EXHIBIT 4(d)(2)
AMBAC ASSURANCE CORPORATION,
as Policy Provider,
AMERICAN AIRLINES, INC.
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but solely as Subordination Agent
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee under the
AMERICAN AIRLINES PASS THROUGH TRUST 2003-1G
INSURANCE AND INDEMNITY AGREEMENT
AMERICAN AIRLINES, INC.
PASS THROUGH CERTIFICATES,
SERIES 2003-1G
Dated as of July 8, 2003
(This Table of Contents is for convenience of reference only
and shall not be deemed to be part of this Insurance Agreement. All capitalized
terms used in this Insurance Agreement and not otherwise defined shall have the
meanings set forth in Article I of this Insurance Agreement.)
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.................................................................................. 2
Section 1.02 Other Definitional Provisions.................................................................. 6
Section 1.03 Negotiated Document............................................................................ 6
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01 Representations and Warranties of American..................................................... 7
Section 2.02 Covenants of American.......................................................................... 9
Section 2.03 Representations, Warranties and Covenants of U.S. Bank, Class G Trustee and
Subordination Agent............................................................................ 11
Section 2.04 Representations, Warranties and Covenants of the Policy Provider............................... 11
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01 Issuance of the Policy......................................................................... 13
Section 3.02 Payment of Fees and Premium.................................................................... 15
Section 3.03 Reimbursement Obligation....................................................................... 16
Section 3.04 Indemnification................................................................................ 17
Section 3.05 Procedure for Payment of Fees and Premiums..................................................... 17
Section 3.06 Late Payments.................................................................................. 17
Section 3.07 Deductions..................................................................................... 17
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01 Effective Date; Term of the Insurance Agreement................................................ 18
Section 4.02 Further Assurances and Corrective Instruments.................................................. 18
Section 4.03 Obligations Absolute........................................................................... 19
Section 4.04 Assignments; Reinsurance; Third-Party Rights................................................... 20
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Section 4.05 Liability of the Policy Provider............................................................... 21
ARTICLE V
MISCELLANEOUS
Section 5.01 Amendments, Etc................................................................................ 21
Section 5.02 Notices........................................................................................ 22
Section 5.03 Severability................................................................................... 23
Section 5.04 Governing Law.................................................................................. 23
Section 5.05 Consent to Jurisdiction........................................................................ 23
Section 5.06 Consent of Policy Provider..................................................................... 24
Section 5.07 Counterparts................................................................................... 24
Section 5.08 Headings....................................................................................... 24
Section 5.09 Trial by Jury Waived........................................................................... 24
Section 5.10 Limited Liability.............................................................................. 24
Section 5.11 Entire Agreement............................................................................... 24
Section 5.12 Successors and Assigns......................................................................... 25
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INSURANCE AND INDEMNITY AGREEMENT (as may be amended, modified
or supplemented from time to time, this "Insurance Agreement"), dated as of July
8, 2003, by and among AMBAC ASSURANCE CORPORATION, as Policy Provider (the
"Policy Provider"), AMERICAN AIRLINES, INC. (with its successors and permitted
assigns, "American"), U.S. BANK TRUST NATIONAL ASSOCIATION ("U.S. Bank"), not in
its individual capacity but solely as Subordination Agent (the "Subordination
Agent"), and U.S. BANK TRUST NATIONAL ASSOCIATION, not in its individual
capacity but solely as Class G Trustee (the "Class G Trustee").
W I T N E S S E T H :
WHEREAS, on the date hereof, American is financing seven
Aircraft;
WHEREAS, pursuant to each Indenture, on the date hereof,
American will issue, on a recourse basis, separate series of Equipment Notes,
which Equipment Notes are to be secured by a security interest in all right,
title and interest of American in and to the Aircraft and certain other property
described in each Indenture;
WHEREAS, on the date hereof, U.S. Bank, not in its individual
capacity but as Trustee under the Class G Trust Agreement, will create the Class
G Trust, which will acquire the Series G Equipment Notes pursuant to the terms
of the Operative Agreements;
WHEREAS, (i) Citibank, N.A., as Class G Liquidity Provider,
has entered into a Class G Liquidity Facility, for the benefit of the Class G
Certificateholders with U.S. Bank, as the Subordination Agent, as agent and
trustee for the trustee of the Class G Trust, and (ii) U.S. Bank, as trustee of
the Class G Trust, the Class G Liquidity Provider, the Policy Provider and the
Subordination Agent have entered into the Intercreditor Agreement;
WHEREAS, pursuant to the Class G Trust Agreement, the Class G
Trust has been created to facilitate the sale of the Class G Certificates;
WHEREAS, the Policy Provider has issued the Policy in respect
of the Class G Certificates, pursuant to which it has agreed to guarantee the
payment of interest on the Class G Certificates to the Subordination Agent for
the benefit of the Class G Certificateholders, and the payment of principal of
the Class G Certificates on the Final Legal Distribution Date and as otherwise
provided therein to the Subordination Agent for the benefit of the Class G
Certificateholders;
WHEREAS, the Policy Provider shall be paid the Premium as set
forth herein; and
WHEREAS, each of American, the Class G Trustee, and the
Subordination Agent has agreed to undertake certain obligations in consideration
for the Policy Provider's issuance of the Policy.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms. Unless the context clearly
requires otherwise, all capitalized terms used but not defined herein shall have
the respective meanings assigned to them in the Intercreditor Agreement or, if
not defined therein, in the Policy described below. For purposes of this
Insurance Agreement, the following terms shall have the following meanings:
"Act" means Part A of subtitle VII of Xxxxx 00, Xxxxxx Xxxxxx
Code.
"Aircraft" means any aircraft which is part of the Collateral.
"Airframe" means any airframe which is part of the Collateral.
"Ambac Commitment" shall have the meaning set forth in the
Policy Fee Letter.
"American Entity" means AMR Corporation, American or any
Affiliate of American that is controlled by AMR Corporation. For the purposes of
the preceding sentence, "control" means the possession, direct or indirect, 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.
"Ambac Supplemental Agreements" means (i) the Policy Provider
Indemnity and Inspection Agreement, (ii) the Supplemental Agreement, dated as of
the date hereof, between American and the Policy Provider, and (iii) the
Agreement Regarding Additional Covenants and Conditions, dated as of the date
hereof, between the Policy Provider and American.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq.
"Citizen of the United States" is defined in Section
40102(a)(15) of the Act and in the FAA Regulations.
"Collateral" means the "Collateral" as defined in each
Indenture with respect to an Aircraft.
"Engine" means any engine which is or will be part of the
Collateral.
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"Event of Loss" means an Event of Loss as defined in Annex A
of any applicable Indenture.
"FAA" means the Federal Aviation Administration of the United
States of America or any Government Entity succeeding to the functions of the
Federal Aviation Administration.
"FAA Filed Documents" with respect to each Aircraft, means the
Indenture with the Indenture Supplement covering such Aircraft attached.
"FAA Regulations" with respect to each Aircraft, means the
Federal Aviation Regulations issued or promulgated pursuant to the Act from time
to time.
"Final Legal Distribution Date" means January 9, 2012 with
respect to the Class G Certificates.
"Financing Statements" means collectively, UCC-1 (and, where
appropriate, UCC-3) financing statements covering each Aircraft and the related
Collateral, executed by American, as debtor (if required), showing the Loan
Trustee as secured party, for filing in Delaware and each other jurisdiction in
which such filing is made in accordance with Section 3.01(d) of the related
Participation Agreement.
"GAAP" means generally accepted accounting principles as set
forth in the statements of financial accounting standards issued by the
Financial Accounting Standards Board of the American Institute of Certified
Public Accountants, as such principles may at any time or from time to time be
varied by any applicable financial accounting rules or regulations issued by the
SEC and, with respect to any Person, shall mean such principles applied on a
basis consistent with prior periods except as may be disclosed in such Person's
financial statements.
"Government Entity" means (i) any federal, state, provincial,
local, municipal or similar government, and any body, board, department,
commission, court, tribunal, authority, agency or other instrumentality of any
such government or otherwise exercising any executive, legislative, judicial,
administrative or regulatory functions of such government or (ii) any other
government entity having jurisdiction over any matter contemplated by the
Operative Agreements or the Underwriting Agreement or relating to the observance
or performance of the obligations of any of the parties to the Operative
Agreements or the Underwriting Agreement.
"Holder" has the meaning given such term in the Policy.
"Indemnification Agreement" means the Indemnification
Agreement, dated as of June 30, 2003, among the Policy Provider, American and
the Underwriters.
"Insurance Agreement" has the meaning given such term in the
initial paragraph hereof.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated as the date hereof, by and among U.S. Bank, as Trustee under each of the
Trusts, the Class G Liquidity Provider, the Policy Provider and the
Subordination Agent.
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"Investment Company Act" means the Investment Company Act of
1940, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"Late Payment Rate" shall mean with respect to any period, a
rate per annum equal to the Debt Rate for the Series G Equipment Notes (as
defined in any Indenture), plus 2%.
"Lien" means any mortgage, pledge, lien, charge, encumbrance
or security interest affecting the title to or any interest in property.
"Loan Trustee" with respect to each Aircraft means U.S. Bank
in its capacity as Loan Trustee under the related Indenture, and any successor
loan trustee appointed pursuant to such related Indenture.
"Material Adverse Change" means, in respect of any Person, as
of any date, a material adverse change in the ability of such Person to perform
its obligations under any of the Operative Agreements to which it is a party as
of such date, or any material adverse change in the business, financial
condition or results of operations of such Person on a consolidated basis with
its subsidiaries.
"Moody's" means Xxxxx'x Investors Service, Inc., and any
successor thereto.
"Offer Date" means June 30, 2003.
"Offering Document" shall have the meaning set forth in the
Indemnification Agreement.
"Operative Agreements" means this Insurance Agreement, the
Intercreditor Agreement, the Indemnification Agreement, each Participation
Agreement, each Indenture, the Series G Equipment Notes, the Class G
Certificates, the Class G Liquidity Facility, the Class G Trust Agreement, the
Ambac Supplemental Agreements, the Pledge Agreement, the Policy and the Policy
Fee Letter, together with all exhibits and schedules included with any of the
foregoing.
"Person" means an individual, joint stock company, trust,
unincorporated association, joint venture, limited liability company,
corporation, business or owner trust, partnership or other organization or
entity (whether governmental or private).
"Pledge Agreement" means the Pledge Agreement, dated as of the
date hereof, between the Policy Provider and American, in form and substance
satisfactory to the Policy Provider.
"Policy" means the Certificate Guaranty Insurance Policy No.
AB0686BE, together with all endorsements thereto, issued by the Policy Provider
in favor of the Subordination Agent for the benefit of the Class G
Certificateholders and the Class G Liquidity Provider to the extent provided
therein, as the same may be amended from time to time in accordance with its
terms.
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"Policy Fee Letter" means the fee letter, dated as of July 8,
2003 among the Policy Provider, the Subordination Agent and American setting
forth the Premium in respect of the Class G Certificates and certain other
amounts payable in respect of the Policy.
"Policy Provider" means Ambac Assurance Corporation, or any
successor thereto, as issuer of the Policy.
"Policy Provider Information" shall have the meaning set forth
in the Indemnification Agreement.
"Premium" means the premium payable in respect of the Policy
on the Closing Date and on each Semi-Annual Distribution Date thereafter in an
amount equal to one-half (1/2) of the product of (a) the Ambac Commitment and
(b) the Premium Percentage; provided, that the Premium payable on the Closing
Date shall be pro rated from the Closing Date to the first Semi-Annual
Distribution Date (based upon a 360 day year of twelve 30 day months).
"Premium Percentage" shall have the meaning set forth in the
Policy Fee Letter.
"Prospectus Supplement" shall have the meaning set forth in
the Indemnification Agreement.
"S&P" means Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc., and any successor thereto.
"SEC" means the Securities and Exchange Commission of the
United States of America, or any successor thereto.
"Section 1110" means 11 U.S.C. Section 1110 of the Bankruptcy
Code or any successor or analogous section of the federal bankruptcy law in
effect from time to time.
"Securities Act" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"Security" means a "security" as defined in Section 2(a)(1) of
the Securities Act.
"Semi-Annual Distribution Date" means each July and January
Regular Distribution Date.
"Series G Equipment Notes" means the Series G Equipment Notes
issued pursuant to any Indenture by American, and authenticated by the Loan
Trustee thereunder, and any Equipment Notes issued in exchange therefor or
replacement thereof pursuant to the terms of such Indenture.
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"Transactions" means the transactions contemplated by the
Operative Agreements and the Underwriting Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, as in force at the date as
of which this Insurance Agreement is executed.
"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
"Underwriters" means Citigroup Global Markets Inc., X.X.
Xxxxxx Securities Inc., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated and
Xxxxxx Xxxxxxx & Co. Incorporated.
"Underwriter Information" shall have the meaning set forth in
the Indemnification Agreement.
"Underwriting Agreement" means the Underwriting Agreement,
dated June 30, 2003, among the Underwriters and American, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"U.S. Air Carrier" means any United States air carrier that is
a Citizen of the United States holding an air carrier operating certificate
issued by the Secretary of Transportation pursuant to the Act for aircraft
capable of carrying 10 or more individuals or 6000 pounds or more of cargo, and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
SECTION 1.02 Other Definitional Provisions. The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Insurance Agreement shall refer to this Insurance Agreement as a whole and not
to any particular provision of this Insurance Agreement. Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."
SECTION 1.03 Negotiated Document. This Insurance Agreement is
the result of negotiations among and has been reviewed by the parties hereto and
their respective counsel. Accordingly, this Insurance Agreement shall be deemed
to be the product of all parties hereto, and no ambiguity shall be construed in
favor of or against any such party on the grounds that a particular party was
the drafter or author of this Insurance Agreement or any part thereof.
Accordingly, in any dispute concerning the meaning of this Insurance Agreement,
or any term or condition hereof, such dispute shall be resolved without
reference to the doctrine of contra proferentem or any related or similar
doctrine.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.01 Representations and Warranties of American.
American represents and warrants as of the Closing Date as follows:
(a) Organization; Qualification. American is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to conduct its
business in which it is currently engaged and to own or hold under lease its
properties and to enter into and perform its obligations under the Operative
Agreements to which it is a party as of such date. American is duly qualified to
do business as a foreign corporation in good standing in each jurisdiction in
which the nature and extent of the business conducted by it, or the ownership of
its properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Material Adverse Change to American.
(b) Corporate Authorization. American has taken, or caused to
be taken, all necessary corporate action (including, without limitation, the
obtaining of any consent or approval of stockholders required by its certificate
of incorporation or by-laws) to authorize the execution and delivery of each of
the Operative Agreements to which it is a party as of such date, and the
performance of its obligations thereunder.
(c) No Violation. The execution and delivery by American of
the Operative Agreements to which it is a party as of such date, the performance
by American of its obligations thereunder and the consummation by American of
the Transactions contemplated thereby, do not and will not (a) violate any
provision of the certificate of incorporation or by-laws of American, (b)
violate any law, regulation, rule or order applicable to or binding on American
or (c) violate or constitute any default under (other than any violation or
default that would not result in a Material Adverse Change to American), or
result in the creation of any Lien (other than as permitted under the related
Indenture) upon the Aircraft under, any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, lease, loan or other material
agreement, instrument or document to which American is a party or by which it or
any of its properties is bound.
(d) Approvals. The execution and delivery by American of the
Operative Agreements to which it is a party and the Underwriting Agreement as of
such date, the performance by American of its respective obligations thereunder
and the consummation by American of the Transactions contemplated thereby do not
and will not require the consent or approval of, or the giving of notice to, or
the registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other creditor of
American, and (b) any Government Entity, other than (w) the filings or
recordings of the FAA Filed Documents and the Financing Statements (and
continuation statements periodically), (x) filings, recordings, notices or other
ministerial actions pursuant to any routine recording, contractual or regulatory
requirements applicable to it, (y) filings, recordings, notices or other actions
contemplated by the Operative Agreements in connection with the leasing or
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reregistration of the Aircraft, and (z) filings, recordings, notices or other
actions relating to the Securities Act, the Trust Indenture Act or state
securities laws.
(e) Valid and Binding Agreements. The Operative Agreements and
the Underwriting Agreement executed and delivered by American on or prior to
such date have been duly executed and delivered by American and, assuming the
due authorization, execution and delivery thereof by the other party or parties
thereto, constitute the legal, valid and binding obligations of American and are
enforceable against American in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity and subject to principles of
public policy limiting the right to enforce the indemnification provisions
contained herein, insofar as such provisions relate to indemnification for
liabilities arising under federal securities laws.
(f) Representations and Warranties. The representations and
warranties of American contained in the Operative Agreements are true and
correct in all material respects.
(g) Litigation. Except as set forth in the Prospectus
Supplement, the most recent Annual Report on Form 10-K, as amended, of American
filed with the SEC on or prior to the Closing Date, or in any Quarterly Report
on Form 10-Q or Current Report on Form 8-K filed by American with the SEC
subsequent to such Form 10-K, no action, claim or proceeding is now pending or,
to the actual knowledge of American, threatened against American before any
court, governmental body, arbitration board, tribunal or administrative agency,
which would reasonably be expected to result in a Material Adverse Change to
American.
(h) Financial Condition. (i) The audited consolidated balance
sheet of American as of December 31, 2002 included in American's Annual Report
for the fiscal year ending December 31, 2002 on Form 10-K, as amended, filed by
American with the SEC, and the related consolidated statements of operations and
cash flows for the fiscal year then ended, and (ii) the unaudited consolidated
financial statements of American as of March 31, 2003 and for the period ending
March 31, 2003 included in the Quarterly Report on Form 10-Q of American have
each been prepared in conformity with GAAP and present fairly in all material
respects the consolidated financial condition of American and its consolidated
subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods. Since March 31, 2003, there has been no Material
Adverse Change of American, except as disclosed in the Prospectus Supplement,
the foregoing SEC filings or any Current Report on Form 8-K filed by American
with the SEC since March 31, 2003.
(i) Registration and Recordation. The representation and
warranty of American set forth in Section 4.01(e) of each Participation
Agreement is true and correct.
(j) No Default. No event exists that, in respect of any
Aircraft, constitutes an Indenture Event of Default.
(k) No Event of Loss. No Event of Loss has occurred with
respect to any Airframe or any Engine which is Collateral under any Indenture
executed on the date hereof and,
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to the actual knowledge of American, no circumstance, condition, act or event
has occurred that, with the giving of notice or lapse of time or both gives rise
to or constitutes an Event of Loss with respect to such Airframe or any such
Engine.
(l) Compliance with Laws.
(a) American is a Citizen of the United States
and a U.S. Air Carrier.
(b) American holds all licenses, permits and
franchises from the appropriate Government Entities necessary
to authorize American to lawfully engage in air transportation
and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to so hold any
such license, permit or franchise would not give rise to a
Material Adverse Change to American.
(c) American is not an "investment company" or a
company controlled by an "investment company" within the
meaning of the Investment Company Act.
(m) Securities Laws. Neither American nor any Person
authorized to act on its behalf has directly or indirectly offered any
beneficial interest or Security relating to the ownership of the Aircraft, or
any of the Equipment Notes or any other interest in or security under any
Indenture, for sale, to, or solicited any offer to acquire any such interest or
security from, or has sold any such interest or security to, any Person in
violation of the Securities Act.
(n) Offering Document. Except for the Policy Provider
Information and the Underwriter Information, the Offering Document on the Offer
Date, and as of the Closing Date, neither contained or will contain any untrue
statement of a material fact nor omitted or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(o) Section 1110. The Loan Trustee under each Indenture will
be entitled to the benefits of Section 1110 (as in effect on the Closing Date)
with respect to the Aircraft subject to such Indenture in the event of a case
under Chapter 11 of the Bankruptcy Code in which American is a debtor.
(p) Class G Certificates. Neither American nor any American
Entity owns or beneficially holds, directly or indirectly on the Closing Date
any Class G Certificates or any interest therein.
(q) Licenses. American holds all licenses, permits and
franchises from the appropriate government entities necessary to authorize
American to lawfully engage in air transportation and to carry on scheduled
commercial passenger service as currently conducted, except where the failure to
so hold any such license, permit or franchise would not give rise to a material
adverse change to American.
SECTION 2.02 Covenants of American. American covenants and
agrees with the Policy Provider as follows:
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(a) So long as the Class G Certificates are outstanding,
neither American nor any of its Affiliates (i) will issue or permit to be
outstanding, directly or indirectly, on or after the Closing Date, any debt
(other than the Series G Equipment Notes) in respect of any Aircraft, including
in connection with a Refunding, in an aggregate amount in excess of 50% of the
Pool Balance of the Class G Certificates then outstanding (provided that any
reduction in the Pool Balance of the Class G Certificates in connection with a
prepayment of any Series G Equipment Notes pursuant to Sections 2.10(b) and
2.10(e) of any Indenture shall be deemed added to the Pool Balance of the Class
G Certificates for the purposes of such calculation), and (ii) will issue or
cause to be issued, directly or indirectly, any debt subordinate to the Series G
Equipment Notes in respect of any Aircraft, including in connection with a
Refunding, to any Person or entity other than American or any of its Affiliates
until the earlier to occur of (A) three years after the Closing Date and (B) the
date on which the corporate ratings assigned to American are at least BBB+ by
S&P and Baa1 by Moody's. American will not redeem, and will not permit the
redemption of, any Equipment Notes in connection with any Refunding pursuant to
Section 2.11(b) of any Indenture if (i) the conditions set forth in the
preceding sentence have not been satisfied, (ii) immediately prior to such
Refunding, any amounts are due to the Policy Provider in respect of Policy
Drawings, Policy Provider Interest Amounts, or amounts due under the Policy Fee
Letter, or (iii) immediately after giving effect to such Refunding, a Payment
Default (as defined in any Indenture) would exist under any Indenture or any
Related Indenture (as defined in any Indenture). So long as American or any of
its Affiliates owns, or beneficially holds, directly or indirectly, any Class C
Certificates or any interest therein, there shall be no Class C Liquidity
Facility in respect of the Class C Certificates. So long as American or any of
its Affiliates owns, or beneficially holds, directly or indirectly, any Class D
Certificates or any interest therein, there shall be no liquidity facility in
respect of the Class D Certificates.
(b) In the event that American does not maintain all-risk
aircraft hull insurance covering any Aircraft or all-risk coverage with respect
to any Engines (as defined in the related Indenture) or Parts (as defined in the
related Indenture) while removed from an Aircraft (including, without
limitation, war risk insurance) as required by Section 7.06(b) of the related
Indenture (the "Specified Insurance"), the Policy Provider is entitled, at its
own expense and without any reimbursement from American (including, without
limitation, pursuant hereto and the Policy Fee Letter or pursuant to any
Participation Agreement) to obtain such Specified Insurance for its own benefit.
(c) American agrees that if the Class G Liquidity Provider is
in default of any payment obligation of the Class G Liquidity Provider under the
Class G Liquidity Facility, American shall, with notice to the Policy Provider
and at its own expense, use commercially reasonable efforts to arrange for a
Replacement Class G Liquidity Facility to replace the Class G Liquidity
Facility; provided, that if the Class G Liquidity Provider in default of any
payment obligation is not replaced by American on or before the date of such
default, then American shall pay to the Policy Provider fees and expenses in the
same amounts and in the same manner that had been payable to the defaulted Class
G Liquidity Provider in connection with its commitment under its Class G
Liquidity Facility (the "Liquidity Fees and Expenses"). American's obligation to
pay the Liquidity Fees and Expenses to the Policy Provider shall terminate on
the earlier of (i) date that the Policy Provider's obligations terminate under
the Policy, and (ii) the date of the issuance of a Replacement Class G Liquidity
Facility.
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(d) American agrees that American will use, and will cause
each other American Entity to use, reasonable best efforts to insure that no
American Entity will own, or beneficially hold, directly or indirectly, any
Class G Certificates or any interest therein. In the event that an American
Entity acquires an interest in any Class G Certificate, American agrees to
immediately pledge, and agrees to cause such other American Entity to
immediately pledge, such interest to the Policy Provider pursuant to the terms
of the Pledge Agreement.
(e) Neither the American nor any person authorized to act on
its behalf will directly or indirectly offer any beneficial interest or security
relating to the ownership of the Aircraft or any interest in any of the
Equipment Notes or any other interest in or security under any Indenture, for
sale to, or solicit any offer to acquire any such interest or security from, or
sell any such interest or security to, any person in violation of the Securities
Act or applicable state or foreign securities laws.
SECTION 2.03 Representations, Warranties and Covenants of U.S.
Bank, Class G Trustee and Subordination Agent. Each of U.S. Bank, Class G
Trustee and Subordination Agent represents, warrants and covenants to American
and the Policy Provider that it shall perform and observe, in all material
respects, all of its respective covenants, obligations and agreements in any
Operative Agreement to which it is a party to be observed or performed by it.
SECTION 2.04 Representations, Warranties and Covenants of the
Policy Provider. The Policy Provider represents, warrants and covenants to
American and the Subordination Agent as follows:
(a) Organization and Licensing. The Policy Provider is duly
organized, validly existing and in good standing as a Wisconsin-domiciled stock
insurance company, duly qualified to conduct an insurance business in every
jurisdiction where qualification may be necessary to accomplish the
Transactions.
(b) Corporate Power. The Policy Provider has the corporate
power and authority to issue the Policy, to execute and deliver this Insurance
Agreement and the other Operative Agreements to which it is a party and to
perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. The Policy Provider has duly
authorized, executed and delivered this Insurance Agreement, the Intercreditor
Agreement, the Indemnification Agreement, the Policy Fee Letter and the Ambac
Supplemental Agreements. All proceedings legally required for the issuance and
execution, delivery and performance of the Policy and the execution, delivery
and performance of this Insurance Agreement have been taken and all licenses,
orders, consents or other authorizations or approvals of any Government Entity
legally required for the enforceability of the Policy have been obtained; any
proceedings not taken and any licenses, authorizations or approvals not obtained
are not material to the enforceability of the Policy.
(d) Enforceability. This Insurance Agreement, the
Intercreditor Agreement, the Policy Fee Letter, the Indemnification Agreement,
the Ambac Supplemental Agreements and the Policy (the "Ambac Documents") each
constitute a legal, valid and binding obligation of the Policy Provider,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
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reorganization, receivership, moratorium and other similar laws affecting
creditors' rights generally and to general principles of equity and subject to
principles of public policy limiting the right to enforce the indemnification
provisions contained herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.
(e) No Conflicts. The execution and delivery by the Policy
Provider of the Ambac Documents does not, and the performance by the Policy
Provider of its obligations under such documents will not, conflict with or
result in a breach of any of the terms, conditions or provisions of the
certificate of incorporation or by-laws of the Policy Provider, or any
restriction contained in any contract, agreement or instrument to which the
Policy Provider is a party or by which it is bound or violate any judgement,
order or decree applicable to the Policy Provider of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over the Policy Provider or constitute a default under any of the foregoing
which would materially and adversely affect its ability to perform its
obligations under the Ambac Documents.
(f) Financial Information. (i) The consolidated financial
statements of the Policy Provider and its subsidiaries as of December 31, 2002
and December 31, 2001, and for each of the years in the three-year period ended
December 31, 2002, included in the Annual Report on Form 10-K of Ambac Financial
Group, Inc. (which was filed with the SEC on March 28, 2003, SEC File Number
001-10777), (ii) the unaudited consolidated financial statements of the Policy
Provider and its subsidiaries as of March 31, 2003 and for the periods ending
March 31, 2003 and March 31, 2002 included in the Quarterly Report on Form 10-Q
of Ambac Financial Group, Inc. for the period ended March 31, 2003 (which was
filed with the SEC on May 15, 2003), and (iii) the Current Reports on Form 8-K
filed with the SEC on January 24, 2003, February 28, 2003, March 4, 2003, March
20, 2003, March 26, 2003, March 31, 2003 and April 21, 2003, as such reports
relate to the Policy Provider, each fairly presents in all material respects the
financial condition of the Policy Provider as of such dates and for the periods
covered by such statements in accordance with accounting principles generally
accepted in the United States of America. Since March 31, 2003, there has been
no change in the financial condition or operations of the Policy Provider that
would materially and adversely affect its ability to perform its obligations
under the Policy, except as disclosed in the Prospectus Supplement, the
foregoing SEC filings or any Current Report on Form 8-K filed with the SEC since
March 31, 2003.
(g) Policy Provider Information. The Policy Provider
Information is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant in
connection with the offer and sale of securities of such registrant registered
under the Securities Act. Within such limited scope of disclosure, however, as
of the Offer Date, the Policy Provider Information did not, and as of the
Closing Date, the Policy Provider Information does not, contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading.
(h) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Policy Provider's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator
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which, if decided adversely, would materially and adversely affect its ability
to perform its obligations under the Operative Agreements to which it is a
party.
(i) Compliance with Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Policy Provider in the conduct of
its business violates any law, regulation, judgment, agreement, order or decree
applicable to the Policy Provider that, if enforced, could result in a Material
Adverse Change with respect to the Policy Provider.
(j) Securities Act. The issuance of the Policy as described in
the Prospectus Supplement is exempt from registration under the Securities Act
pursuant to Section 3(a)(8) thereof.
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
SECTION 3.01 Issuance of the Policy. The Policy Provider
agrees to issue the Policy on the Closing Date, subject to satisfaction of the
conditions precedent set forth below on or prior to the Closing Date:
(a) Operative Agreements. The Policy Provider shall have
received (i) a copy of each of the Operative Agreements, with the exception of
the Policy, in form and substance reasonably satisfactory to the Policy
Provider, duly authorized, executed and delivered by each party thereto, other
than the Policy Provider, and (ii) a copy of the Prospectus Supplement;
(b) Certified Documents and Resolutions. The Policy Provider
shall have received (i) a copy of the certificate of incorporation and by-laws
of American, and (ii) a certificate of the Secretary or Assistant Secretary of
American dated the Closing Date stating that attached thereto is a true,
complete and correct copy of resolutions duly adopted by the Board of Directors
of American authorizing the execution, delivery and performance by American of
the Operative Agreements to which it is a party and the consummation of the
Transactions and that such applicable organizational documents and resolutions
are in full force and effect without amendment or modification on the Closing
Date;
(c) Incumbency Certificate. The Policy Provider shall have
received a certificate of the Secretary or an Assistant Secretary of each of
American and the Subordination Agent certifying the names and signatures of the
officers of American and the Subordination Agent, respectively, authorized to
execute and deliver the Operative Agreements to which it is a party on or prior
to the Closing Date;
(d) Representations and Warranties. The representations and
warranties of American, the Class G Trustee and the Subordination Agent set
forth in this Insurance Agreement and the other Operative Agreements to which
they are a party, respectively, shall be true and correct on and as of the
Closing Date;
(e) Documentation. The Policy Provider shall have received a
copy of each document, instrument, certificate and opinion required to be
delivered on or before the Closing
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Date under the Operative Agreements and the Underwriting Agreement, including
each opinion of counsel addressed to any of Moody's, S&P, the Class G Trustee,
American and the Subordination Agent and the Underwriters (except for the
comfort letters of Ernst & Young LLP and the opinion of counsel to the
Underwriters addressed only to the Underwriters), in respect of American and the
Subordination Agent or any of the other parties to the Operative Agreements and
the Underwriting Agreement and the Transactions dated the Closing Date, in form
and substance reasonably satisfactory to the Policy Provider, addressed to the
Policy Provider (or accompanied by a letter from the counsel rendering such
opinion to the effect that the Policy Provider is entitled to rely on such
opinion as of its date as if it were addressed to the Policy Provider) and
addressing such matters as the Policy Provider may reasonably request, and the
counsel providing each such opinion shall have been instructed by its client to
deliver such opinion to the addressees thereof;
(f) Approvals, Etc. The Policy Provider shall have received
true and correct copies of all governmental and third party approvals, licenses
and consents, if any, required in connection with the Transactions;
(g) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or threatened before any court, governmental or administrative agency or
arbitrator in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with any of the Operative Agreements, the
Underwriting Agreement or the consummation of the Transactions;
(h) Legality. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transactions illegal or
otherwise prevent the consummation thereof;
(i) Issuance of Ratings. The Policy Provider shall have
received confirmation in writing that the Class G Certificates, when issued,
will be rated "AAA" by S&P and "Aaa" by Moody's and shall have received
confirmation in writing of a rating of the risk insured by the Policy without
regard to the Policy and a capital charge acceptable to the Policy Provider,
both as set forth in the commitment letter, dated June 3, 2003 between the
Policy Provider and American;
(j) Satisfactory Documentation. The Policy Provider and its
counsel shall have reasonably determined that all documents, certificates and
opinions to be delivered in connection with the Certificates (other than with
respect to the Policy Provider) conform to the terms of the related Trust
Agreement, the Prospectus Supplement, this Insurance Agreement and the
Intercreditor Agreement;
(k) Filings. The Policy Provider shall have received evidence
that there shall have been made and shall be in full force and effect, all
filings, recordings and registrations, and there shall have been given or taken
any notice or similar action as is necessary in order to establish, perfect,
protect and preserve the right and interest of the Policy Provider created by
the Operative Agreements executed and delivered on or prior to the Closing Date;
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(l) Conditions Precedent. All conditions precedent to the
issuance of the Certificates under the Trust Agreements shall have been
satisfied (other than with respect to the Policy Provider), or waived with the
consent of the Policy Provider. All conditions precedent to the effectiveness of
the Class G Liquidity Facility shall have been satisfied or waived, and all
conditions precedent, if any, to the purchases of the Class G Certificates by
the Underwriters under the Underwriting Agreement, the Class C Certificates by
the Initial Class C Holder and the Class D Certificates by the Initial Class D
Holder, as applicable, shall have been satisfied or waived by the Underwriters,
the Initial Class C Holder or the Initial Class D Holder, as applicable;
(m) Expenses. The Policy Provider shall have received payment
in full of all amounts required to be paid by American to or for account of the
Policy Provider in accordance with the Policy Fee Letter on or prior to the
Closing Date; and
(n) Insurance Reports. The Policy Provider shall have received
an insurance report of an independent insurance broker and the related
certificates of insurance, each in form and substance reasonably satisfactory to
the to the Policy Provider, as to the compliance with the terms of Section 7.06
of each Indenture relating to insurance with respect of the Aircraft.
SECTION 3.02 Payment of Fees and Premium.
(a) Legal Fees. Promptly upon receipt of an invoice, American
shall pay or cause to be paid to, or as directed by, the Policy Provider, actual
and reasonable legal fees, disbursements and charges incurred by the Policy
Provider in connection with the issuance of the Policy and this Insurance
Agreement in accordance with the Policy Fee Letter. Any additional actual and
reasonable fees of the Policy Provider's counsel or auditors payable in respect
of any amendment, modification or supplement to the Offering Document requested
by American and incurred after the Closing Date shall be paid by American
promptly following receipt of documentation thereof (but in no event later than
thirty days following the receipt of such documentation).
(b) Rating Agency Fees. American shall promptly pay the
initial fees of S&P and Moody's with respect to rating the Certificates and the
Transactions following receipt of a statement with respect thereto. All periodic
and subsequent fees of S&P or Moody's with respect to, and directly allocable
to, the Certificates shall be for the account of, and shall be billed to,
American. The fees for any other rating agency shall be paid by the party
requesting such other agency's rating unless such other agency is a substitute
for S&P or Moody's in the event that S&P or Xxxxx'x is no longer rating the
Certificates, in which case the fees for such agency shall be paid by American.
(c) Premium.
(i) In consideration of the issuance by the Policy
Provider of the Policy, American shall pay or cause to be paid to the
Policy Provider, the Premium as and when due. American shall also pay
any additional amounts, as and when due, to be paid by it under the
Policy Fee Letter.
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(ii) Except as provided in the Policy Fee Letter, no
portion of the Premium paid shall be refundable, without regard to
whether the Policy Provider makes any payment under the Policy or any
other circumstances relating to the Class G Certificates or provision
being made for payment of the Class G Certificates prior to maturity;
SECTION 3.03 Reimbursement Obligation.
(a) As and when due in accordance with and from the funds
specified in Sections 2.04(b), 3.02 and 3.03 of the Intercreditor Agreement, the
Policy Provider shall be entitled to reimbursement for any payment made by the
Policy Provider under the Policy to the Subordination Agent or to the Class G
Liquidity Provider under Section 2.06(c) or 3.07(c) of the Intercreditor
Agreement (the "Policy Payments"), which reimbursement shall be due and payable
on the date provided in such Sections, in an amount equal to the amount to be so
paid and all amounts previously paid that remain unreimbursed. In addition, to
the extent that any such payment by the Policy Provider shall have been made as
a result of a default by the Class G Liquidity Provider in its obligation to
make an Advance, as provided in the Intercreditor Agreement, the Policy Provider
shall be entitled to the payment of interest on such amounts to the extent, at
the time and in the priority that the Class G Liquidity Provider would have been
paid pursuant to Sections 2.04(b), 3.02 and 3.03 of the Intercreditor Agreement
had the Class G Liquidity Provider made such Advance.
(b) After the maturity date of the Series G Equipment Notes
and following the sale or other disposition of the Collateral or the Series G
Equipment Notes under all defaulted Indentures (the "Reimbursement Date"), and
so long as there are no Liquidity Obligations owing to the Class G Liquidity
Provider, if the Policy Provider has not been reimbursed in full for all Policy
Payments under the Intercreditor Agreement, American agrees to reimburse the
Policy Provider immediately, upon demand, to the extent of such Policy Payments,
less any amount in respect of such Policy Payments paid to and received by the
Policy Provider as a distribution to it under the Intercreditor Agreement (the
"Reimbursable Amount"); provided, that, notwithstanding the foregoing, if at any
time prior to the Reimbursement Date there are no Liquidity Obligations
outstanding, the Policy Provider shall be entitled to reimbursement by American
immediately upon demand of any Reimbursable Amount; provided, further that,
notwithstanding the foregoing, American's obligations under the other Operative
Agreements and the Policy Provider's rights to payments thereunder shall not be
affected or reduced by this Section 3.03, except to the extent that American
shall not be required to make any payment to the Policy Provider under this
Section 3.03(b) that has already been received by the Policy Provider pursuant
to the Intercreditor Agreement.
(c) American agrees to pay to the Policy Provider any and all
charges, fees, costs and expenses that the Policy Provider may reasonably pay or
incur, including actual and reasonable attorneys' and accountants' fees and
expenses (without duplication of amounts paid to the Policy Provider in respect
of the Operative Agreements), in connection with (i) the preservation (in
connection with the occurrence of an Indenture Event of Default), enforcement or
defense of any rights in respect of this Insurance Agreement, including
defending, monitoring or participating in any litigation or proceeding,
including any bankruptcy proceeding, and (ii) any amendment, modification,
waiver, consent or other action requested by or agreed to by American with
respect to, or related to, any Operative Agreements or to any form document
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attached to any Operative Agreement as an exhibit, schedule or annex thereto,
whether or not executed or completed. Provided that five (5) Business Days'
prior written notice of the intended payment or incurrence shall have been given
to American by the Policy Provider, such reimbursement shall be due on the dates
on which such charges, fees, costs or expenses are paid or incurred by the
Policy Provider.
(d) In the event that any payment of any kind is made under
the Policy in respect of Class G Certificates owned or beneficially held,
directly or indirectly, by American or any American Entity, American agrees to
immediately refund such payment directly to the Policy Provider.
SECTION 3.04 Indemnification. American agrees that the Policy
Provider is hereby entitled to the full benefit of the indemnity contained in
each Policy Provider Indemnity and Inspection Agreement as if such provisions
were set forth in full herein and as if the "Operative Documents" referred to
therein include this Insurance Agreement. The Policy Provider agrees to comply
with all of its obligations as an Indemnitee under Section 1.1(f) of each Policy
Provider Indemnity and Inspection Agreement.
SECTION 3.05 Procedure for Payment of Fees and Premiums. All
payments to be made to the Policy Provider under this Insurance Agreement shall
be made to the Policy Provider in lawful currency of the United States of
America in immediately available funds on the date when due to such account as
the Policy Provider shall direct by written notice given at least ten calendar
days prior to such date to American. In the event that the date of any payment
to the Policy Provider or the expiration of any time period hereunder occurs on
a day that is not a Business Day, then such payment shall be made, or such
expiration of time period shall occur, on the next succeeding Business Day with
the same force and effect as if such payment was made or time period expired on
the scheduled date of payment or expiration date, as applicable.
SECTION 3.06 Late Payments. If American fails to pay the
Premium or any other amounts owing to the Policy Provider under this Insurance
Agreement or the Policy Fee Letter (including without limitation any Policy
Drawings, Premiums, indemnities, fees, costs and expenses) when due, interest on
such amount shall be assessed against, and due and payable by, American at the
Late Payment Rate from the date such amount was due until the date such amount
is paid; provided that, notwithstanding the foregoing, American's obligations
under the other Operative Agreements and the Policy Provider's rights to
payments thereunder shall not be affected or reduced by this Section 3.06,
except to the extent that American shall not be required to make any payment to
the Policy Provider under this Section 3.06 that has already been received by
the Policy Provider pursuant to the Intercreditor Agreement and no payment shall
be required to be made to the Policy Provider under the Intercreditor Agreement
(and no claim shall be made by the Policy Provider under the Intercreditor
Agreement) to the extent such amount has been received under this Agreement. For
the purposes of calculating late payments on Policy Payments, interest shall be
deemed to commence to accrue on the date that the Policy Provider made such
Policy Payment.
SECTION 3.07 Deductions. All payments made to the Policy
Provider by American in respect of this Article III shall be made without any
deduction or withholding for or on account of any tax, levy, impost, duty,
charge, assessment or fee of any nature (any of the
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foregoing an "Additional Tax") unless such deduction or withholding is required
by any applicable law, as modified by the practice of any relevant governmental
revenue authority, then in effect. If a payor is so required to deduct or
withhold any Additional Tax, then such payor shall (a) promptly notify the
Policy Provider of such requirement, (b) pay to the Policy Provider, in addition
to the amount to which the Policy Provider is otherwise entitled, such
additional amount as is necessary to ensure that the net amount actually
received by the Policy Provider (free and clear of taxes, whether assessed
against the payor or the Policy Provider) will equal the full amount the Policy
Provider would have received had no such deduction or withholding been required,
provided that such an additional amount shall be payable only if such Additional
Tax would not have arisen but for a present or former connection between the
jurisdiction of the government or taxation authority imposing such Additional
Tax and the payor (or an Affiliate of such payor), and (c) pay to the relevant
authorities the full amount required to be deducted or withheld (including the
full amount required to be deducted or withheld from any additional amount, if
any, paid to the Policy Provider pursuant to foregoing clause (b)); provided,
that no additional amounts shall be required to be paid to the Policy Provider
hereunder in respect of Additional Taxes to the extent such Additional Taxes
would not have been imposed but for (i) the fact that the Policy Provider is not
the beneficial owner of the payment or that the Policy Provider (or any
transferee of any rights or interests thereof) ceases to be (or is not) a
"United States person" within the meaning of section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended, (ii) any present or former connection between
the jurisdiction of the government or taxing authority imposing such Additional
Taxes and the Policy Provider, or (iii) the failure of the Policy Provider, as
soon as practicable after the payor's written request therefor, to complete,
execute and provide to or as directed by the payor any form of documentation
that may be required or reasonably requested by the payor in order to allow the
payor to make payments under this Insurance Agreement without deduction or
withholding for or on account of any Additional Taxes or with such deduction or
withholding at a reduced rate (so long as, in the sole discretion of the Policy
Provider, the completion, execution or submission of such form or document would
not adversely affect the legal or commercial position of the Policy Provider).
ARTICLE IV
FURTHER AGREEMENTS
SECTION 4.01 Effective Date; Term of the Insurance Agreement.
This Insurance Agreement shall take effect on the Closing Date and shall remain
in effect until the later of (a) such time as the Policy Provider is no longer
subject to a claim under the Policy and the Policy shall have been surrendered
to the Policy Provider for cancellation, and (b) all amounts payable to the
Policy Provider by American or the Subordination Agent hereunder or from any
other source hereunder or under the Operative Agreements and all amounts payable
under the Class G Certificates have been paid in full; provided, that the
provisions of Section 3.04 hereof shall survive any termination of this
Insurance Agreement.
SECTION 4.02 Further Assurances and Corrective Instruments.
(a) Except as otherwise provided in Article VIII of the
Intercreditor Agreement, neither American nor the Subordination Agent shall (i)
agree to any amendment or modification to any of the Operative Agreements to
which either of them is a party, which amendment or
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modification would have an adverse effect on the rights or remedies of the
Policy Provider, or (ii) grant any waiver of rights in respect of any of the
Operative Agreements to which either of them is a party, without the prior
written consent of the Policy Provider so long as the Policy Provider is the
Controlling Party and any such waiver without prior written consent of the
Policy Provider shall be null and void and of no force or effect.
(b) To the extent permitted by law, each of American, the
Policy Provider and the Subordination Agent agrees that it will, from time to
time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements hereto and such further instruments as American,
the Policy Provider or the Subordination Agent may reasonably request and as may
be required to effectuate the intention of or facilitate the performance of this
Insurance Agreement.
SECTION 4.03 Obligations Absolute.
(a) The obligations of American hereunder and under the other
Operative Agreements shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance Agreement and the other
Operative Agreements under all circumstances irrespective of:
(i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver, with respect to any of
the Operative Agreements (other than the Policy) or the Certificates;
(ii) any exchange or release of any other obligations
hereunder;
(iii) the existence of any claim, setoff, defense,
reduction, abatement or other right that any Person may have at any
time against the Policy Provider or any other Person;
(iv) any document presented in connection with the Policy
proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) any payment by the Policy Provider under the Policy
against presentation of a certificate or other document that does not
strictly comply with the terms of the Policy;
(vi) any failure of American to receive the proceeds from
the sale of the Certificates; and
(vii) any other circumstances, other than payment in full,
that might otherwise constitute a defense available to, or discharge
of, any Person in respect of any Operative Agreements.
(b) Each of the parties hereto renounces the right to assert
as a defense to the performance of its obligations herein each of the following:
(i) to the extent permitted by law, any and all redemption and exemption rights
and the benefit of all valuation and appraisement
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privileges against the indebtedness and obligations evidenced by any Operative
Agreements or by any extension or renewal thereof; (ii) presentment and demand
for payment, notices of nonpayment and of dishonor, protest of dishonor and
notice of protest; (iii) all notices in connection with the delivery and
acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder, except as required by the
Operative Agreements; and (iv) all rights of abatement, diminution, postponement
or deduction, and all rights of setoff or recoupment arising out of any breach
under any of the Operative Agreements, by any party thereto or any beneficiary
thereof, or out of any obligation at any time owing to American.
(c) American (i) agrees that any consent, waiver or
forbearance hereunder or in the other Operative Agreements with respect to an
event shall operate only for such event and not for any subsequent event; (ii)
consents to any and all extensions of time that may be granted to American by
the Policy Provider with respect to any payment hereunder or other provisions
hereof; and (iii) consents to the addition of any and all other makers,
endorsers, guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder, and agrees
that the addition of any such obligors or security shall not affect the
liability of American for any payment hereunder.
(d) No failure by the Policy Provider to exercise, and no
delay by the Policy Provider in exercising, any right hereunder or under the
Operative Agreements shall operate as a waiver thereof. The exercise by the
Policy Provider of any right hereunder shall not preclude the exercise of any
other right, and the remedies provided herein to the Policy Provider are
declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.
(e) Nothing herein shall be construed as prohibiting any party
hereto from pursuing any rights or remedies it may have against any Person in a
separate legal proceeding.
SECTION 4.04 Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance Agreement shall be a continuing obligation
of the parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
Subordination Agent, except as provided in Section 7.01 of the Intercreditor
Agreement, and American, except for any transaction expressly permitted by
Section 5.02 of the Basic Agreement, may not assign their respective rights
under this Insurance Agreement, or delegate any of their duties hereunder,
without the prior written consent of the other parties hereto. The Policy
Provider, except as set forth in subsection (b) of this Section 4.04, may not
assign its rights under this Insurance Agreement or delegate any of its duties
hereunder without the prior written consent of the other parties hereto. Any
assignments made in violation of this Insurance Agreement shall be null and
void.
(b) The Policy Provider shall have the right to grant
participations in its rights under this Insurance Agreement and to enter into
contracts of reinsurance with respect to the Policy upon such terms and
conditions as the Policy Provider may in its discretion determine; provided,
that no such participation or reinsurance agreement or arrangement shall relieve
the Policy Provider of any of its obligations hereunder or under the Policy or
grant to any participant or reinsurer any rights hereunder or under any
Operative Agreement, and neither American nor
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any other party to any Operative Agreement shall be required to pay the Policy
Provider hereunder or under any other Operative Agreement any amount greater
than it would have been required to pay had there been no such participation or
reinsurance.
(c) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right, remedy
or claim, express or implied, upon any Person, including, particularly, any
Holder, other than upon the Policy Provider against American, or upon American
against the Policy Provider (either directly or as the Controlling Party), and
all the terms, covenants, conditions, promises and agreements contained herein
shall be for the sole and exclusive benefit of the parties hereto and their
successors and permitted assigns. None of the Subordination Agent, the Class G
Liquidity Provider, the Trustee or any Holder shall have any right to payment
from the Premium paid or payable hereunder or from any amounts paid by American
pursuant to Section 3.02, 3.03, 3.04, 3.05 or 3.06 hereof.
SECTION 4.05 Liability of the Policy Provider. Neither the
Policy Provider nor any of its officers, directors or employees shall be liable
or responsible for: (i) the use that may be made of the Policy by the
Subordination Agent or for any acts or omissions of the Subordination Agent in
connection therewith; or (ii) the validity, sufficiency, accuracy or genuineness
of documents delivered to the Policy Provider in connection with any claim under
the Policy, or of any signatures thereon, even if such documents or signatures
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged (unless the Policy Provider shall have actual knowledge
thereof). In furtherance and not in limitation of the foregoing, the Policy
Provider may accept documents that appear on their face to be in order, without
responsibility for further investigation.
SECTION 4.06 No Duplication of Payments. Any payments made
hereunder to the Policy Provider are to be without duplication of any payments
received by the Policy Provider under the Intercreditor Agreement and, to the
extent that the Policy Provider has received, pursuant to the Intercreditor
Agreement, payment of any amounts due or owing hereunder, such payment shall not
be sought by the Policy Provider pursuant to the terms hereof. Any payments made
under the Intercreditor Agreement are to be without duplication of any payments
received by the Policy Provider hereunder and, to the extent that the Policy
Provider has received hereunder payment of any amounts due or owing under the
Intercreditor Agreement, such payment shall not be sought by the Policy Provider
pursuant to the terms of the Intercreditor Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Amendments, Etc. This Insurance Agreement may be
amended, modified, supplemented or terminated only by written instrument or
written instruments signed by the parties hereto; provided that if such
amendment, modification, supplement or termination would have a material adverse
effect on the interests of the Subordination Agent, a Pass Through Trustee or
any Class G Certificateholder, Ratings Confirmation shall also be obtained prior
to such amendment, modification, supplement or termination being effective.
American agrees to provide a copy of any amendment to this Insurance Agreement
promptly to the Subordination
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Agent and the Rating Agencies. No act or course of dealing shall be deemed to
constitute an amendment, modification, supplement or termination hereof.
SECTION 5.02 Notices. All demands, notices and other
communications to be given hereunder shall be in writing (except as otherwise
specifically provided herein) and shall be mailed by registered mail or
personally delivered and faxed to the recipient as follows:
(a) To the Policy Provider:
Ambac Assurance Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Surveillance Department
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
In each case in which notice or other communication to the
Policy Provider refers to an event of default under any Operative Agreement or
any Policy Drawing, or with respect to which failure on the part of the Policy
Provider to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of the general counsel of (i) the Policy Provider at its address set forth above
(if by facsimile to (000) 000-0000), and (ii) American and the Subordination
Agent at its address set forth below and, in all cases, both any original and
all copies shall be marked to indicate "URGENT MATERIAL ENCLOSED.")
(b) To American:
American Airlines, Inc.
0000 Xxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxx, XX 00000
Attention: Treasurer
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
(c) To the Subordination Agent:
U.S. Bank Trust National Association
000 Xxxxxx Xxxxxx
Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Corporate Trust Division
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
Any party, by notice to the other parties hereto, may
designate different addresses for subsequent notices or communications. All such
notices and other communications shall be
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effective upon receipt unless received after business hours on any day, in which
case on the opening of business on the next Business Day. Whenever the words
"notice" or "notify" or similar words are used herein, they mean the provision
of formal notice as set forth in this Section 5.02.
SECTION 5.03 Severability. In the event that any provision of
this Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
SECTION 5.04 Governing Law. This Insurance Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
including all matters of construction, validity and performance. This Insurance
Agreement is being delivered in New York.
SECTION 5.05 Consent to Jurisdiction.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of the United States District Court for the Southern
District of New York and any court of appropriate jurisdiction in the State of
New York located in the City and County of New York, and any appellate court
from any thereof, in any action, suit or proceeding brought against it or in
connection with any of the Operative Agreements or the Transactions or for
recognition or enforcement of any judgment, and the parties hereto hereby
irrevocably and unconditionally agree that all claims in respect of any such
action or proceeding may be heard or determined in such New York state court or,
to the extent permitted by law, in such federal court. The parties hereto agree
that a final unappealable judgment in any such action, suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. To the extent permitted by applicable
law, the parties hereto hereby waive and agree not to assert by way of motion,
as a defense or otherwise in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that the related documents or the
subject matter thereof may not be litigated in or by such courts.
(b) To the extent permitted by applicable law, the parties
hereto shall not seek and hereby waive the right to any review of the judgment
of any such court by any court of any other nation or jurisdiction which may be
called upon to grant an enforcement of such judgment.
(c) Service on any party may be made by delivering, by U.S.
registered mail, messenger or courier service, copies of the summons and
complaint and other process which may be served in any suit, action or
proceeding to such party addressed to its street address shown in Section
5.02(b), Attention: General Counsel, and such service shall be effective service
of process for any litigation brought against such party in any court. Such
address may be changed by such party by written notice to the other parties
hereto.
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(d) Nothing contained in this Insurance Agreement shall limit
or affect any party's right to serve process in any other manner permitted by
law or to start legal proceedings relating to any of the Operative Agreements
against any other party or its properties in the courts of any jurisdiction.
SECTION 5.06 Consent of Policy Provider. No disclosure
relating to the Policy Provider contained in any Offering Document, which
disclosure modifies, alters, changes, amends or supplements the disclosure
relating to the Policy Provider provided by the Policy Provider for use in the
Prospectus Supplement shall be made without the Policy Provider's prior written
consent. In the event that the consent of the Policy Provider is required under,
or the Policy Provider, as Controlling Party or otherwise, gives direction to
the Loan Trustee, the Subordination Agent or the Pass Through Trustee pursuant
to, any Operative Agreement, the determination whether to grant or withhold such
consent or to give such direction shall be made by the Policy Provider in its
sole discretion without any implied duty towards any other Person.
SECTION 5.07 Counterparts. This Insurance Agreement may be
executed in counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
SECTION 5.08 Headings. The headings of Articles and Sections
and the Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation.
SECTION 5.09 Trial by Jury Waived. Each party hereby waives,
to the fullest extent permitted by law, any right to a trial by jury in respect
of any litigation arising directly or indirectly out of, under or in connection
with this Insurance Agreement or any of the other Operative Agreements or any of
the Transactions contemplated hereunder or thereunder. Each party hereto (A)
certifies that no representative, agent or attorney of any party hereto has
represented, expressly or otherwise, that it would not, in the event of
litigation, seek to enforce the foregoing waiver, and (B) acknowledges that it
has been induced to enter into the Operative Agreements to which it is a party
by, among other things, this waiver.
SECTION 5.10 Limited Liability. No recourse under any
Operative Agreement or the Policy shall be had against, and no personal
liability shall attach to, any officer, employee, director, affiliate or
shareholder of any party hereto, as such, by the enforcement of any assessment
or by any legal or equitable proceeding, by virtue of any statute or otherwise
in respect of any of the Operative Agreements, the Certificates or the Policy,
it being expressly agreed and understood that each Operative Agreement is solely
an obligation of each party hereto, and that any and all personal liability,
either at common law or in equity, or by statute or constitution, of every such
officer, employee, director, affiliate or shareholder for breaches of any party
hereto of any obligations under any Operative Agreement is hereby expressly
waived as a condition of and in consideration for the execution and delivery of
this Insurance Agreement.
SECTION 5.11 Entire Agreement. This Insurance Agreement, the
Policy, the Policy Fee Letter and the other Operative Agreements set forth the
entire agreement between the parties with respect to the subject matter hereof
and thereof, and supersede and replace any
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agreement or understanding that may have existed between the parties prior to
the date hereof in respect of such subject matter. This Insurance Agreement and
the Policy are separate and independent agreements and nothing herein shall be
construed to vary or otherwise modify any terms of the Policy. No breach by any
party hereto of any representation, warranty, covenant, agreement or undertaking
contained herein shall in any way affect the obligations of the Policy Provider
under the Policy.
SECTION 5.12 Successors and Assigns. This Insurance Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Insurance Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Policy Provider
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President
U.S. BANK TRUST NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Subordination Agent
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
U.S. BANK TRUST NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Class G Trustee
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
AMERICAN AIRLINES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
Corporate Finance & Banking
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