Pass
Through Trustee of the Pass Through Certificates and the Pass Through
Agreements will have been duly authorized by the Pass Through Trustee.
2. With respect to the Pass Through Certificates of each series, when
(a) the applicable Pass Through Agreement shall have been executed and
delivered by Phillips and the Pass Through Trustee, (b) the Pass Through
Certificates of such series shall have been duly executed, authenticated,
issued and delivered by the Pass Through Trustee and sold as contemplated by
each of the Registration Statement, the Prospectus, the supplement or
supplements to the Prospectus relating to the Pass Through Certificates of such
series and the applicable Pass Through Agreement, assuming that the terms of
the Pass Through Certificates of such series are in compliance with then
applicable law, and (c) the applicable provisions of the 1933 Act and such
"Blue Sky" or securities laws as may be applicable shall have been complied
with, then (i) each Pass Through Agreement will constitute a valid and binding
obligation of the Pass Through Trustee enforceable against the Pass Through
Trustee in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and by general principles of equity,
and (ii) the Pass Through Certificates of such series will be validly issued
and will be entitled to the benefits of the applicable Pass Through Agreement.
3. The discussion in the Prospectus contained in the Registration
Statement entitled "Certain State Taxes," insofar as it relates to statements
of law or legal conclusions, is correct in all material respects.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, to the use of our name in the second sentence of the
first paragraph under the caption "Certain State Taxes" in the Prospectus and
to the reference to us under the caption "Legal Opinions" in the Prospectus. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ SHIPMAN & GOODWIN
SHIPMAN & GOODWIN
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM T-1
-------------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 06-0850628
- ------------------------------- -----------------------------
(State of incorporation if (I.R.S. Employer
not a national bank Identification No.)
</TABLE>
777 Main Street, Hartford, Connecticut 06115
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Patricia Beaudry, 777 Main Street, Hartford, CT (203) 728-2065
------------------------------------------------------------------
(Name, address and telephone number of agent for service)
PHILLIPS PETROLEUM COMPANY
------------------------------------------------------------------
(Exact name of obligors as specified in its charter)
<TABLE>
<S> <C>
Delaware 73-0400345
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
Phillips Building, Bartlesville, OK 74004
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
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 or supervising authority to
which it is subject:
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee; none with respect to Hartford
National Corporation, Shawmut Corporation, Shawmut Service Corporation and
Shawmut National Corporation (the "affiliates").
Item 16. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
1. A copy of the Articles of Association and By-Laws of the
trustee as now in effect.
2. A copy of the Certificate of Authority of the trustee to
do Business and the Certification of Fiduciary Powers of the Trustee.
3. A copy of the By-laws of the trustee are provided in
Exhibit 1 referenced above.
4. Consent of the trustee required by Section 321(b) of the
Act.
5. A copy of the latest Consolidated Reports of Condition
and Income of the trustee, published pursuant to law or the
requirements of its supervising or examining authority.
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<PAGE> 3
NOTES
Inasmuch as this Form T-1 is filed prior to the ascertainment by
the trustee of all facts on which to base its answer to Item 2, the answer to
said Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-1.
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<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Shawmut Bank Connecticut, 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, thereunto duly authorized, all in the City of
Hartford, and State of Connecticut, on the day of September, 1994.
-----
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Trustee
By /s/ KATHY A. LARIMORE
-------------------------
Kathy A. Larimore
Assistant Vice President
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<PAGE> 5
EXHIBIT 1
ARTICLES OF ASSOCIATION
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Shawmut Bank
Connecticut, National Association".
SECOND. The main office of the Association shall be in Hartford, County of
Hartford, State of Connecticut. The general business of the Association shall
be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefor in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
three million five hundred thousand (3,500,000) shares of common stock of the
par value of six and 25/100 dollars ($6.25) each, but said capital stock may be
increased or decreased from time to time, in accordance with the provisions of
the laws of the United States.
No holder of shares of the capital stock of any class of the corporation shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the corporation, whether now or hereafter authorized, or to
any obligations convertible into stock of the corporation, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
The Association, at any time and from time to time, may authorize and issue
debt obligations, whether or not subordinated, without the approval of the
shareholders.
<PAGE> 6
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. Any person, his heirs, executors, or administrators may be indemnified
or reimbursed by the Association for reasonable expenses actually incurred in
connection with any action, suit, or proceeding, civil or criminal, to which he
or they shall be made a party by reason of his being or having been a director,
officer, or employee of the Association or any firm, corporation, or
organization which he served in any such capacity at the request of the
Association: provided, that no person shall be so indemnified or reimbursed in
relation to any matter in such action, suit, or proceeding as to which he shall
finally be adjudged to have been guilty of or liable for gross negligence,
willful misconduct or criminal acts in the performance of his duties to the
Association: and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval
of a court of competent jurisdiction, or the holders of record of a majority of
the outstanding shares of the Association, or the board of directors, acting by
vote of directors not parties to the same or substantially the same action,
suit, or proceeding, constituting a majority of the whole number of directors.
The foregoing right of indemnification or reimbursement shall not be exclusive
of other rights to which such person, his heirs, executors, or administrators
may be entitled as a matter of law.
<PAGE> 7
The Association may, upon the affirmative vote of a majority of its board of
directors, purchase insurance for the purpose of indemnifying its directors,
officers and other employees to the extent that such indemnification is allowed
in the preceding paragraph. Such insurance may, but need not, be for the
benefit of all directors, officers, or employees.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. 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.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of January 11, 1993
<PAGE> 8
BYLAWS
OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1 Annual Meeting. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the association, city of
Hartford, state of Connecticut or such other places as the board of directors
may designate, at 1:00 o'clock, on the third Wednesday of April of each year,
or if that date falls on a legal holiday in the state in which the association
is located, on the next following banking day. If, for any cause, an election
of directors is not made on that date, or in the event of a legal holiday, on
the next following banking day, an election may be held on any subsequent day
within 60 days of the date fixed, to be designated by the board directors, or,
if the directors fail to fix the date, by shareholders representing two-thirds
of the shares.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by the board of directors or upon call of the Chairman or at the
written request of shareholders owning, in the aggregate, not less than ten
(10) percent of the stock of the association.
Section 1.3. Notice of Meetings. Unless otherwise provided by the laws of the
United States, a notice of the time, place and purpose of every regular annual
meeting or special meeting of shareholders shall be given by first-class mail,
postage prepaid, mailed at least ten (10) days prior to the date of such
meeting to each shareholder of record at his address as shown upon the books of
the association. If an annual or special shareholders' meeting is adjourned to
a different date, time, or place, notice need not be given of the new date,
time or place, if the new date, time or place is announced at the meeting
before adjournment, unless any additional items of business are to be
considered, or the association becomes aware of an intervening event materially
affecting any matter to be voted on more than 10 days prior to the date to
which the meeting is adjourned. If a new record date for the adjourned meeting
is fixed, however, notice of the adjourned meeting must be given to persons who
are shareholders as of the new record date.
Section 1.4. Proxies. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting.
Proxies shall be dated and filed with the records of the meeting. Proxies with
rubber-stamped facsimile signatures may be used and unexecuted proxies may be
counted upon receipt of a confirming telegram from the shareholder. Proxies
meeting the above requirements submitted at any time during a meeting shall be
accepted.
<PAGE> 9
Section 1.5. Quorum. A majority of the outstanding capital stock, represented
in person or by proxy, shall constitute a quorum at any meeting of
shareholders, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice.
Section 1.6. Voting. In deciding on questions at meetings of shareholders,
except in the election of directors, each shareholder shall be entitled to one
vote for each share of stock held. A majority of votes cast shall decide each
matter submitted to the shareholders at the meeting except in cases where by
law a larger vote is required.
ARTICLE II
DIRECTORS
Section 2.1. Board of Directors. The board of directors shall manage and
administer the business and affairs of the association. Except as expressly
limited by law, all corporate powers of the association shall be vested in and
may be exercised by the board.
Section 2.2. Number. The board shall consist of not less than five nor more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of a majority of the shareholders at any
meeting thereof.
Section 2.3. Term. The directors of this association shall hold office for one
year and until their successors are elected and have qualified.
Section 2.4. Oath. Each person elected or appointed a director of this
association must take the oath of such office as prescribed by the laws of the
United States. No person elected or appointed a director of this association
shall exercise the functions of such office until he has taken such oath.
Section 2.5. Honorary Directors. There may not be more than five honorary
directors of the association who shall be entitled to attend meetings of the
board and take part in its proceedings but without the right to vote. Honorary
directors shall be appointed at the annual meeting of the board of directors to
hold office until the next annual meeting provided, however, that the board may
at any regularly constituted meeting between annual meetings of the board of
directors appoint honorary directors within the limitations imposed by this
bylaw.
Section 2.6. Vacancies. Any vacancies occurring in the board of directors for
any reason, including an increase in the number thereof, may be filled, in
accordance with the laws of the United States, by appointment by the remaining
directors, and any director so appointed shall hold office until the next
annual meeting and until his successor is elected and has qualified.
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<PAGE> 10
Section 2.7. Organization Meeting. The. annual meeting of the board of
directors shall be held at the main office of the association to organize the
new board and appoint committees of the board and officers of the association
for the succeeding year, and for transacting such other business as properly
may come before the meeting. Such meeting shall be held on the day of the
election of directors or as soon thereafter as practicable, and, in any event,
within 30 days thereof. If, at the time fixed for such meeting, there shall
not be a quorum, the directors present may adjourn the meeting, from time to
time, until a quorum is obtained.
Section 2.8. Regular Meetings. The regular meetings of the board of directors
shall be held, without notice, at the main office, or at such other place as
has been duly authorized by the board, on such day and at such time as the
board shall determine. When any regular meeting of the board falls upon a
holiday, the meeting shall be held on the next banking business day unless the
board shall designate another day.
Section 2.9. Special Meetings. Special meetings of the board of directors may
be called by the chairman, the president, or at the request of seven or more
directors. Each member of the board of directors shall be given notice stating
the time and place by telegram, letter, or in person, of each special meeting.
Section 2.10. Quorum. A majority of the members of the board shall constitute
a quorum at any meeting. If the number of directors is reduced below the
number that would constitute a quorum, no business may be transacted, except
selecting directors to fill vacancies in conformance with these bylaws. If a
quorum is present, the board of directors may take action through the vote of a
majority of the directors who are in attendance.
Section 2.11. Record Time. The board of directors may fix a day and hour, not
exceeding fifty (50) days preceding the date fixed for the payment of any
dividend or for any meeting of the shareholders as a record time for the
determination of shareholders entitled to receive such dividend, or as the time
as of which shareholders entitled to notice of and to vote at such meeting
shall be determined, as the case may be, and only shareholders of record at the
time so fixed shall be entitled to receive such dividend or to notice of and to
vote at such meeting.
Section 2.12. Fees. All directors other than directors who are officers of the
association or its affiliates shall be entitled to reasonable fees for their
services as such directors and as members of committees of the board, said fees
to be fixed by vote of the board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1. Executive Committee. The board of directors may establish an
executive committee consisting of the chairman, not less than five directors,
not officers, who are appointed by the board, and such other directors as the
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<PAGE> 11
board may appoint. The board shall designate the chairman thereof. The
Executive Committee shall possess and may exercise such powers as are provided
in these bylaws and all other delegable powers of the board and shall meet at
the call of any member thereof. All action of said committee shall be reported
to the board at the next regular board meeting thereafter. Four members of the
Committee, of whom not less than three shall be directors who are not officers,
shall be necessary to constitute a quorum.
Section 3.2. Loan and Investment Committee. The board of directors shall
establish a loan and investment committee consisting of the chairman, the
president, not less than four directors, not officers, who are appointed by the
board, and such other directors as the board may appoint. The committee shall
ensure that the association's credit and investment policies are adequate and
that lending and investment activities are conducted in accordance with the
association's policies and with applicable laws and regulations. The committee
shall exercise oversight and receive reports with respect to lending activities
and credit risk management. The committee shall also exercise oversight and
receive reports with respect to the association's securities portfolio and
securities portfolio activities to ensure appropriate portfolio
diversification, asset quality, liquidity, and profitability. The committee
shall also have oversight responsibilities with respect to the association's
investment policy, liquidity policy, liquidity contingency planning and
interest rate risk exposure. All action by the committee shall be reported to
the board at the next regular board meeting thereafter. Four members of the
committee, of whom not less than two shall be directors who are not officers,
shall be necessary to constitute a quorum.
Section 3.3. Trust Committee. The board of directors shall establish a trust
committee consisting of the president and not less than four directors, not
officers, who are appointed by the board and such other directors as the board
may appoint. The trust committee shall have authority, between meetings of the
board, to discharge the responsibilities of the association with respect to the
exercise of fiduciary powers, except as the board may by resolution or other
appropriate action otherwise from time to time determine. All action by said
committee shall be reported to the board at the next regular board meeting
thereafter. Four members of the trust committee, of whom at least two shall be
directors who are not officers, shall be necessary to constitute a quorum.
Section 3.4. Audit Committee. The audit committee of Shawmut National
Corporation, no member of whom is an officer of the association, is designated
to oversee the audit affairs of the association. Members of the association's
board of directors, none of whom may be officers of the association, may serve
on the audit committee of Shawmut National Corporation. In addition, the board
may, from time to time, appoint an audit committee consisting of not less than
four members of the board, no one of whom shall be an executive officer of the
association, to perform such audit functions as may be assigned by the board.
The duty of the audit committee shall be to examine at least once during each
calendar year and within 15 months of the last examination of affairs of the
association or cause suitable examination to be made by auditors responsible
only to the board of directors and to report the result of such examination in
writing to the board at the next regular meeting
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<PAGE> 12
thereafter. Such report shall state whether the association is in a sound
condition, whether fiduciary powers have been administered according to law and
sound fiduciary principles, whether adequate internal controls and procedures
are being maintained, and shall recommend to the board of directors such
changes in the manner of conducting the affairs of the association as shall be
deemed advisable.
Section 3.5. Community Affairs Committee. The board of directors shall
establish a community affairs committee consisting of not less than four
directors and such other persons as shall be appointed by the board. The
community affairs committee shall oversee compliance by the association with
the policies and provisions of the Community Reinvestment Act of 1978, as
amended; shall establish and supervise policies relating to voluntary corporate
contributions and other matters of business and community conduct, all as the
board or the chairman may from time to time specify or request. All actions by
said committee shall be reported to the board at the next regular board meeting
thereafter. Three members of the committee, of whom at least two shall be
directors who are not officers, shall be necessary to constitute a quorum.
Section 3.6. Substitute Committee Members. In the case of the absence of any
member of any committee of the board from any meeting of such committee, the
directors who are not officers and are present at such meeting, or the senior
officer present if no such directors are there, may designate a substitute to
serve in lieu of such absent member. Such substitute need not be a director
unless such absent member is a director but in any case when the board of
directors shall have designated one or more alternate members for such
committee, the substitute shall be selected from such of said alternates as are
then available.
Section 3.7. Additional Committees. The board of directors may by resolution
designate one or more additional committees, each consisting of two or more of
the directors. Any such additional committee shall have and may exercise such
powers as the board may from time to time prescribe for furthering the business
and affairs of the association.
ARTICLE IV
WAIVER OF NOTICE; WRITTEN CONSENT; PARTICIPATION BY TELEPHONE
Section 4.1. Waiver of Notice. Notice of the time, place and purpose of any
regular meeting of the board of directors or a committee thereof may be waived
in writing by any director or member of such committee, as the case may be,
either before or after such meeting. Attendance in person at a meeting of the
board of directors or a committee thereof shall be deemed to constitute a
waiver of notice thereof.
Section 4.2. Written Consent. Unless otherwise restricted by the articles of
association or these bylaws, any action required or permitted to be taken at
any meeting of the board of directors or a committee thereof may be taken
without a meeting if a consent in writing, setting forth the action to so be
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<PAGE> 13
taken, shall be signed before or after such action by all of the directors, or
all of the members of a committee thereof, as the case may be. Such written
consent shall be filed with the records of the association.
Section 4.3. Participation by Telephone. One or more directors may participate
in a meeting of the board of directors, of a committee of the board, or of the
shareholders, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in this manner shall constitute presence in person
at such meeting.
ARTICLE V
OFFICERS AND EMPLOYEES
Section 5.1. Officers. The officers of the association shall consist of a
chairman, a president, one or more vice chairmen, one or more executive vice
presidents, one or more senior vice presidents, one or more vice presidents, a
secretary, an auditor and such other officers as may be appropriate for the
prompt and orderly transaction of the business of the association. Any officer
may hold more than one office, except that the chairman and president may not
also serve as secretary. The chairman, the president, any vice chairman, and
the auditor shall be elected annually by the board of directors to serve for
one year and until his successor is elected and qualifies. All other officers
shall be appointed to hold office during the pleasure of the board, which may
in its discretion delegate the authority to appoint and remove any officer or
officers (other than the auditor) below the ranks of president and vice
chairman.
Section 5.2. Chairman. The chairman shall preside or designate the presiding
officer at all meetings of the board of directors and shareholders. The
chairman shall be the chief executive officer of the association unless
otherwise designated by the board, and may have and exercise such further
powers and duties as from time to time may be conferred upon or assigned to the
chairman by the board of directors. The chairman may establish advisory
committees for any branch, region, or division of the association to advise on
the affairs of such branch, region, or division; provided that such advisory
committee members shall not attend meetings of the board of directors or any
committee thereof, and shall not participate in the management of the
association. If at any time the office of chairman shall be vacant, the powers
and duties of that office shall devolve upon the president; if the office of
president shall be vacant, the powers and duties of that office shall devolve
upon the chairman; and if the office of the chairman and president are vacant,
the board shall designate one or more officers of the association to perform
the duties of chairman until such time as a new chairman is appointed.
Section 5.3. President. The president shall have general executive powers and
may also have and exercise such further powers and duties as may be conferred
upon or assigned by the board or the chairman.
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<PAGE> 14
Section 5.4. Vice Chairman. Each Vice Chairman shall perform such duties as
may be assigned from time to time by the board of directors or the chairman.
Section 5.5. Secretary. The secretary of the association, or other designated
officer of the association, shall keep accurate minutes of all meetings of the
board of directors; shall attend to the giving of all notices required by these
bylaws; shall be custodian of the corporate seal, records, documents and papers
of the association; shall provide for the keeping of proper records of all
transactions of the association; shall have and may exercise any and all other
powers and duties pertaining by law, regulation or practice, or imposed by the
bylaws; and shall also perform such other duties as may be assigned from time
to time, by the board of directors or the chairman.
Section 5.6. Auditor. The general auditor of the association, or his designee,
shall be the officer in charge of auditing. Said officer shall be responsible
for the conduct of a program of continuous audits of the association and all of
its departments and shall make, or cause to be made, further examinations as he
deems necessary or are required from time to time by the responsible audit
committee or the board. Said officer shall report the results of audit
activities periodically to the responsible audit committee or the board.
Section 5.7. Other Officers. All other officers shall perform such duties and
exercise such powers as shall pertain to their respective offices, or as shall
be imposed by law, or as may be conferred upon, or assigned to them by the
board of directors or the chairman.
Section 5.8. Resignation. An officer may resign at any time by delivering
notice to the association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
ARTICLE VI
SIGNING AUTHORITY
Section 6.1. Signing Authority. Each officer of this association, excluding
the auditor and each other officer whose primary duties are auditing in nature,
shall have authority for and on behalf of this association to execute, deliver,
sign and endorse checks, drafts, pledges, certificates, receipts for money,
warehouse receipts, bills of lading or similar documents, contracts arising in
the ordinary course of the business of the association, bankers' acceptances
made by the association, commercial credits of the association, securities and
property received in trust or for deposit, proxies to vote stock held by the
association in any capacity, petitions, foreclosures and other deeds, powers,
leases, assignments, discharges, releases, extensions, purchase agreements,
conveyances, and other written instruments pertaining to real estate or
interest therein and, where indicated, to affix the corporate seal of the
association to any of the foregoing; to guarantee and witness signatures upon
securities, documents or other written
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<PAGE> 15
instruments; to purchase, sell, assign, pledge or transfer funds or other
securities of the association or within its control as a fiduciary; and,
subject to the approval of such officer or committee as the board may
designate, to accept trusts and appointments and to execute trust indentures
and any other instruments establishing trusts or making appointments. Each
officer at the level of senior vice president or above, shall be empowered to
authorize another person or persons, whether or not such other person or
persons are officers or employees of the association, to sign or endorse any of
the foregoing documents on behalf of the association in a particular
transaction; but such officer shall by signed entry personally note the fact of
such authorization on the records of the association relating to such
transaction. The officer in charge of the international division of the
association, or in his absence his designee, shall be empowered to authorize
another person or persons, whether or not such other person or persons are
officers or employees of the association, to execute documents and do such
other acts and things as may be required in connection with a particular loan
or extension of credit, proceeding before a court or other judicial or
administrative body, or other transaction; but such officer shall by signed
entry personally note the fact of such authorization on the records of the
association relating to such act or transaction. Any one officer at the level
of senior vice president or above shall have authority for and on behalf of the
association to borrow money. The chairman, the president, any vice chairman,
any executive vice president, and the senior vice president or other officer in
charge of investment administration or such other officers as may be designated
by the chairman may each, acting singly, authorize borrowings and request
advances from any Federal Reserve Bank or any Federal Home Loan Bank, as the
case may be, and may agree with said bank upon appropriate terms and collateral
for such transactions. The officers and other employees of the association
shall have such further signature powers as may be specified by the board of
directors or by the chairman or his designee.
ARTICLE VII
STOCK AND STOCK CERTIFICATES
Section 7.1. Transfers. Shares of stock shall be transferable on the books of
the association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall in proportion to his or her shares, succeed to all rights of the prior
holder of such shares. The board of directors may impose conditions upon the
transfer of the stock reasonably calculated to simplify the work of the
association with respect to stock transfer, voting shareholder meetings, and
related matters and to protect it against fraudulent transfer.
Section 7.2. Stock Certificates. Certificates of stock shall bear the
signature of the chairman or president (which may be engraved, printed or
impressed), and shall be signed manually or by facsimile process by the
secretary or assistant secretary, and the seal of the association shall be
engraved thereon. Each certificate shall recite on its face that the stock
represented thereby is transferable only upon the books of the association
properly endorsed.
<PAGE> 16
ARTICLE VIII
CORPORATE SEAL
Section 8. Corporate Seal. The board of directors shall provide a seal for
the association. The secretary shall have custody thereof and may designate
such other officers as may have counterparts.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Fiscal Year. The fiscal year of the association shall be the
calendar year.
Section 9.2. Records. The articles of association, the bylaws and the
proceedings of all meetings of the shareholders, the board of directors, and
standing committees of the board, shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
secretary or other officer appointed to act as secretary of the meeting.
ARTICLE X
BYLAWS
Section 10. Amendments. These bylaws may be altered, amended, or added to or
repealed by a vote of a majority of the members of the board then in office at
any meeting, provided that notice thereof shall have been given in the notice
of such meeting.
A true copy
Attest:
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of January 11, 1993
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EXHIBIT 2
[LOGO]
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COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
2. "Shawmut Bank Connecticut, National Association", Hartford,
Connecticut, Charter No. 1338, is a National Banking Association formed
under the laws of the United States and is authorized thereunder to transact
the business of banking and exercise fiduciary powers on the date of this
certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused the seal of
the 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 14th day of July, 1994.
/s/ EUGENE A. LUDWIG
-----------------------------
Comptroller of the Currency
<PAGE> 18
EXHIBIT 4
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under a Pass Through Agreement to be
entered into between Phillip Petroleum Company and Shawmut Bank Connecticut,
National Association, Trustee, does hereby consent that, pursuant to Section
321(b) of the Trust Indenture Act of 1939, reports of examinations with
respect to the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION
Trustee
By /s/ KATHY A. LARIMORE
-------------------------------
Kathy A. Larimore
Assistant Vice President
Dated: September , 1994
-----
<PAGE> 19
EXHIBIT 5
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1994
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 RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1) ................................... 0081 875,210 1.a.
b. Interest-bearing balances(2) ............................................................ 0071 145,435 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. 1754 3,906,126 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ 1773 779,309 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices //////////////////
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: //////////////////
a. Federal funds sold ...................................................................... 0276 233,300 3.a.
b. Securities purchased under agreements to resell ......................................... 0277 0 3.b.
4. Loans and lease financing receivables: //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 9,146,312 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ................... RCFD 3123 309,789 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ....................... RCFD 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 8,836,523 4.d.
5. Assets held in trading accounts ............................................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases) ................................... 2145 178,499 6.
7. Other real estate owned (from Schedule RC-M) ............................................... 2150 32,388 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding ............................... 2155 31,941 9.
10. Intangible assets (from Schedule RC-M) ..................................................... 2143 77,424 10.
11. Other assets (from Schedule RC-F) .......................................................... 2160 644,600 11.
12. Total assets (sum of items 1 through 11) ................................................... 2170 15,740,755 12.
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
3
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
LIABILITIES ///////////////////////
13. Deposits: ///////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... RCON 2200 9,763,814 13.a.
(1) Noninterest-bearing(1) ................................ RCON 6631 2,762,398 /////////////////////// 13.a.(1)
(2) Interest-bearing ...................................... RCON 6636 7,001,416 /////////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, ///////////////////////
part II) .............................................................................. RCFN 2200 196,619 13.b.
(1) Noninterest-bearing ................................... RCFN 6631 0 /////////////////////// 13.b.(1)
(2) Interest-bearing ...................................... RCFN 6636 196,619 /////////////////////// 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ///////////////////////
a. Federal funds purchased ............................................................... RCFD 0278 1,860,850 14.a.
b. Securities sold under agreements to repurchase ........................................ RCFD 0279 1,284,572 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. RCON 2840 447,595 15.a.
b. Trading liabilities ................................................................... RCFD 3548 6,575 15.b.
16. Other borrowed money: ///////////////////////
a. With original maturity of one year or less ............................................ RCFD 2332 497,414 16.a.
b. With original maturity of more than one year .......................................... RCFD 2333 260,803 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... RCFD 2910 9,784 17.
18. Bank's liability on acceptances executed and outstanding ................................. RCFD 2920 31,941 18.
19. Subordinated notes and debentures ........................................................ RCFD 3200 0 19.
20. Other liabilities (from Schedule RC-G) ................................................... RCFD 2930 177,566 20.
21. Total liabilities (sum of items 13 through 20) ........................................... RCFD 2948 14,537,533 21.
///////////////////////
22. Limited-life preferred stock and related surplus ......................................... RCFD 3282 0 22.
EQUITY CAPITAL ///////////////////////
23. Perpetual preferred stock and related surplus ............................................ RCFD 3838 0 23.
24. Common stock ............................................................................. RCFD 3230 19,487 24.
25. Surplus (exclude all surplus related to preferred stock).................................. RCFD 3839 926,125 25.
26. a. Undivided profits and capital reserves ................................................ RCFD 3632 275,774 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ RCFD 8434 (18,164) 26.b.
27. Cumulative foreign currency translation adjustments ...................................... RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) ........................................ RCFD 3210 1,203,222 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, ///////////////////////
and 28) .................................................................................. RCFD 3300 15,740,755 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C>
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 independent external Number
auditors as of any date during 1993 ............................................................... RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducte 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.
4
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
----------
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
C405 <-
-----------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------------------------- ----- ------------------- -------------
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and ////////////////// //////////////////
coin .................................................................... 0022 672,793 ////////////////// 1.
a. Cash items in process of collection and unposted debits .............. ////////////////// 0020 520,047 1.a.
b. Currency and coin .................................................... ////////////////// 0080 152,746 1.b.
2. Balances due from depository institutions in the U.S. ................... ////////////////// 0082 133,071 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... 0083 0 ////////////////// 2.a.
b. Other commercial banks in the U.S. and other depository institutions ////////////////// //////////////////
in the U.S. (including their IBFs) ................................... 0085 133,071 ////////////////// 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. ////////////////// 0070 136,505 3.
a. Foreign branches of other U.S. banks ................................. 0073 0 ////////////////// 3.a.
b. Other banks in foreign countries and foreign central banks ........... 0074 136,505 ////////////////// 3.b.
4. Balances due from Federal Reserve Banks ................................. 0090 78,276 0090 78,276 4.
5. Total (sum of items 1 through 4) (total of column A must equal ////////////////// //////////////////
Schedule RC, sum of items 1.a and 1.b) .................................. 0010 1,020,645 0010 1,020,645 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, //////////////////
column B above) .............................................................................. 0050 132,636 M.1.
</TABLE>
5
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-B--Securities
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
C410 <-
--------------------------------------------------------------------------- --------
Held-to-maturity Available-for-sale
----------------------------------------- -----------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
-------------------- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------- ----- ------------- ----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... 0211 1,068,833 0213 1,016,552 1286 534,139 1287 515,844 1.
2. U.S. Government agency ////////////////// ////////////////// ////////////////// //////////////////
and corporation obligations ////////////////// ////////////////// ////////////////// //////////////////
(exclude mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities): ////////////////// ////////////////// ////////////////// //////////////////
a. Issued by U.S. Govern- ////////////////// ////////////////// ////////////////// //////////////////
ment agencies(2) .............. 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. ////////////////// ////////////////// ////////////////// //////////////////
Government-sponsored ////////////////// ////////////////// ////////////////// //////////////////
agencies(3) ................... 1294 0 1295 0 1297 0 1298 0 2.b.
3. Securities issued by states ////////////////// ////////////////// ////////////////// //////////////////
and political subdivisions ////////////////// ////////////////// ////////////////// //////////////////
in the U.S.: ////////////////// ////////////////// ////////////////// //////////////////
a. General obligations ........... 1676 0 1677 0 1678 135 1679 137 3.a.
b. Revenue obligations ........... 1681 0 1686 0 1690 0 1691 0 3.b.
c. Industrial development ////////////////// ////////////////// ////////////////// //////////////////
and similar obligations ....... 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities (MBS): ////////////////// ////////////////// ////////////////// //////////////////
a. Pass-through securities: ////////////////// ////////////////// ////////////////// //////////////////
(1) Guaranteed by ////////////////// ////////////////// ////////////////// //////////////////
GNMA ...................... 1698 0 1699 0 1701 78,175 1702 80,542 4.a.(1)
(2) Issued by FNMA ////////////////// ////////////////// ////////////////// //////////////////
and FHLMC ................. 1703 1,752,887 1705 1,708,934 1706 0 1707 0 4.a.(2)
(3) Privately-issued .......... 1709 19,308 1710 18,253 1711 0 1713 0 4.a.(3)
b. CMOs and REMICs: ////////////////// ////////////////// ////////////////// //////////////////
(1) Issued by FNMA ////////////////// ////////////////// ////////////////// //////////////////
and FHLMC ................. 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2) Privately-issued ////////////////// ////////////////// ////////////////// //////////////////
and collateralized ////////////////// ////////////////// ////////////////// //////////////////
by MBS issued or ////////////////// ////////////////// ////////////////// //////////////////
guaranteed by ////////////////// ////////////////// ////////////////// //////////////////
FNMA, FHLMC, or ////////////////// ////////////////// ////////////////// //////////////////
GNMA ...................... 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other privately- ////////////////// ////////////////// ////////////////// //////////////////
issued .................... 1733 146,608 1734 144,265 1735 151,600 1736 139,578 4.b.(3)
5. Other debt securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Other domestic debt ////////////////// ////////////////// ////////////////// //////////////////
securities .................... 1737 915,240 1738 904,035 1739 0 1741 0 5.a.
b. Foreign debt ////////////////// ////////////////// ////////////////// //////////////////
securities .................... 1742 3,250 1743 3,250 1744 0 1746 0 5.b.
</TABLE>
- -------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than pass-through securities, CMOs, and REMICs)
issued by the Farm Credit System, the Federal Home Loan Bank System, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Financing Corporation, Resolution Funding Corporation,
the Student Loan Marketing Association, and the Tennessee Valley Authority.
6
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
----------------------------------------- -----------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
-------------------- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------ ----- ------------- ----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C> <C>
6. Equity securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Investments in mutual ////////////////// ////////////////// ////////////////// //////////////////
funds ....................... ////////////////// ////////////////// 1747 5,016 1748 5,016 6.a.
b. Other equity securities ////////////////// ////////////////// ////////////////// //////////////////
with readily determin- ////////////////// ////////////////// ////////////////// //////////////////
able fair values ............ ////////////////// ////////////////// 1749 0 1751 0 6.b.
c. All other equity ////////////////// ////////////////// ////////////////// //////////////////
securities(1) ............... ////////////////// ////////////////// 1752 38,192 1753 38,192 6.c.
7. Total (sum of items 1 ////////////////// ////////////////// ////////////////// //////////////////
through 6) (total of ////////////////// ////////////////// ////////////////// //////////////////
column A must equal ////////////////// ////////////////// ////////////////// //////////////////
Schedule RC, item 2.a) ////////////////// ////////////////// ////////////////// //////////////////
(total of column D must ////////////////// ////////////////// ////////////////// //////////////////
equal Schedule RC, ////////////////// ////////////////// ////////////////// //////////////////
item 2.b) ...................... 1754 3,906,126 1771 3,795,289 1772 807,257 1773 779,309 7.
</TABLE>
<TABLE>
<CAPTION>
Memoranda C412 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Pledged securities(2) ......................................................................... 0416 2,899,544 M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual status): //////////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////////
(1) Three months or less ................................................................... 0343 0 M.2.a.(1)
(2) Over three months through 12 months .................................................... 0344 22,223 M.2.a.(2)
(3) Over one year through five years ....................................................... 0345 2,058,261 M.2.a.(3)
(4) Over five years ........................................................................ 0346 2,384,920 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... 0347 4,465,404 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ........................................................... 4544 6,016 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ 4545 170,807 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. 4551 0 M.2.b.(3)
(4) Less frequently than every five years .................................................. 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. 4553 176,823 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt //////////////////
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual //////////////////
debt securities included in Schedule RC-N, item 9, column C) ............................... 0393 4,642,227 M.2.c.
3. Not applicable //////////////////
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included //////////////////
in Schedule RC-B, items 3 through 5, column A, above) ......................................... 5365 0 M.4.
5. Not applicable //////////////////
6. Floating rate debt securities with a remaining maturity of one year or less(2) (included in //////////////////
Memorandum item 2.b.(5) above) ................................................................ 5519 3,001 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or //////////////////
trading securities during the calendar year-to-date ........................................... 1778 238 M.7.
</TABLE>
- -------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
7
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
<TABLE>
<CAPTION>
Do not deduct the allowance for loan and lease losses from amounts
reported in this schedule. Report total loans and leases, net of unearned
income. Exclude assets held in trading accounts. C415 <-
-----------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------------------- ----- ------------- ----- -------------
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... 1410 5,239,388 ////////////////// 1.
a. Construction and land development ................................... ////////////////// 1415 76,735 1.a.
b. Secured by farmland (including farm residential and other ////////////////// //////////////////
improvements) ....................................................... ////////////////// 1420 1,719 1.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit ................... ////////////////// 1797 417,777 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: ////////////////// //////////////////
(a) Secured by first liens ...................................... ////////////////// 5367 3,226,287 1.c.(2)(a)
(b) Secured by junior liens ..................................... ////////////////// 5368 211,935 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... ////////////////// 1460 100,761 1.d.
e. Secured by nonfarm nonresidential properties ........................ ////////////////// 1480 1,204,174 1.e.
2. Loans to depository institutions: ////////////////// //////////////////
a. To commercial banks in the U.S. ..................................... ////////////////// 1505 17 2.a.
(1) To U.S. branches and agencies of foreign banks .................. 1506 0 ////////////////// 2.a.(1)
(2) To other commercial banks in the U.S. ........................... 1507 17 ////////////////// 2.a.(2)
b. To other depository institutions in the U.S. ........................ 1517 0 1517 0 2.b.
c. To banks in foreign countries ....................................... ////////////////// 1510 0 2.c.
(1) To foreign branches of other U.S. banks ......................... 1513 0 ////////////////// 2.c.(1)
(2) To other banks in foreign countries ............................. 1516 0 ////////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... 1590 1,280 1590 1,280 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile) ....................................... 1763 2,624,506 1763 2,624,506 4.a.
b. To non-U.S. addressees (domicile) ................................... 1764 0 1764 0 4.b.
5. Acceptances of other banks: ////////////////// //////////////////
a. Of U.S. banks ....................................................... 1756 240 1756 240 5.a.
b. Of foreign banks .................................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures (i.e., consumer loans) (includes purchased paper) ......... ////////////////// 1975 455,734 6.
a. Credit cards and related plans (includes check credit and other ////////////////// //////////////////
revolving credit plans) ............................................. 2008 26,062 ////////////////// 6.a.
b. Other (includes single payment, installment, and all student loans) . 2011 429,672 ////////////////// 6.b.
7. Loans to foreign governments and official institutions (including ////////////////// //////////////////
foreign central banks) ................................................. 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and political ////////////////// //////////////////
subdivisions in the U.S. (includes nonrated industrial development ////////////////// //////////////////
obligations) ........................................................... 2107 76,157 2107 76,157 8.
9. Other loans ............................................................ 1563 755,405 ////////////////// 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . ////////////////// 1545 103,947 9.a.
b. All other loans (exclude consumer loans) ............................ ////////////////// 1564 651,458 9.b.
10. Lease financing receivables (net of unearned income) ................... ////////////////// 2165 3,418 10.
a. Of U.S. addressees (domicile) ....................................... 2182 3,418 ////////////////// 10.a.
b. Of non-U.S. addressees (domicile) ................................... 2183 0 ////////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ 2123 9,833 2123 9,833 11.
12. Total loans and leases, net of unearned income (sum of items 1 through ////////////////// //////////////////
10 minus item 11) (total of column A must equal Schedule RC, item 4.a) . 2122 9,146,312 2122 9,146,312 12.
</TABLE>
8
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Consolidated Domestic
Memoranda Bank Offices
-------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------------------- ----- ------------- ----- -------------
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms ////////////////// //////////////////
(included in Schedule RC-C, part I, above): ////////////////// //////////////////
a. Loans secured by real estate: ////////////////// //////////////////
(1) To U.S. addressees (domicile) ................................... 1687 43,012 M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... 1689 0 M.2.a.(2)
b. Loans to finance agricultural production and other loans to farmers . 1613 0 M.2.b.
c. Commercial and industrial loans: //////////////////
(1) To U.S. addressees (domicile) ................................... 1758 0 M.2.c.(1)
(2) To non-U.S. addressees (domicile)................................ 1759 0 M.2.c.(2)
d. All other loans (exclude loans to individuals for household, //////////////////
family, and other personal expenditures) ............................ 1615 700 M.2.d.
e. Lease financing receivables: //////////////////
(1) Of U.S. addressees (domicile) ................................... 1789 0 M.2.e.(1)
(2) Of non-U.S. addressees (domicile) ............................... 1790 0 M.2.e.(2)
f. Total (sum of Memorandum items 2.a through 2.e) ..................... 1616 43,712 M.2.f.
3. Maturity and repricing data for loans and leases(1) (excluding those //////////////////
in nonaccrual status): //////////////////
a. Fixed rate loans and leases with a remaining maturity of: //////////////////
(1) Three months or less ............................................ 0348 450,888 M.3.a.(1)
(2) Over three months through 12 months ............................. 0349 81,259 M.3.a.(2)
(3) Over one year through five years ................................ 0356 819,672 M.3.a.(3)
(4) Over five years ................................................. 0357 2,399,164 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of //////////////////
Memorandum items 3.a.(1) through 3.a.(4)) ....................... 0358 3,750,983 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: //////////////////
(1) Quarterly or more frequently .................................... 4554 3,963,831 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . 4555 554,895 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than //////////////////
annually ........................................................ 4561 722,391 M.3.b.(3)
(4) Less frequently than every five years ........................... 4564 3,881 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) //////////////////
through 3.b.(4)) ................................................ 4567 5,244,998 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) //////////////////
(must equal the sum of total loans and leases, net, from //////////////////
Schedule RC-C, part I, item 12, plus unearned income from //////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual loans and //////////////////
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... 1479 8,995,981 M.3.c.
4. Loans to finance commercial real estate, construction, and land //////////////////
development activities (not secured by real estate) included in //////////////////
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... 2746 37,810 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) 5369 238,903 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family //////////////////
residential properties (included in Schedule RC-C, part I, item ////////////////// RCON Bil Mil Thou
1.c.(2)(a), column B, page RC-6) ....................................... ////////////////// 5370 1,470,716 M.6.
</TABLE>
- -------------
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
9
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-7a
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of
Condition.
Report the number and amount currently outstanding as of June 30 of business
loans with "original amounts" of $1,000,000 or less and farm loans with
"original amounts" of $500,000 or less. The following guidelines should be used
to determine the "original amount" of a loan: (1) For loans drawn down under
lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan
commitment was most recently approved, extended, or renewed prior to the report
date. However, if the amount currently outstanding as of the report date
exceeds this size, the "original amount" is the amount currently outstanding on
the report date. (2) For loan participations and syndications, the "original
amount" of the loan participation or syndication is the entire amount of the
credit originated by the lead lender. (3) For all other loans, the "original
amount" is the total amount of the loan at origination or the amount currently
oustanding as of the report date, whichever is larger.
Loans to Small Businesses
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially C418 <-
all of the bank's "Loans secured by nonfarm nonresidential properties" in domestic ------ --------
offices reported in Schedule RC-C, part I, item 1.e, column B, and all or substantially YES NO
all of the bank's "Commercial and industrial loans to U.S. addressees" in domestic offices ---------------------
reported in Schedule RC-C, part I, item 4.a, column B, have original amounts of $100,000 6999 /// 1.
or less (see instructions) ................................................................ X
</TABLE>
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO, skip items 2.a and 2.b, complete items 3 and 4 below, and go to item 5.
<TABLE>
<S> <C> <C>
--------------------
2. Report the total number of loans currently outstanding for each of the Number of Loans
--------------------
following Schedule RC-C, part I, loan categories: RCON ////////////
------
a. "Loans secured by nonfarm nonresidential properties" in domestic //////////////////
offices reported in Schedule RC-C, part I, item 1.e, column B ........... 5562 N/A 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic offices //////////////////
reported in Schedule RC-C, part I, item 4.a, column B ................... 5563 N/A 2.b.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
-------------------- --------------------
Dollar Amounts in Thousands RCON ///////////// RCON Bil Mil Thou
- --------------------------------------------------------------------------------- ------ ----- -------------
<S> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm ///////////////////////////////////////
nonresidential properties" in domestic offices reported in Schedule RC-C, ///////////////////////////////////////
part I, item 1.e, column B (sum of items 3.a through 3.c must be less than ///////////////////////////////////////
or equal to Schedule RC-C, part I, item 1.e, column B): ///////////////////////////////////////
a. With original amounts of $100,000 or less ................................ 5564 1,127 5565 39,831 3.a.
b. With original amounts of more than $100,000 through $250,000 ............. 5566 1,073 5567 131,881 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ........... 5568 1,131 5569 422,956 3.c.
4. Number and amount currently outstanding of "Commercial and industrial ///////////////////////////////////////
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, ///////////////////////////////////////
part I, item 4.a, column B (sum of items 4.a through 4.c must be less than ///////////////////////////////////////
or equal to Schedule RC-C, part I, item 4.a, column B): ///////////////////////////////////////
a. With original amounts of $100,000 or less ................................ 5570 2,304 5571 49,374 4.a.
b. With original amounts of more than $100,000 through $250,000 ............. 5572 507 5573 50,467 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ........... 5574 477 5575 148,262 4.c.
</TABLE>
9a
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-7b
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C>
5. Indicate in the appropriate box at the right whether all or substantially
all of the bank's "Loans secured by farmland (including farm residential and YES NO
other improvements)" in domestic offices reported in Schedule RC-C, part I,
item 1.b, column B, and all or substantially all of the bank's "Loans to ----------------------
finance agricultural production and other loans to farmers" in domestic offices 6860 /// 5.
reported in Schedule RC-C, part I, item 3, column B, have original amounts of X
$100,000 or less (see instructions) ................................................................. ----------------------
</TABLE>
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO, skip items 6.a and 6.b and complete items 7 and 8 below.
<TABLE>
<S> <C>
6. Report the total number of loans currently outstanding for each of the ----------------------
following Schedule RC-C, part I, loan categories: Number of Loans
--------------------
a. "Loans secured by farmland (including farm residential and other RCON ////////////
improvements)" in domestic offices reported in Schedule RC-C, part I, //////////////////
item 1.b, column B ....................................................... 5576 N/A 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in //////////////////
domestic offices reported in Schedule RC-C, part I, item 3, column B ..... 5577 N/A 6.b.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
-------------------- --------------------
Dollar Amounts in Thousands RCON ///////////// RCON Bil Mil Thou
- --------------------------------------------------------------------------------- ------ ----- -------------
<S> <C> <C>
7. Number and amount currently outstanding of "Loans secured by farmland ///////////////////////////////////////
(including farm residential and other improvements)" in domestic offices ///////////////////////////////////////
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a ///////////////////////////////////////
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, ///////////////////////////////////////
column B): ///////////////////////////////////////
a. With original amounts of $100,000 or less ................................ 5578 3 5579 98 7.a.
b. With original amounts of more than $100,000 through $250,000 ............. 5580 2 5581 312 7.b.
c. With original amounts of more than $250,000 through $500,000 ............. 5582 4 5583 579 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural ///////////////////////////////////////
production and other loans to farmers" in domestic offices reported in ///////////////////////////////////////
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c ///////////////////////////////////////
must be less than or equal to Schedule RC-C, part I, item 3, column B): ///////////////////////////////////////
a. With original amounts of $100,000 or less ................................ 5584 23 5585 480 8.a.
b. With original amounts of more than $100,000 through $250,000 ............. 5586 2 5587 233 8.b.
c. With original amounts of more than $250,000 through $500,000 ............. 5588 2 5589 567 8.c.
</TABLE>
9b
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of interest rate,
foreign exchange rate, and other commodity and equity contracts (as reported in
Schedule RC-L, items 11, 12, and 13).
<TABLE>
<CAPTION>
C420 <-
----------------- --------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
ASSETS ///////////////////////
1. U.S. Treasury securities in domestic offices ................................................ RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- ///////////////////////
backed securities) .......................................................................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... RCON 3533 0 3.
4. Mortgage-backed securities in domestic offices: ///////////////////////
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... RCON 3534 0 4.a.
b. CMOs and REMICs issued by FNMA or FHLMC .................................................. RCON 3535 0 4.b.
c. All other ................................................................................ RCON 3536 0 4.c.
5. Other debt securities in domestic offices ................................................... RCON 3537 0 5.
6. Certificates of deposit in domestic offices ................................................. RCON 3538 0 6.
7. Commercial paper in domestic offices ........................................................ RCON 3539 0 7.
8. Bankers acceptances in domestic offices ..................................................... RCON 3540 0 8.
9. Other trading assets in domestic offices .................................................... RCON 3541 0 9.
10. Trading assets in foreign offices ........................................................... RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity ///////////////////////
contracts: ///////////////////////
a. In domestic offices ...................................................................... RCON 3543 0 11.a.
b. In foreign offices ....................................................................... RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... RCFD 3545 0 12.
///////// Bil Mil Thou
LIABILITIES ---------- -------------
13. Liability for short positions ............................................................... RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity ///////////////////////
contracts ................................................................................... RCFD 3547 6,575 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... RCFD 3548 6,575 15.
</TABLE>
10
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425 <-
--------------------------------------------------------------
Nontransaction
Transaction Accounts Accounts
----------------------------------------- --------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
-------------------- -------------------- --------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------- ----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C>
Deposits of: ////////////////// ////////////////// //////////////////
1. Individuals, partnerships, and corporations .......... 2201 3,339,818 2240 2,308,854 2346 5,743,349 1.
2. U.S. Government ...................................... 2202 59,873 2280 59,873 2520 0 2.
3. States and political subdivisions in the U.S. ........ 2203 156,286 2290 134,195 2530 203,512 3.
4. Commercial banks in the U.S. ......................... 2206 106,373 2310 106,373 ////////////////// 4.
a. U.S. branches and agencies of foreign banks ....... ////////////////// ////////////////// 2347 0 4.a.
b. Other commercial banks in the U.S. ................ ////////////////// ////////////////// 2348 1,500 4.b.
5. Other depository institutions in the U.S. ............ 2207 92,936 2312 92,936 2349 0 5.
6. Banks in foreign countries ........................... 2213 2,164 2320 2,164 ////////////////// 6.
a. Foreign branches of other U.S. banks .............. ////////////////// ////////////////// 2367 0 6.a.
b. Other banks in foreign countries .................. ////////////////// ////////////////// 2373 0 6.b.
7. Foreign governments and official institutions ////////////////// ////////////////// //////////////////
(including foreign central banks) .................... 2216 289 2300 289 2377 0 7.
8. Certified and official checks ........................ 2330 57,714 2330 57,714 ////////////////// 8.
9. Total (sum of items 1 through 8) (sum of ////////////////// ////////////////// //////////////////
columns A and C must equal Schedule RC, ////////////////// ////////////////// //////////////////
item 13.a) ........................................... 2215 3,815,453 2210 2,762,398 2385 5,948,361 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): //////////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... 6835 931,299 M.1.a.
b. Total brokered deposits ..................................................................... 2365 464,856 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): //////////////////
(1) Issued in denominations of less than $100,000 ........................................... 2343 48 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than $100,000 //////////////////
and participated out by the broker in shares of $100,000 or less ........................ 2344 458,356 M.1.c.(2)
d. Total deposits denominated in foreign currencies ............................................ 3776 0 M.1.d.
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. //////////////////
reported in item 3 above which are secured or collateralized as required under state law) ... 5590 359,797 M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must //////////////////
equal item 9, column C above): //////////////////
a. Savings deposits: //////////////////
(1) Money market deposit accounts (MMDAs) ................................................... 6810 837,541 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. 0352 2,372,564 M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... 6648 1,923,177 M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ 6645 815,079 M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. 6646 0 M.2.d.
3. All NOW accounts (included in column A above) .................................................. 2398 1,053,054 M.3.
</TABLE>
11
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Deposit Totals for FDIC Insurance Assessments(1)
Dollar Amounts in Thousands RCON Bil Mil Thou
-------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C) ///////////////////
(must equal Schedule RC, item 13.a) ......................................................... 2200 9,763,814 M.4.
//////////////////
a. Total demand deposits (must equal item 9, column B) ...................................... 2210 2,762,398 M.4.a.
b. Total time and savings deposits(2) (must equal item 9, column A plus item 9, column C //////////////////
minus item 9, column B) .................................................................. 2350 7,001,416 M.4.b.
</TABLE>
------------
(1) An amended Certified Statement should be submitted to the FDIC if the
deposit totals reported in this item are amended after the semiannual
Certified Statement originally covering this report date has been filed
with the FDIC.
(2) For FDIC insurance assessment purposes, "total time and savings deposits"
consists of nontransaction accounts and all transaction accounts other
than demand deposits.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more //////////////////
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing //////////////////
frequency of:(1) //////////////////
a. Three months or less ....................................................................... 0359 572,417 M.5.a.
b. Over three months through 12 months (but not over 12 months) ............................... 3644 718,973 M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) //////////////////
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of: //////////////////
(1) Three months or less ................................................................... 2761 223,575 M.6.a.(1)
(2) Over three months through 12 months .................................................... 2762 223,827 M.6.a.(2)
(3) Over one year through five years ....................................................... 2763 363,434 M.6.a.(3)
(4) Over five years ........................................................................ 2765 4,243 M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of //////////////////
Memorandum items 6.a.(1) through 6.a.(4)) .............................................. 2767 815,079 M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ........................................................... 4568 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ 4569 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. 4571 0 M.6.b.(3)
(4) Less frequently than every five years .................................................. 4572 0 M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of //////////////////
Memorandum items 6.b.(1) through 6.b.(4)) .............................................. 4573 0 M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5) //////////////////
and 6.b.(5)) (must equal Memorandum item 2.c. above) ....................................... 6645 815,079 M.6.c.
</TABLE>
- -------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
12
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-11
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFN Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
Deposits of: //////////////////
1. Individuals, partnerships, and corporations ................................................... 2621 196,619 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ 2623 0 2.
3. Foreign banks (including U.S. branches and //////////////////
agencies of foreign banks, including their IBFs) .............................................. 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks) ............... 2650 0 4.
5. Certified and official checks ................................................................. 2330 0 5.
6. All other deposits ............................................................................ 2668 0 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... 2200 196,619 7.
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
C430 <-
-------------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ RCFD 2164 47,928 1.
2. Net deferred tax assets(1) ................................................................... RCFD 2148 128,218 2.
3. Excess residential mortgage servicing fees receivable ........................................ RCFD 5371 34,070 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... RCFD 2168 434,384 4.
a. TEXT 3549 ---------------------------------------------------- RCFD 3549 /////////////////////// 4.a.
b. TEXT 3550 ---------------------------------------------------- RCFD 3550 /////////////////////// 4.b.
c. TEXT 3551 ---------------------------------------------------- RCFD 3551 /////////////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... RCFD 2160 644,600 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands ////////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... RCFD 5610 30,674 M.1.
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
C435 <-
-------------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ RCON 3645 13,800 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. RCFD 3646 55,957 1.b.
2. Net deferred tax liabilities(1) .............................................................. RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries ............................................... RCFD 3000 0 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... RCFD 2938 107,809 4.
a. TEXT 3552 ---------------------------------------------------- RCFD 3552 /////////////////////// 4.a.
A/P SECURITIES PURCHSED 52,593
b. TEXT 3553 ---------------------------------------------------- RCFD 3553 /////////////////////// 4.b.
c. TEXT 3554 ---------------------------------------------------- RCFD 3554 /////////////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... RCFD 2930 177,566 5.
</TABLE>
- ------------
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
13
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440 <-
--------------------
Domestic Offices
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... 2155 31,941 1.
2. Bank's liability on acceptances executed and outstanding ........................................ 2920 31,941 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... 1350 233,300 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... 2800 3,145,422 4.
5. Other borrowed money ............................................................................ 2850 758,217 5.
EITHER //////////////////
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... 2163 N/A 6.
OR //////////////////
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... 2941 51,619 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . 2192 15,595,754 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs) 3129 14,340,911 9.
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
RCON Bil Mil Thou
----- -------------
10. U.S. Treasury securities ....................................................................... 1779 1,584,677 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed //////////////////
securities) .................................................................................... 1785 0 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. 1786 137 12.
13. Mortgage-backed securities: //////////////////
a. Pass-through securities: //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ 1787 1,833,429 13.a.(1)
(2) Privately-issued ........................................................................ 1869 19,308 13.a.(2)
b. CMOs and REMICs: //////////////////
(1) Issued by FNMA and FHLMC ................................................................ 1877 0 13.b.(1)
(2) Privately-issued ........................................................................ 2253 286,186 13.b.(2)
14. Other domestic debt securities ................................................................. 3159 915,240 14.
15. Foreign debt securities ........................................................................ 3160 3,250 15.
16. Equity securities: //////////////////
a. Investments in mutual funds ................................................................. 3161 5,016 16.a.
b. Other equity securities with readily determinable fair values ............................... 3162 0 16.b.
c. All other equity securities ................................................................. 3169 38,192 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... 3170 4,685,435 17.
</TABLE>
Memorandum (to be completed only by banks with IBFs and other "foreign"
offices)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
EITHER //////////////////
1. Net due from the IBF of the domestic offices of the reporting bank .............................. 3051 N/A M.1.
OR //////////////////
2. Net due to the IBF of the domestic offices of the reporting bank ................................ 3059 N/A M.2.
</TABLE>
14
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-13
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-I--Selected Assets and Liabilities of IBFs
<TABLE>
<CAPTION>
To be completed only by banks with IBFs and other "foreign" offices.
C445 <-
--------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) .................. 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, //////////////////
column A) ...................................................................................... 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) ..... 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ...................................... 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, //////////////////
part II, items 2 and 3) ........................................................................ 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ...... 2381 N/A 6.
</TABLE>
Schedule RC-K--Quarterly Averages (1)
<TABLE>
<CAPTION>
C455 <-
-------------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
ASSETS ///////////////////////
1. Interest-bearing balances due from depository institutions ............................... RCFD 3381 113,132 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ....... RCFD 3382 3,557,492 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... RCFD 3383 408 3.
4. a. Other debt securities(2) .............................................................. RCFD 3647 1,099,528 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . RCFD 3648 47,593 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices ///////////////////////
of the bank and of its Edge and Agreement subsidiaries, and in IBFs ...................... RCFD 3365 86,013 5.
6. Loans: ///////////////////////
a. Loans in domestic offices: ///////////////////////
(1) Total loans ....................................................................... RCON 3360 9,223,155 6.a.(1)
(2) Loans secured by real estate ...................................................... RCON 3385 5,209,698 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... RCON 3386 1,094 6.a.(3)
(4) Commercial and industrial loans ................................................... RCON 3387 2,806,178 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... RCON 3388 436,911 6.a.(5)
(6) Obligations (other than securities and leases) of states and political subdivisions ///////////////////////
in the U.S. ....................................................................... RCON 3389 52,626 6.a.(6)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. RCFN 3360 0 6.b.
7. Assets held in trading accounts .......................................................... RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income) ..................................... RCFD 3484 2,938 8.
9. Total assets ............................................................................. RCFD 3368 15,427,856 9.
LIABILITIES ///////////////////////
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, ///////////////////////
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. RCON 3485 1,052,580 10.
11. Nontransaction accounts in domestic offices: ///////////////////////
a. Money market deposit accounts (MMDAs) ................................................. RCON 3486 674,355 11.a.
b. Other savings deposits ................................................................ RCON 3487 2,337,570 11.b.
c. Time certificates of deposit of $100,000 or more ...................................... RCON 3345 654,640 11.c.
d. All other time deposits ............................................................... RCON 3469 1,817,001 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. RCFN 3404 166,104 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs .............. RCFD 3353 4,145,690 13.
14. Other borrowed money ..................................................................... RCFD 3355 559,025 14.
</TABLE>
- -------------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
15
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-14
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
<TABLE>
<CAPTION>
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
C460 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Unused commitments: //////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home //////////////////
equity lines ............................................................................... 3814 434,131 1.a.
b. Credit card lines .......................................................................... 3815 0 1.b.
c. Commercial real estate, construction, and land development: //////////////////
(1) Commitments to fund loans secured by real estate ....................................... 3816 64,337 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... 6550 19,581 1.c.(2)
d. Securities underwriting .................................................................... 3817 0 1.d.
e. Other unused commitments ................................................................... 3818 4,646,357 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. 3819 717,700 2.
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 1,464 ////////////////// 2.a.
3. Performance standby letters of credit and foreign office guarantees ........................... 3821 52,474 3.
a. Amount of performance standby letters of credit conveyed to //////////////////
others .......................................................... RCFD 3822 0 ////////////////// 3.a.
4. Commercial and similar letters of credit ...................................................... 3411 8,082 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by //////////////////
the reporting bank ............................................................................ 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting //////////////////
(nonaccepting) bank ........................................................................... 3429 0 6.
7. Securities borrowed ........................................................................... 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified //////////////////
against loss by the reporting bank) ........................................................... 3433 0 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold //////////////////
for Call Report purposes: //////////////////
a. FNMA and FHLMC residential mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ........... 3650 135,753 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... 3651 135,753 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ........... 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ........... 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... 3655 0 9.c.(2)
10. When-issued securities: //////////////////
a. Gross commitments to purchase .............................................................. 3434 0 10.a.
b. Gross commitments to sell .................................................................. 3435 0 10.b.
11. Interest rate contracts (exclude when-issued securities): //////////////////
a. Notional value of interest rate swaps ...................................................... 3450 2,353,000 11.a.
b. Futures and forward contracts .............................................................. 3823 1,617,000 11.b.
c. Option contracts (e.g., options on Treasuries): //////////////////
(1) Written option contracts ............................................................... 3824 542,750 11.c.(1)
(2) Purchased option contracts ............................................................. 3825 1,317,750 11.c.(2)
12. Foreign exchange rate contracts: //////////////////
a. Notional value of exchange swaps (e.g., cross-currency swaps) .............................. 3826 0 12.a.
b. Commitments to purchase foreign currencies and U.S. dollar exchange (spot, forward, //////////////////
and futures) ............................................................................... 3415 6,636,878 12.b.
c. Option contracts (e.g., options on foreign currency): //////////////////
(1) Written option contracts ............................................................... 3827 0 12.c.(1)
(2) Purchased option contracts ............................................................. 3828 0 12.c.(2)
</TABLE>
16
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
C461 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
13. Contracts on other commodities and equities: //////////////////
a. Notional value of other swaps (e.g., oil swaps) ............................................ 3829 0 13.a.
b. Futures and forward contracts (e.g., stock index and commodity--precious metals, //////////////////
wheat, cotton, livestock--contracts) ....................................................... 3830 0 13.b.
c. Option contracts (e.g., options on commodities, individual stocks and stock indexes): //////////////////
(1) Written option contracts ............................................................... 3831 0 13.c.(1)
(2) Purchased option contracts ............................................................. 3832 0 13.c.(2)
14. All other off-balance sheet liabilities (itemize and describe each component of this item //////////////////
over 25% of Schedule RC, item 28, "Total equity capital") ..................................... 3430 0 14.
//////////////////
a. TEXT 3555 ------------------------------------------------------ RCFD 3555 ////////////////// 14.a.
b. TEXT 3556 ------------------------------------------------------ RCFD 3556 ////////////////// 14.b.
c. TEXT 3557 ------------------------------------------------------ RCFD 3557 ////////////////// 14.c.
d. TEXT 3558 ------------------------------------------------------ RCFD 3558 ////////////////// 14.d.
15. All other off-balance sheet assets (itemize and describe each component of this item //////////////////
over 25% of Schedule RC, item 28, "Total equity capital") ..................................... 5591 0 15.
//////////////////
a. TEXT 5592 ------------------------------------------------------ RCFD 5592 ////////////////// 15.a.
b. TEXT 5593 ------------------------------------------------------ RCFD 5593 ////////////////// 15.b.
c. TEXT 5594 ------------------------------------------------------ RCFD 5594 ////////////////// 15.c.
d. TEXT 5595 ------------------------------------------------------ RCFD 5595 ////////////////// 15.d.
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Not applicable //////////////////
2. Not applicable //////////////////
3. Unused commitments with an original maturity exceeding one year that are reported in //////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments //////////////////
that are fee paid or otherwise legally binding) ............................................... 3833 2,816,829 M.3.
a. Participations in commitments with an original maturity //////////////////
exceeding one year conveyed to others ........................... RCFD 3834 19,202 ////////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: //////////////////
Standby letters of credit and foreign office guarantees (both financial and performance) issued //////////////////
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above ............. 3377 247,737 M.4.
5. To be completed for the September report only: //////////////////
Installment loans to individuals for household, family, and other personal expenditures that //////////////////
have been securitized and sold without recourse (with servicing retained), amounts //////////////////
outstanding by type of loan: //////////////////
a. Loans to purchase private passenger automobiles ............................................ 2741 N/A M.5.a.
b. Credit cards and related plans ............................................................. 2742 N/A M.5.b.
c. All other consumer installment credit (including mobile home loans) ........................ 2743 N/A M.5.c.
</TABLE>
17
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-16
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
C465 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------ ----- -------------
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal //////////////////
shareholders, and their related interests as of the report date: //////////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal //////////////////
shareholders, and their related interests ..................................................... 6164 2,850 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all //////////////////
extensions of credit by the reporting bank (including extensions of credit to //////////////////
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number //////////////////
of total capital as defined for this purpose in agency regulations. RCFD 6165 6 ////////////////// 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches //////////////////
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... 3405 0 2.
3. Not applicable. //////////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others //////////////////
(include both retained servicing and purchased servicing): //////////////////
a. Mortgages serviced under a GNMA contract ...................................................... 5500 25,771 4.a.
b. Mortgages serviced under a FHLMC contract: //////////////////
(1) Serviced with recourse to servicer ........................................................ 5501 79,375 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... 5502 772,633 4.b.(2)
c. Mortgages serviced under a FNMA contract: //////////////////
(1) Serviced under a regular option contract .................................................. 5503 56,379 4.c.(1)
(2) Serviced under a special option contract .................................................. 5504 2,531,783 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ 5505 4,598,318 4.d.
5. To be completed only by banks with $1 billion or more in total assets: //////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must //////////////////
equal Schedule RC, item 9): //////////////////
a. U.S. addressees (domicile) .................................................................... 2103 31,941 5.a.
b. Non-U.S. addressees (domicile) ................................................................ 2104 0 5.b.
6. Intangible assets: //////////////////
a. Mortgage servicing rights ..................................................................... 3164 17,632 6.a.
b. Other identifiable intangible assets: //////////////////
(1) Purchased credit card relationships ....................................................... 5506 0 6.b.(1)
(2) All other identifiable intangible assets .................................................. 5507 4,262 6.b.(2)
c. Goodwill ...................................................................................... 3163 55,530 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ 2143 77,424 6.d.
e. Intangible assets that have been grandfathered for regulatory capital purposes ................ 6442 0 6.e.
YES NO
7. Does your bank have any mandatory convertible debt that is part of your Tier 2 capital? .......... 6167 /// 7.
X
If yes, complete items 7.a through 7.e: RCFD Bil Mil Thou
----- -------------
a. Total equity contract notes, gross ............................................................ 3290 N/A 7.a.
b. Common or perpetual preferred stock dedicated to redeem the above notes ....................... 3291 N/A 7.b.
c. Total equity commitment notes, gross .......................................................... 3293 N/A 7.c.
d. Common or perpetual preferred stock dedicated to redeem the above notes ....................... 3294 N/A 7.d.
e. Total (item 7.a minus 7.b plus 7.c minus 7.d) ................................................. 3295 N/A 7.e.
</TABLE>
- -------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
18
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-17
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands ///////// Bil Mil Thou
- --------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C>
8. a. Other real estate owned: ///////////////////////
(1) Direct and indirect investments in real estate ventures ......................... RCFD 5372 0 8.a.(1)
(2) All other real estate owned: ///////////////////////
(a) Construction and land development in domestic offices ....................... RCON 5508 6,966 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... RCON 5510 6,043 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... RCON 5511 927 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... RCON 5512 18,452 8.a.(2)(e)
(f) In foreign offices .......................................................... RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... RCFD 2150 32,388 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: ///////////////////////
(1) Direct and indirect investments in real estate ventures ......................... RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... RCFD 2130 0 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, ///////////////////////
item 23, "Perpetual preferred stock and related surplus" ............................... RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include ///////////////////////
proprietary, private label, and third party mutual funds): ///////////////////////
a. Money market funds .................................................................. RCON 6441 39,322 10.a.
b. Equity securities funds ............................................................. RCON 8427 4,703 10.b.
c. Debt securities funds ............................................................... RCON 8428 3,190 10.c.
d. Other mutual funds .................................................................. RCON 8429 0 10.d.
e. Annuities ........................................................................... RCON 8430 0 10.e.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only): //////////////////
a. Reciprocal holdings of banking organizations' capital instruments ........................ 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments ..................... 3837 N/A M.1.b.
</TABLE>
19
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
<TABLE>
<CAPTION>
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10, C470 <-
--------------------------------------------------------------
column A, and in Memorandum items 2 through 4, (Column A) (Column B) (Column C)
column A, as confidential. Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
-------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------ ----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1245 87,042 1246 20,512 1247 129,736 1.a.
b. To non-U.S. addressees (domicile) ............ 1248 0 1249 0 1250 0 1.b.
2. Loans to depository institutions and ////////////////// ////////////////// //////////////////
acceptances of other banks: ////////////////// ////////////////// //////////////////
a. To U.S. banks and other U.S. depository ////////////////// ////////////////// //////////////////
institutions ................................. 5377 0 5378 0 5379 0 2.a.
b. To foreign banks ............................. 5380 0 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and ////////////////// ////////////////// //////////////////
other loans to farmers .......................... 1594 9 1597 0 1583 117 3.
4. Commercial and industrial loans: ////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1251 17,828 1252 1,695 1253 24,247 4.a.
b. To non-U.S. addressees (domicile) ............ 1254 0 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and ////////////////// ////////////////// //////////////////
other personal expenditures: ////////////////// ////////////////// /////////////////
a. Credit cards and related plans ............... 5383 437 5384 117 5385 266 5.a.
b. Other (includes single payment, installment, ////////////////// ////////////////// //////////////////
and all student loans) ....................... 5386 6,800 5387 230 5388 5,636 5.b.
6. Loans to foreign governments and official ////////////////// ////////////////// //////////////////
institutions .................................... 5389 0 5390 0 5391 0 6.
7. All other loans ................................. 5459 4,840 5460 191 5461 162 7.
8. Lease financing receivables: ////////////////// ////////////////// //////////////////
a. Of U.S. addressees (domicile) ................ 1257 0 1258 0 1259 0 8.a.
b. Of non-U.S. addressees (domicile) ............ 1271 0 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other ////////////////// ////////////////// //////////////////
real estate owned and other repossessed assets) . 3505 0 3506 0 3507 0 9.
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or partially ////////////////// ////////////////// //////////////////
guaranteed by the U.S. Government ............... 5612 807 5613 229 5614 187 10.
a. Guaranteed portion of loans and leases ////////////////// ////////////////// //////////////////
included in item 10 above .................... 5615 703 5616 229 5617 179 10.a.
</TABLE>
20
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-19
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-N--Continued
<TABLE>
<CAPTION>
C473 <-
--------------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
Memoranda accruing accruing
-------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------ ----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 1 through 8, above ......... 1658 199 1659 0 1661 1,570 M.1.
2. Loans to finance commercial real estate, ////////////////// ////////////////// //////////////////
construction, and land development activities ////////////////// ////////////////// //////////////////
(not secured by real estate) included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 4 and 7, above ............. 6558 2,506 6559 0 6560 2,053 M.2.
</TABLE>
<TABLE>
<CAPTION>
3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C>
(included in Schedule RC-N, item 1, above): ////////////////// ////////////////// //////////////////
a. Construction and land development ............ 2759 12,451 2769 6,083 3492 16,905 M.3.a.
b. Secured by farmland .......................... 3493 0 3494 0 3495 379 M.3.b.
c. Secured by 1-4 family residential properties: ////////////////// ////////////////// //////////////////
(1) Revolving, open-end loans secured by ////////////////// ////////////////// //////////////////
1-4 family residential properties and ////////////////// ////////////////// //////////////////
extended under lines of credit ........... 5398 4,362 5399 65 5400 2,248 M.3.c.(1)
(2) All other loans secured by 1-4 family ////////////////// ////////////////// //////////////////
residential properties ................... 5401 27,274 5402 6,173 5403 26,957 M.3.c.(2)
d. Secured by multifamily (5 or more) ////////////////// ////////////////// //////////////////
residential properties ....................... 3499 2,668 3500 160 3501 1,769 M.3.d.
e. Secured by nonfarm nonresidential properties . 3502 40,287 3503 8,031 3504 76,078 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
-------------------- --------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
----- ------------- ----- -------------
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other ////////////////// //////////////////
commodity and equity contracts: ////////////////// //////////////////
a. Book value of amounts carried as assets ...... 3522 0 3528 0 M.4.a.
b. Replacement cost of contracts with a ////////////////// //////////////////
positive replacement cost .................... 3529 0 3530 0 M.4.b.
</TABLE>
21
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-20
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION>
An amended Certified Statement should be submitted to the FDIC if the amounts reported in items 1
through 10 of this schedule are amended after the semiannual Certified Statement originally covering
this report date has been filed with the FDIC. C475 <-
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Unposted debits (see instructions): //////////////////
a. Actual amount of all unposted debits ...................................................... 0030 N/A 1.a.
OR //////////////////
b. Separate amount of unposted debits: //////////////////
(1) Actual amount of unposted debits to demand deposits ................................... 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... 0032 0 1.b.(2)
2. Unposted credits (see instructions): //////////////////
a. Actual amount of all unposted credits ..................................................... 3510 N/A 2.a.
OR //////////////////
b. Separate amount of unposted credits: //////////////////
(1) Actual amount of unposted credits to demand deposits .................................. 3512 110,947 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total //////////////////
deposits in domestic offices) ................................................................ 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in //////////////////
Puerto Rico and U.S. territories and possessions (not included in total deposits): //////////////////
a. Demand deposits of consolidated subsidiaries .............................................. 2211 13,275 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: //////////////////
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches //////////////////
(included in Schedule RC-G, item 1.b) ..................................................... 5515 0 5.c.
Item 6 is not applicable to state nonmember banks that have not been authorized by the //////////////////
Federal Reserve to act as pass-through correspondents. //////////////////
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on //////////////////
behalf of its respondent depository institutions that are also reflected as deposit liabilities //////////////////
of the reporting bank: //////////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, //////////////////
Memorandum item 4.a) ...................................................................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, //////////////////
Memorandum item 4.b) ...................................................................... 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) //////////////////
a. Unamortized premiums ...................................................................... 5516 0 7.a.
b. Unamortized discounts ..................................................................... 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of //////////////////
the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... 5518 242,934 8.
9. Deposits in lifeline accounts ................................................................ 5596 ///////////// 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total //////////////////
deposits in domestic offices) ................................................................ 8432 0 10.
</TABLE>
- --------------
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
22
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-O--Continued
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) //////////////////
must equal Schedule RC, item 13.a): //////////////////
a. Deposit accounts of $100,000 or less: //////////////////
(1) Amount of deposit accounts of $100,000 or less ........................................ 2702 5,837,328 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number //////////////////
completed for the June report only) ........................ RCON 3779 814,627 ////////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000: //////////////////
(1) Amount of deposit accounts of more than $100,000 ........... Number 2710 3,926,486 M.1.b.(1)
(2) Number of deposit accounts of more than $100,000 ........... RCON 2722 7,236 ////////////////// M.1.b.(2)
</TABLE>
2. Estimated amount of uninsured deposits in domestic offices of the bank: a.
An estimate of your bank's uninsured deposits can be determined by multiplying
the number of deposit accounts of more than $100,000 reported in Memorandum
item 1.b.(2) above by $100,000 and subtracting the result from the amount of
deposit accounts of more than $100,000 reported in Memorandum item 1.b.(1)
above.
<TABLE>
<S> <C> <C>
Indicate in the appropriate box at the right whether your bank has a method or procedure
for determining a better estimate of uninsured deposits than the estimate YES NO
described above ........................................................................... 6861 /// M.2.a.
X
RCON Bil Mil Thou
b. If the box marked YES has been checked, report the estimate of uninsured deposits ----- -------------
determined by using your bank's method or procedure ....................................... 5597 N/A M.2.b.
</TABLE>
<TABLE>
<S> <C> <C>
C477 <-
Person to whom questions about the Reports of Condition and Income should be directed: ----------
</TABLE>
<TABLE>
<S> <C>
ROBERT DUFF, ASSISTANT VICE PRESIDENT (203) 986-2474
- ----------------------------------------------------------------------------------- --------------------------------------
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
23
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-R--Risk-Based Capital
This schedule must be completed by all banks as follows: Banks that
reported total assets of $1 billion or more in Schedule RC, item 12, for June
30, 1993, must complete items 2 through 9 and Memorandum item 1. Banks with
assets of less than $1 billion must complete items 1 through 3 below or Schedule
RC-R in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C> <C>
C480 <-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed ---------------
only by banks with total assets of less than $1 billion. Indicate in the appropriate YES NO
box at the right whether the bank has total capital greater than or equal to eight percent ------------ ---------------
of adjusted total assets ............................................................... RCFD 6056 //// 1.
</TABLE>
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on Schedule RC-L
(see instructions). If the box marked YES has been checked, then the bank only
has to complete items 2 and 3 below. If the box marked NO has been checked,
the bank must complete the remainder of this schedule. A NO response to item 1
does not necessarily mean that the bank's actual risk-based capital ratio is
less than eight percent or that the bank is not in compliance with the
risk-based capital guidelines.
<TABLE>
<CAPTION>
(Column A) (Column B)
Subordinated Debt(1) Other
and Intermediate Limited-
Items 2 and 3 are to be completed by all banks. Term Preferred Life Capital
Stock Instruments
-------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------ ----- ------------- ----- -------------
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original ////////////////// //////////////////
weighted average maturity of at least five years) with a remaining ////////////////// //////////////////
maturity of: ////////////////// //////////////////
a. One year or less ...................................................... 3780 0 3786 0 2.a.
b. Over one year through two years ....................................... 3781 0 3787 0 2.b.
c. Over two years through three years .................................... 3782 0 3788 0 2.c.
d. Over three years through four years ................................... 3783 0 3789 0 2.d.
e. Over four years through five years .................................... 3784 0 3790 0 2.e.
f. Over five years ....................................................... 3785 0 3791 0 2.f.
</TABLE>
<TABLE>
<S> <C>
RCFD Bil Mil Thou
3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk-based --------------------
capital guidelines ............................................................................ 3792 1,315,830 3.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Items 4-9 and Memorandum item 1 are to be completed Assets Credit Equiv-
by banks that answered NO to item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more. on the of Off-Balance
Balance Sheet Sheet Items(2)
-------------------- --------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
----- ------------- ----- -------------
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned
to the Zero percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet: ////////////////// //////////////////
(1) Securities issued by, other claims on, and claims unconditionally ////////////////// //////////////////
guaranteed by, the U.S. Government and its agencies and other ////////////////// //////////////////
OECD central governments .......................................... 3794 1,682,256 ////////////////// 4.a.(1)
(2) All other ......................................................... 3795 257,131 ////////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3796 0 4.b.
</TABLE>
- --------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.e,
"Total."
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
24
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-23
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-R--Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
-------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------ ----- ------------- ----- -------------
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 20 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet: ////////////////// //////////////////
(1) Claims conditionally guaranteed by the U.S. Government and its ////////////////// //////////////////
agencies and other OECD central governments ........................ 3798 28,703 ////////////////// 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- ////////////////// //////////////////
ment and its agencies and other OECD central governments; by ////////////////// //////////////////
securities issued by U.S. Government-sponsored agencies; and ////////////////// //////////////////
by cash on deposit ................................................. 3799 0 ////////////////// 5.a.(2)
(3) All other .......................................................... 3800 2,841,097 ////////////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3801 206,582 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 50 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet .................................. 3802 3,482,611 ////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3803 224,752 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 100 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet .................................. 3804 7,786,693 ////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3805 2,142,903 7.b.
8. On-balance sheet asset values excluded from the calculation of the ////////////////// //////////////////
risk-based capital ratio(2) .............................................. 3806 (27,947) ////////////////// 8.
9. Total assets recorded on the balance sheet (sum of ////////////////// //////////////////
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, ////////////////// //////////////////
item 12 plus items 4.b and 4.c) .......................................... 3807 16,050,544 ////////////////// 9.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Notional Replacement
Principal Cost
Memorandum Value (Market Value)
-------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------ ----- ------------- ----- -------------
<S> <C> <C> <C>
1. Notional principal value and replacement cost of interest rate and ////////////////// //////////////////
foreign exchange rate contracts (in column B, report only those ////////////////// //////////////////
contracts with a positive replacement cost): ////////////////// //////////////////
a. Interest rate contracts (exclude futures contracts) ................... ////////////////// 3808 24,909 M.1.a.
(1) With a remaining maturity of one year or less ..................... 3809 900,000 ////////////////// M.1.a.(1)
(2) With a remaining maturity of over one year ........................ 3810 2,770,750 ////////////////// M.1.a.(2)
b. Foreign exchange rate contracts (exclude contracts with an original ////////////////// //////////////////
maturity of 14 days or less and futures contracts) .................... ////////////////// 3811 182,605 M.1.b.
(1) With a remaining maturity of one year or less ..................... 3812 6,314,817 ////////////////// M.1.b.(1)
(2) With a remaining maturity of over one year ........................ 3813 0 ////////////////// M.1.b.(2)
</TABLE>
- --------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Until a final rule on the regulatory capital treatment of net unrealized
holding gains (losses) on available-for-sale securities that is applicable
to the reporting bank has taken effect, a bank that has adopted FASB
Statement No. 115 should include the difference between the fair value and
the amortized cost of its available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8
also includes on-balance sheet asset values (or portions thereof) of
off-balance sheet interest rate, foreign exchange rate, and commodity
contracts and those contracts (e.g., futures contracts) not subject to
risk-based capital. Exclude from item 8 margin accounts and accrued
receivables as well as any portion of the allowance for loan and lease
losses in excess of the amount that may be included in Tier 2 capital.
25
<PAGE> 44
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-24
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1994
<TABLE>
<S> <C>
- --------------------------------------------------------------- ----------------------------------, ---------------------------
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION HARTFORD Connecticut
Legal Title of Bank City State
</TABLE>
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public. BANKS
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE
PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as
the bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT
ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
No comment /X/ (RCON 6979) C471 C472 <-
- ------------------------------------------------------------------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
- -------------------------------------- ----------------
Signature of Executive Officer of Bank Date of Signature
26
<PAGE> 45
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<TABLE>
<S> <C>
NAME AND ADDRESS OF BANK OMB No. For OCC: 1557-0081
OMB No. For FDIC: 3064-0052
OMB No. For Federal Reserve: 7100-0036
Expiration Date: 2/28/95
PLACE LABEL HERE SPECIAL REPORT
(Dollar Amounts in Thousands)
------------------------------------------------------------------
CLOSE OF BUSINESS FDIC Certificate Number
DATE C-700 <-
6/30/94 |0|2|4|9|9|
</TABLE>
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
The following information is required by Public Laws 90-44 and 102-242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of all loans or
other extensions of credit to their executive officers made since the date of
the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of
credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under bank
credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code of
Federal Regulations (Federal Reserve Board Regulation O) for the definitions of
"executive officer" and "extension of credit," respectively. Exclude loans and
other extensions of credit to directors and principal shareholders who are not
executive officers.
<TABLE>
<S> <C> <C>
a. Number of loans made to executive officers since the previous Call Report date .............. RCFD 3561 0 a.
b. Total dollar amount of above loans (in thousands of dollars) ................................ RCFD 3562 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) .......................................... RCFD 7701 0.00 % to RCFD 7702 0.00 % c.
</TABLE>
<TABLE>
<S> <C>
- -------------------------------------------------------- ----------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
- --------------------------------------------------------------------- ---------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER (TEXT 8904)
ROBERT DUFF ASSISTANT VICE PRESIDENT (203) 986-2474
</TABLE>
FDIC 8040/53 (12-92)
27
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Consolidated Report of Income
for the period January 1, 1994-June 30, 1994
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
I480 <-
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Interest income: //////////////////
a. Interest and fee income on loans: //////////////////
(1) In domestic offices: //////////////////
(a) Loans secured by real estate ................................................... 4011 196,635 1.a.(1)(a)
(b) Loans to depository institutions ............................................... 4019 126 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ............ 4024 45 1.a.(1)(c)
(d) Commercial and industrial loans ................................................ 4012 81,941 1.a.(1)(d)
(e) Acceptances of other banks ..................................................... 4026 3 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: //////////////////
(1) Credit cards and related plans ............................................. 4054 1,399 1.a.(1)(f)(1)
(2) Other ...................................................................... 4055 16,286 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ......................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political //////////////////
subdivisions in the U.S.: //////////////////
(1) Taxable obligations ........................................................ 4503 31 1.a.(1)(h)(1)
(2) Tax-exempt obligations ..................................................... 4504 1,398 1.a.(1)(h)(2)
(i) All other loans in domestic offices ............................................ 4058 16,786 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... 4059 0 1.a.(2)
b. Income from lease financing receivables: //////////////////
(1) Taxable leases ..................................................................... 4505 91 1.b.(1)
(2) Tax-exempt leases .................................................................. 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions:(1) //////////////////
(1) In domestic offices ................................................................ 4105 3 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... 4106 1,917 1.c.(2)
d. Interest and dividend income on securities: //////////////////
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations .... 4027 103,941 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: //////////////////
(a) Taxable securities ............................................................. 4506 0 1.d.(2)(a)
(b) Tax-exempt securities .......................................................... 4507 9 1.d.(2)(b)
(3) Other domestic debt securities ..................................................... 3657 29,126 1.d.(3)
(4) Foreign debt securities ............................................................ 3658 94 1.d.(4)
(5) Equity securities (including investments in mutual funds) .......................... 3659 1,408 1.d.(5)
e. Interest income from assets held in trading accounts ................................... 4069 0 1.e.
</TABLE>
- ------------
(1) Includes interest income on time certificates of deposit not held in
trading accounts.
28
<PAGE> 47
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Year-to-date
- ----------------------------------------------------------------------------------- --------------
<S> <C> <C> <C> <C>
1. Interest income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities purchased //////////////////
under agreements to resell in domestic offices of the bank and of //////////////////
its Edge and Agreement subsidiaries, and in IBFs .................... 4020 1,330 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ 4107 452,569 1.g.
2. Interest expense: //////////////////
a. Interest on deposits: //////////////////
(1) Interest on deposits in domestic offices: //////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and //////////////////
telephone and preauthorized transfer accounts) .............. 4508 5,649 2.a.(1)(a)
(b) Nontransaction accounts: //////////////////
(1) Money market deposit accounts (MMDAs) ................... 4509 7,486 2.a.(1)(b)(1)
(2) Other savings deposits .................................. 4511 21,212 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ 4174 11,912 2.a.(1)(b)(3)
(4) All other time deposits ................................. 4512 37,615 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs .......................................... 4172 2,737 2.a.(2)
b. Expense of federal funds purchased and securities sold under //////////////////
agreements to repurchase in domestic offices of the bank and of //////////////////
its Edge and Agreement subsidiaries, and in IBFs .................... 4180 77,496 2.b.
c. Interest on demand notes issued to the U.S. Treasury and on //////////////////
other borrowed money ................................................ 4185 8,839 2.c.
d. Interest on mortgage indebtedness and obligations under //////////////////
capitalized leases .................................................. 4072 436 2.d.
e. Interest on subordinated notes and debentures ....................... 4200 0 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... 4073 173,382 2.f.
3. Net interest income (item 1.g minus 2.f) ............................... ////////////////// RIAD 4074 279,187 3.
4. Provisions: //////////////////
a. Provision for loan and lease losses ................................. ////////////////// RIAD 4230 (1,933) 4.a.
b. Provision for allocated transfer risk ............................... ////////////////// RIAD 4243 0 4.b.
5. Noninterest income: //////////////////
a. Income from fiduciary activities .................................... 4070 35,011 5.a.
b. Service charges on deposit accounts in domestic offices ............. 4080 33,116 5.b.
c. Trading gains (losses) and fees from foreign exchange transactions .. 4075 (286) 5.c.
d. Other foreign transaction gains (losses) ............................ 4076 0 5.d.
e. Gains (losses) and fees from assets held in trading accounts ........ 4077 1,046 5.e.
f. Other noninterest income: //////////////////
(1) Other fee income ................................................ 5407 28,253 5.f.(1)
(2) All other noninterest income* ................................... 5408 22,474 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) ............. ////////////////// RIAD 4079 119,614 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. ////////////////// RIAD 3521 467 6.a.
b. Realized gains (losses) on available-for-sale securities ............ ////////////////// RIAD 3196 (3,041) 6.b.
7. Noninterest expense: //////////////////
a. Salaries and employee benefits ...................................... 4135 140,465 7.a.
b. Expenses of premises and fixed assets (net of rental income) //////////////////
(excluding salaries and employee benefits and mortgage interest) .... 4217 44,063 7.b.
c. Other noninterest expense* .......................................... 4092 152,231 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) ............ ////////////////// RIAD 4093 336,759 7.d.
8. Income (loss) before income taxes and extraordinary items and other //////////////////
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) ////////////////// RIAD 4301 61,401 8.
9. Applicable income taxes (on item 8) .................................... ////////////////// RIAD 4302 19,897 9.
10. Income (loss) before extraordinary items and other adjustments //////////////////
(item 8 minus 9) ....................................................... ////////////////// RIAD 4300 41,504 10.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
29
<PAGE> 48
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------- ----- -------------
<S> <C> <C> <C> <C>
11. Extraordinary items and other adjustments: //////////////////
a. Extraordinary items and other adjustments, gross of income taxes* . 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* ........................... 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes //////////////////
(item 11.a minus 11.b) ............................................ ////////////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... ////////////////// RIAD 4340 41,504 12.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------ ----- -------------
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after //////////////////
August 7, 1986, that is not deductible for federal income tax purposes .......................... 4513 5 M.1.
2. Fee income from the sale and servicing of mutual funds and annuities in domestic offices //////////////////
(included in Schedule RI, item 5.g) ............................................................. 8431 670 M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above ........ 4309 0 M.3.
4. To be completed only by banks with $1 billion or more in total assets: //////////////////
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary //////////////////
items and other adjustments" (item 8 above) ..................................................... 1244 1,207 M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to //// Number
nearest whole number) ........................................................................... 4150 5,854 M.5.
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483 <-
------------ --------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------ ----- -------------
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1993, Reports of Condition //////////////////
and Income ...................................................................................... 3215 1,131,626 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ 3217 1,131,626 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. 4340 41,504 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. 4346 0 5.
6. Changes incident to business combinations, net .................................................. 4356 94,072 6.
7. LESS: Cash dividends declared on preferred stock ................................................ 4470 0 7.
8. LESS: Cash dividends declared on common stock ................................................... 4460 43,150 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions //////////////////
for this schedule) .............................................................................. 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ 8433 (20,830) 11.
12. Foreign currency translation adjustments ........................................................ 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, //////////////////
item 28) ........................................................................................ 3210 1,203,222 14.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
30
<PAGE> 49
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
I486 <-
-----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
-------------------- --------------------
calendar year-to-date
-----------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ------------------------------------------------------------------------------ ----- ------------- ----- -------------
<S> <C> <C> <C>
1. Loans secured by real estate: ////////////////// //////////////////
a. To U.S. addressees (domicile) ......................................... 4651 54,212 4661 3,354 1.a.
b. To non-U.S. addressees (domicile) ..................................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: ////////////////// //////////////////
a. To U.S. banks and other U.S. depository institutions .................. 4653 0 4663 0 2.a.
b. To foreign banks ...................................................... 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... 4655 0 4665 1 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile) ......................................... 4645 9,339 4617 3,474 4.a.
b. To non-U.S. addressees (domicile) ..................................... 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures: ////////////////// //////////////////
a. Credit cards and related plans ........................................ 4656 767 4666 330 5.a.
b. Other (includes single payment, installment, and all student loans) ... 4657 1,268 4667 1,903 5.b.
6. Loans to foreign governments and official institutions ................... 4643 0 4627 0 6.
7. All other loans .......................................................... 4644 1,083 4628 164 7.
8. Lease financing receivables: ////////////////// //////////////////
a. Of U.S. addressees (domicile) ......................................... 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile) ..................................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) ......................................... 4635 66,669 4605 9,226 9.
</TABLE>
<TABLE>
<CAPTION>
Cumulative Cumulative
Charge-offs Recoveries
Jan. 1, 1986 Jan. 1, 1986
Memoranda through through
Dollar Amounts in Thousands Dec. 31, 1989 Report Date
- ------------------------------------------------------------------------------ -------------------- --------------------
To be completed by national banks only. RIAD Bil Mil Thou RIAD Bil Mil Thou
----- ------------- ----- -------------
<S> <C> <C>
1. Charge-offs and recoveries of Special-Category Loans, as defined for this ////////////////// //////////////////
Call Report by the Comptroller of the Currency ........................... ////////////////// 4784 645 M.1.
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
(Column A) (Column B)
Memorandum items 2 and 3 are to be completed by all banks. Charge-offs Recoveries
-------------------- --------------------
2. Loans to finance commercial real estate, construction, and land calendar year-to-date
development activities (not secured by real estate) included in RIAD Bil Mil Thou RIAD Bil Mil Thou
----- ------------- ----- -------------
<S> <C> <C> <C>
Schedule RI-B, part I, items 4 and 7, above .............................. 5409 761 5410 199 M.2.
3. Loans secured by real estate in domestic offices (included in ////////////////// //////////////////
Schedule RI-B, part I, item 1, above): ////////////////// //////////////////
a. Construction and land development ..................................... 3582 3,580 3583 463 M.3.a.
b. Secured by farmland ................................................... 3584 0 3585 13 M.3.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit ..................... 5411 1,307 5412 33 M.3.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... 5413 23,678 5414 848 M.3.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. 3588 2,663 3589 75 M.3.d.
e. Secured by nonfarm nonresidential properties .......................... 3590 22,984 3591 1,922 M.3.e.
</TABLE>
31
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-B--Continued
Part II. Changes in Allowance for Loan and
Lease Losses and in Allocated
Transfer Risk Reserve
<TABLE>
<CAPTION>
(Column A) (Column B)
Allowance for Allocated
Loan and Lease Transfer Risk
Losses Reserve
-------------------- --------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ------------------------------------------------------------------------------ ----- ------------- ----- -------------
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1993, Reports of ////////////////// //////////////////
Condition and Income ..................................................... 3124 350,900 3131 0 1.
2. Recoveries (column A must equal part I, item 9, column B above) .......... 4605 9,226 3132 0 2.
3. LESS: Charge-offs (column A must equal part I, item 9, column A above) ... 4635 66,669 3133 0 3.
4. Provision (column A must equal Schedule RI, item 4.a; column B must ////////////////// //////////////////
equal Schedule RI, item 4.b) ............................................. 4230 (1,933) 4243 0 4.
5. Adjustments* (see instructions for this schedule) ........................ 4815 18,265 3134 0 5.
6. Balance end of current period (sum of items 1 through 5) (column A must ////////////////// //////////////////
equal Schedule RC, item 4.b; column B must equal Schedule RC, ////////////////// //////////////////
item 4.c) ................................................................ 3123 309,789 3128 0 6.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
I489 <-
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Federal ....................................................................................... 4780 N/A 1.
2. State and local................................................................................ 4790 N/A 2.
3. Foreign ....................................................................................... 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ 4770 N/A 4.
5. Deferred portion of item 4 ........................................ RIAD 4772 N/A ////////////////// 5.
</TABLE>
32
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492 <-
--------------
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------- ----- --------------
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs: //////////////////
a. Interest income booked ................................................................... 4837 N/A 1.a.
b. Interest expense booked .................................................................. 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs //////////////////
(item 1.a minus 1.b) ..................................................................... 4839 N/A 1.c.
2. Adjustments for booking location of international operations: //////////////////
a. Net interest income attributable to international operations booked at domestic offices .. 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations: //////////////////
a. Noninterest income attributable to international operations .............................. 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations ............. 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations ....................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a //////////////////
minus 3.b and 3.c) ....................................................................... 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation //////////////////
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect //////////////////
the effects of equity capital on overall bank funding costs ................................. 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation //////////////////
adjustment (sum of items 4 and 5) ........................................................... 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. 4341 N/A 8.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above .................................... 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------- ----- -------------
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. 4849 N/A 1.
2. Interest expense booked at IBFs ............................................................. 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices //////////////////
(excluding IBFs): //////////////////
a. Gains (losses) and extraordinary items ................................................... 5491 N/A 3.a.
b. Fees and other noninterest income ........................................................ 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at //////////////////
domestic offices (excluding IBFs) ........................................................... 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic offices //////////////////
(excluding IBFs) ............................................................................ 4853 N/A 5.
</TABLE>
33
<PAGE> 52
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
<CAPTION>
I495 <-
------ --------
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) //////////////////
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): //////////////////
a. Net gains on other real estate owned ..................................................... 5415 0 1.a.
b. Net gains on sales of loans .............................................................. 5416 0 1.b.
c. Net gains on sales of premises and fixed assets .......................................... 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of //////////////////
Schedule RI, item 5.f.(2): //////////////////
d. TEXT 4461 ------------------------------------------------------------------------------ 4461 13,983 1.d.
REIMBURSEMENT FROM AFFILIATES
e. TEXT 4462 ------------------------------------------------------------------------------ 4462 1.e.
f. TEXT 4463 ------------------------------------------------------------------------------ 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c): //////////////////
a. Amortization expense of intangible assets ................................................ 4531 4,862 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: //////////////////
b. Net losses on other real estate owned .................................................... 5418 0 2.b.
c. Net losses on sales of loans ............................................................. 5419 0 2.c.
d. Net losses on sales of premises and fixed assets ......................................... 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of //////////////////
Schedule RI, item 7.c: //////////////////
e. TEXT 4464 ------------------------------------------------------------------------------ 4464 43,800 2.e.
ACQUISITION COSTS
f. TEXT 4467 ------------------------------------------------------------------------------ 4467 19,800 2.f.
RESTRUCTURING CHARGES
g. TEXT 4468 ------------------------------------------------------------------------------ 4468 2.g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and //////////////////
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe //////////////////
all extraordinary items and other adjustments): //////////////////
a. (1) TEXT 4469 -------------------------------------------------------------------------- 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 ////////////////// 3.a.(2)
b. (1) TEXT 4487 -------------------------------------------------------------------------- 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 ////////////////// 3.b.(2)
c. (1) TEXT 4489 -------------------------------------------------------------------------- 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 ////////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, //////////////////
item 2) (itemize and describe all adjustments): //////////////////
a. TEXT 4492 ------------------------------------------------------------------------------ 4492 4.a.
b. TEXT 4493 ------------------------------------------------------------------------------ 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from //////////////////
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): //////////////////
a. TEXT 4494 ------------------------------------------------------------------------------ 4494 5.a.
b. TEXT 4495 ------------------------------------------------------------------------------ 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule RI-A, //////////////////
item 10) (itemize and describe all corrections): //////////////////
a. TEXT 4496 ------------------------------------------------------------------------------ 4496 6.a.
b. TEXT 4497 ------------------------------------------------------------------------------ 4497 6.b.
</TABLE>
34
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION>
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------- ----- --------------
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) //////////////////
(itemize and describe all such transactions): //////////////////
a. TEXT 4498 ------------------------------------------------------------------------------ 4498 7.a.
b. TEXT 4499 ------------------------------------------------------------------------------ 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, //////////////////
item 5) (itemize and describe all adjustments): //////////////////
a. TEXT 4521 ------------------------------------------------------------------------------ 4521 18,265 8.a.
GATEWAY SAVINGS BANK POOLING
b. TEXT 4522 ------------------------------------------------------------------------------ 4522 8.b.
9. Other explanations (the space below is provided for the bank to briefly describe, I498 I499 <-
at its option, any other significant items affecting the Report of Income):
No comment /X/ (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
35
<PAGE> 54
This form is for use by National Banks only. It should be used for
publication purposes only, and should not be returned to the FDIC.
Comptroller of the Currency
Administrator of National Banks
R E P O R T O F C O N D I T I O N
Consolidating domestic and foreign subsidiaries of the
<TABLE>
<S> <C>
------------------------------------------------------------ of -------------------------
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION HARTFORD
Name of Bank City
in the state of --------------------------, at the close of business on June 30, 1994,
Connecticut
published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161.
Charter Number --------------------- Comptroller of the Currency ------------------------------------------- District
01338 Northeastern
</TABLE>
Statement of Resources and Liabilities
ASSETS
<TABLE>
<CAPTION>
Thousands of dollars
Cash and balances due from depository institutions: ---------------
<S> <C>
Noninterest-bearing balances and currency and coin ...................................... 875,210
Interest-bearing balances ............................................................... 145,435
Held-to-maturity securities ............................................................... 3,906,126
Available-for-sale securities ............................................................. 779,309
Federal funds sold and securities purchased under agreements to resell in domestic offices ///////////
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ///////////
Federal funds sold ...................................................................... 233,300
Securities purchased under agreements to resell ......................................... 0
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Loans and lease financing receivables:
Loans and leases, net of unearned income ........................ 9,146,312
LESS: Allowance for loan and lease losses ....................... 309,789
LESS: Allocated transfer risk reserve ........................... 0
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Loans and leases, net of unearned income, allowance, and reserve ........................ 8,836,523
Assets held in trading accounts ........................................................... 0
Premises and fixed assets (including capitalized leases) .................................. 178,499
Other real estate owned ................................................................... 32,388
Investments in unconsolidated subsidiaries and associated companies ....................... 0
Customers' liability to this bank on acceptances outstanding .............................. 31,941
Intangible assets ......................................................................... 77,424
Other assets .............................................................................. 644,600
Total assets .............................................................................. 15,740,755
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FDIC 8040/54 (3-94)
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<PAGE> 55
LIABILITIES
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Deposits:
In domestic offices ..................................................................... 9,763,814
Noninterest-bearing ........................................... 2,762,398
Interest-bearing .............................................. 7,001,416
In foreign offices, Edge and Agreement subsidiaries, and IBFs ........................... 196,619
Noninterest-bearing ........................................... 0
Interest-bearing .............................................. 196,619
Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased ................................................................. 1,860,850
Securities sold under agreements to repurchase .......................................... 1,284,572
Demand notes issued to the U.S. Treasury .................................................. 447,595
Trading liabilities ....................................................................... 6,575
Other borrowed money: ///////////
With original maturity of one year or less .............................................. 497,414
With original maturity of more than one year ............................................ 260,803
Mortgage indebtedness and obligations under capitalized leases ............................ 9,784
Bank's liability on acceptances executed and outstanding .................................. 31,941
Subordinated notes and debentures ......................................................... 0
Other liabilities ......................................................................... 177,566
Total liabilities ......................................................................... 14,537,533
Limited-life preferred stock and related surplus .......................................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................................. 0
Common stock .............................................................................. 19,487
Surplus ................................................................................... 926,125
Undivided profits and capital reserves .................................................... 275,774
Net unrealized holding gains (losses) on available-for-sale securities .................... (18,164)
Cumulative foreign currency translation adjustments ....................................... 0
Total equity capital ...................................................................... 1,203,222
Total liabilities, limited-life preferred stock, and equity capital ....................... 15,740,755
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We, the undersigned directors, attest to the correctness of I, ------------------------------------------------
this statement of resources and liabilities. We declare that it SUSAN E. LESTER
has been examined by us, and to the best of our knowledge Name
and belief has been prepared in conformance with the
instructions and is true and correct. ------------------------------------------------
CHIEF FINANCIAL OFFICER
Title
of the above-named bank do hereby declare that this
Report of Condition is true and correct to the best
of my knowledge and belief.
------------------------------------------------------------
------------------------------------------------------------ Directors
------------------------------------------------------------
---------------------------------------------------
Signature
---------------------------------------------------
Date
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FDIC 8040/54 (Page 2)
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