COLLATERAL MAINTENANCE AGREEMENT
BETWEEN
CONTINENTAL AIRLINES, INC.
AND
MBIA INSURANCE CORPORATION
dated as of December 6, 2002
relating to
Floating Rate Secured Notes due 2007
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION..............................1
Section 1.1 Definitions...................................................1
Section 1.2 Rules of Construction.........................................1
ARTICLE 2 REPORTS REGARDING THE COLLATERAL...................................1
Section 2.2 Semiannual Appraisal..........................................2
Section 2.3 Quarterly Reports.............................................3
Section 2.4 Special Reports...............................................3
Section 2.5 Information from the Trustee..................................4
Section 2.6 Independent Appraiser.........................................4
ARTICLE 3 COLLATERAL REQUIREMENTS............................................4
Section 3.1 Maintenance of Collateral Ratio and Rotable Ratio.............4
Section 3.2 Certain Limitations Regarding the Collateral..................6
Section 3.3 Fleet Reduction...............................................7
Section 3.4 Liens.........................................................7
Section 3.5 Maintenance...................................................7
Section 3.6 Possession....................................................8
Section 3.7 Inspection....................................................9
Section 3.8 The Company's Obligation to Insure............................9
ARTICLE 4 MISCELLANEOUS.....................................................10
Section 4.1 Benefits of Agreement Restricted.............................10
Section 4.2 Appraiser's Certificate......................................10
Section 4.3 Notices; Waiver..............................................10
Section 4.4 Amendments, Etc..............................................11
Section 4.5 No Waiver....................................................11
Section 4.6 Successors and Assigns.......................................11
Section 4.7 Governing Law................................................12
Section 4.8 Effect of Headings...........................................12
PAGE
Section 4.9 Counterpart Originals........................................12
Section 4.10 Severability.................................................12
APPENDIX I - DEFINITIONS
APPENDIX II - FORM OF APPRAISAL COMPLIANCE REPORT
APPENDIX III - FORM OF NONAPPRAISAL COMPLIANCE REPORT
APPENDIX IV - INSURANCE
COLLATERAL MAINTENANCE AGREEMENT
COLLATERAL MAINTENANCE AGREEMENT, dated as of December 6, 2002, between
0CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and MBIA
INSURANCE CORPORATION, a New York insurance company (the "POLICY PROVIDER").
R E C I T A L S
WHEREAS, the Company, the Trustee, the Policy Provider and the Liquidity
Provider have entered into the Indenture providing for the issuance of
$200,000,000 aggregate principal amount of the Securities, and the Policy
Provider has issued the Policy under which the Trustee may make drawings to make
certain payments with respect to the Securities;
WHEREAS, in order to secure the payment of the principal amount of and
interest on the Securities and all other Obligations of the Company under the
Indenture, the Securities and the other Operative Documents, the Company has
granted a security interest in the Spare Parts Collateral pursuant to the
Security Agreement; and
WHEREAS, the Company and the Policy Provider wish to set forth herein
certain additional agreements with respect to the Spare Parts Collateral.
NOW, THEREFORE, in consideration of the premises and other benefits to the
Company, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Policy Provider agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 DEFINITIONS. Capitalized terms used above or hereinafter and
not otherwise defined herein shall have the meanings ascribed to such terms in
Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall
be part of this Agreement as if fully set forth in this place.
Section 1.2 RULES OF CONSTRUCTION. The rules of construction for this
Agreement are set forth in Section 2 of the Definitions Appendix.
ARTICLE 2
REPORTS REGARDING THE COLLATERAL
Section 2.1 ANNUAL APPRAISAL. So long as the Securities are Outstanding, by
the fifth Business Day of February in 2004 and by the fifth Business Day of
February of each year thereafter, the Company shall furnish the Policy Provider
and the Trustee an Independent Appraiser's Certificate signed by an Independent
Appraiser, dated as of a date between the preceding January 15 and February 1
(inclusive). Each such Independent Appraiser's Certificate shall state, in the
opinion of such Independent Appraiser, based upon use of the Annual Methodology,
the following:
(a) the Fair Market Value of the Collateral (excluding any Cash Collateral
and, for the avoidance of doubt, any Excluded Parts) as of a specified
date within 30 days (or, if an Independent Appraiser's Certificate
signed by such Independent Appraiser has not previously been delivered
to the Policy Provider pursuant to this Agreement or in the Offering
Memo, 60 days) (the "PERMITTED DAYS") preceding the date of such
Certificate (the "ANNUAL VALUATION DATE");
(b) the Fair Market Value of the Rotables and of the Expendables included
in the Collateral as of the applicable Annual Valuation Date (and
shall separately state the quantity of such Rotables and Expendables);
and
(c) the Fair Market Value of the Serviceable Parts and the Unserviceable
Parts included in the Collateral as of the applicable Annual Valuation
Date.
Each annual Independent Appraiser's Certificate shall be accompanied by an
Appraisal Compliance Report determined as of the applicable Annual Valuation
Date. The Appraisal Compliance Report shall set forth the calculation of the
Collateral Ratio and the Rotable Ratio based on the Fair Market Value of the
Collateral and the Rotables set forth in such Independent Appraiser's
Certificate, the Fair Market Value of Cash Collateral held by the Collateral
Agent, and the principal amount of the Securities Outstanding, each as of the
applicable Annual Valuation Date. Upon written request of the Policy Provider
given to the Company within twenty Business Days after delivery to the Policy
Provider of an annual Independent Appraiser's Certificate under this Section
2.1, the Company shall furnish to the Policy Provider (with a copy to the
Trustee) a recent Parts Inventory Report and a report showing the percentage of
the average cost of the Pledged Spare Parts located at each Company facility as
of the same date as the date of such Parts Inventory Report.
Section 2.2 SEMIANNUAL APPRAISAL. So long as the Securities are
Outstanding, by the fifth Business Day of February in 2003, by the fifth
Business Day of August in 2003 and by the fifth Business Day of August in each
year thereafter, the Company shall furnish the Policy Provider and the Trustee
an Independent Appraiser's Certificate signed by an Independent Appraiser, dated
as of a date between the preceding January 15 and February 1 (inclusive), in the
case of such Certificate due in February 2003 (the "FEBRUARY 2003 CERTIFICATE"),
or the preceding July 15 and August 1 (inclusive), in the case of such other
Certificates. Each such semiannual Independent Appraiser's Certificate shall
state, in the opinion of such Independent Appraiser, based upon the use of the
Semiannual Methodology, the following:
(a) the Fair Market Value of the Collateral (excluding any Cash Collateral
and, for the avoidance of doubt, any Excluded Parts) as of a specified
date within the Permitted Days preceding the date of such Certificate
(the "SEMIANNUAL VALUATION DATE");
(b) the Fair Market Value of the Rotables and of the Expendables included
in the Collateral as of the applicable Semiannual Valuation Date (and
shall separately state the quantity of such Rotables and Expendables);
and
(c) the Fair Market Value of the Serviceable Parts and the Unserviceable
Parts included in the Collateral as of the applicable Semiannual
Valuation Date.
Each semiannual Independent Appraiser's Certificate shall be accompanied by
an Appraisal Compliance Report determined as of the applicable Semiannual
Valuation Date, except that no Appraisal Compliance Report shall be required to
accompany the February 2003 Certificate, and the Maximum Collateral Ratio and
Minimum Rotable Ratio requirements shall not be required to be satisfied in
connection with the February 2003 Certificate. The Appraisal Compliance Report
provided with the semiannual Independent Appraiser's Certificate shall set forth
the calculation of the Collateral Ratio and the Rotable Ratio based on the Fair
Market Value of the Collateral and Rotables set forth in such Independent
Appraiser's Certificate, the Fair Market Value of Cash Collateral held by the
Collateral Agent, and the principal amount of the Securities Outstanding, each
as of the applicable Semiannual Valuation Date, PROVIDED that the Cash
Collateral deposited by the Company with the Security Agent on the Closing Date
shall be excluded from the calculation of the Collateral Ratio and Rotable Ratio
in connection with the Independent Appraiser's Certificate due by the fifth
Business Day of August, 2003, for purposes of Article 3 of this Agreement (but
not for purposes of Section 7.03 of the Security Agreement).
Section 2.3 QUARTERLY REPORTS. So long as the Securities are Outstanding,
within ten Business Days after each May 1 and November 1, commencing with May 1,
2003, the Company shall furnish the Policy Provider and the Trustee a
Nonappraisal Compliance Report determined as of such May 1 or November 1, as
applicable, or any date during such ten Business Day period thereafter.
Section 2.4 SPECIAL REPORTS. The Policy Provider may (i) if the Company
defaults in any of its obligations with respect to indebtedness of the Company
in an outstanding principal amount greater than $100,000,000 which results in
the acceleration of the Company's obligation to pay such indebtedness in full
prior to its stated final maturity date, at any time prior to the payment of
such indebtedness or the reversal of such acceleration, or (ii) if an Event of
Default occurs, at any time while such Event of Default is continuing, request
by written notice to the Company that the Company furnish to the Policy Provider
(with a copy to the Trustee) a special Independent Appraiser's Certificate. Any
such special Independent Appraiser's Certificate shall state, in the opinion of
such Independent Appraiser, based upon use of the Annual Methodology, the
following:
(a) the Fair Market Value of the Collateral (excluding any Cash Collateral
and, for the avoidance of doubt, any Excluded Parts) as of a specified
date within the Permitted Days preceding the date of such Certificate
(the "SPECIAL VALUATION DATE" and, together with each Annual Valuation
Date and Semiannual Valuation Date, the "VALUATION DATES");
(b) the Fair Market Value of the Rotables and of the Expendables included
in the Collateral as of the applicable Special Valuation Date (and
shall separately state the quantity of such Rotables and Expendables);
and
(c) the Fair Market Value of the Serviceable Parts and the Unserviceable
Parts included in the Collateral as of the applicable Special
Valuation Date.
The Company shall furnish to the Policy Provider (with a copy to the
Trustee) any such requested special Independent Appraiser's Certificate
reasonably promptly after receipt of such request. Notwithstanding the
foregoing, the Company shall not be obligated (i) to furnish any Independent
Appraiser's Certificate under this Section 2.4 during the Section 1110 Period or
(ii) to deliver pursuant to this Article 2 an Independent Appraiser's
Certificate more than twice in any six month period. Upon written request of the
Policy Provider given to the Company within twenty Business Days after delivery
to the Policy Provider of a special Independent Appraiser's Certificate under
this Section 2.4, the Company shall furnish to the Policy Provider (with a copy
to the Trustee) a recent Parts Inventory Report and a report showing the
percentage of the average cost of the Pledged Spare Parts located at each
Company facility as of the same date as the date of such Parts Inventory Report.
Section 2.5 INFORMATION FROM THE TRUSTEE. The Fair Market Value of any
Investment Securities included in the Cash Collateral for purposes of this
Agreement shall be determined by the Trustee in accordance with customary
financial market practices. The Trustee shall inform the Company of the
principal amount of the Securities Outstanding and the Fair Market Value of any
Investment Securities included in the Collateral, in each case as of any
Valuation Date or for purposes of Section 3.1, promptly after the Company's
request for such information.
Section 2.6 INDEPENDENT APPRAISER. If the Policy Provider has a reasonable
basis for concluding that the performance of the Independent Appraiser that
executed the most recent Independent Appraiser's Certificate delivered pursuant
to Article 2 was not satisfactory, the Policy Provider may designate another
Independent Appraiser to perform the next required appraisal under this Article
2 by written notice given to the Company within 90 days after the date of such
most recent Independent Appraiser's Certificate. The Company shall use such
other Independent Appraiser designated by the Policy Provider for the next
appraisal unless it gives the Policy Provider written notice of reasonable
objection to the use of such other Independent Appraiser.
ARTICLE 3
COLLATERAL REQUIREMENTS
Section 3.1 MAINTENANCE OF COLLATERAL RATIO AND ROTABLE RATIO.
(a) If the Collateral Ratio, as most recently determined pursuant to an
Appraisal Compliance Report, is greater than the Maximum Collateral Ratio, the
Company shall within 90 days after the date of the Appraisal Compliance Report
setting forth the calculation of such Collateral Ratio:
(i) subject additional Qualified Spare Parts (the "ADDITIONAL PARTS")
to the Lien of the Security Agreement in accordance with Section 3.1(c);
(ii) grant a security interest to a Collateral Agent in other property
to secure the Obligations for the benefit of the Holders and the
Indemnitees, PROVIDED that the Company shall have received, with respect to
the use for purposes of this Section 3.1(a) of such additional collateral
and the applicable Collateral Agreement, (x) approval of the Policy
Provider and (y) Rating Agency Confirmation;
(iii) provide additional cash and/or Investment Securities to the
Collateral Agent under the Security Agreement, PROVIDED that if the
Continental Cash Balance as of the applicable Valuation Date was less than
$600,000,000, then the amount of Cash Collateral included in the
Collateral, after giving effect to the action taken pursuant to Sections
3.1(a) and 3.1(b) with respect to such Valuation Date, shall not exceed
$20,000,000;
(iv) deliver Securities to the Trustee for cancellation;
(v) redeem some or all of the Securities pursuant to Article 4 of the
Indenture; or
(vi) any combination of the foregoing;
such that, the Collateral Ratio, as recalculated giving effect to such action
taken pursuant to this Section 3.1(a) and, in the case of clauses (i), (ii) and
(iii) of this Section 3.1(a), using the Fair Market Value of any such additional
Collateral determined pursuant to Section 3.1(d) (but otherwise using the
information used to determine the Collateral Ratio as most recently determined
pursuant to Article 2), would not be greater than the Maximum Collateral Ratio.
(b) If the Rotable Ratio, as most recently determined pursuant to an
Appraisal Compliance Report, is less than the Minimum Rotable Ratio, the Company
shall within 90 days after the date of the Appraisal Compliance Report setting
forth the calculation of such Rotable Ratio:
(i) subject additional Rotables (the "ADDITIONAL ROTABLES") to the
Lien of the Security Agreement in accordance with Section 3.1(c);
(ii) provide additional cash and/or Investment Securities to the
Collateral Agent under the Security Agreement; PROVIDED that if the
Continental Cash Balance as of the applicable Valuation Date was less than
$600,000,000, then the amount of Cash Collateral included in the
Collateral, after giving effect to the action taken pursuant to Sections
3.1(a) and 3.1(b) with respect to such Valuation Date, shall not exceed
$20,000,000;
(iii) deliver Securities to the Trustee for cancellation;
(iv) redeem some or all of the Securities pursuant to Article 4 of the
Indenture; or
(v) any combination of the foregoing.
such that, the Rotable Ratio, as recalculated giving effect to such action taken
pursuant to this Section 3.1(b) and, in the case of clauses (i) and (ii) of this
Section 3.1(b), using the Fair Market Value of any such additional Collateral
determined pursuant to Section 3.1(d) (but otherwise using the information used
to determine the Rotable Ratio as most recently determined pursuant to Article
2), would not be less than the Minimum Rotable Ratio.
(c) In order to comply with Section 3.1(a)(i) or 3.1(b)(i), the Company
shall (i) add one or more locations as Designated Locations pursuant to Section
4.02(b) of the Security Agreement, in which case the Qualified Spare Parts or
Rotables, as the case may be, at such new Designated Locations, to the extent
not included in the Pledged Spare Parts on the preceding Valuation Date, shall
be deemed Additional Parts or Additional Rotables, as the case may be; and/or
(ii) add to a Designated Location Qualified Spare Parts or Rotables, as the case
may be, that were not included as Pledged Spare Parts on the preceding Valuation
Date, which shall be deemed Additional Parts or Additional Rotables, as the case
may be.
(d) In connection with the provision of additional Collateral pursuant to
clause (i) or (ii) of Section 3.1(a) or Section 3.1(b), the Company shall
furnish to the Policy Provider (with a copy to the Trustee) an Independent
Appraiser's Certificate signed by an Independent Appraiser, dated as of a date
after the most recent Valuation Date, stating, in the opinion of such
Independent Appraiser, the Fair Market Value of such additional Collateral
(other than Cash Collateral), as of a date not earlier than 60 days prior to the
date of such Independent Appraiser's Certificate (but not earlier than the most
recent Valuation Date) and using, in the case of Additional Parts or Additional
Rotables, the Annual Methodology.
(e) If the Company shall have provided Cash Collateral pursuant to Section
3.1(a)(iii) or Section 3.1(b)(ii) (the "TEMPORARY CASH COLLATERAL"), it shall
within 90 days after providing such Temporary Cash Collateral (i) in the case of
Section 3.1(a)(iii), take additional action pursuant to Section 3.1(a)
(excluding the right to provide Cash Collateral) to cause the Collateral Ratio,
calculated to exclude such Temporary Cash Collateral, not to be greater than the
Maximum Collateral Ratio and (ii) in the case of Section 3.1(b)(ii), take
additional action pursuant to Section 3.1(b) (excluding the right to provide
Cash Collateral) to cause the Rotable Ratio, calculated to exclude such
Temporary Cash Collateral, not to be less than the Minimum Rotable Ratio.
Section 3.2 CERTAIN LIMITATIONS REGARDING THE COLLATERAL. During any period
commencing on the Closing Date or the date of an Independent Appraiser's
Certificate delivered pursuant to Article 2 through the date preceding the date
of the next Independent Appraiser's Certificate delivered pursuant to Article 2
(each, an "APPLICABLE PERIOD"), the Company agrees that, as of any date during
an Applicable Period, the aggregate Appraised Value of all Pledged Spare Parts
(x) previously during such Applicable Period sold, transferred or disposed of
(excluding any such transaction pursuant to Section 4.02(a)(ii) of the Security
Agreement and Pledged Spare Parts deemed sold pursuant to the proviso in Section
3.6(a) of this Agreement as to which the Company has reacquired title)
(collectively, "SALES") shall not exceed 2% of the Appraised Value of the
Collateral, (y) then subject to leases to Permitted Lessees or loans to other
Persons (together, "LOANS") shall not exceed 2% of the Appraised Value of the
Collateral or (z) previously during such Applicable Period moved from a
Designated Location to a location not a Designated Location (excluding those
permitted under Sections 4.02(a)(i) of the Security Agreement and clauses (i)
and (ii) of Section 3.6(a) of this Agreement) ("MOVES") shall not exceed 2% of
the Appraised Value of the Collateral.
Section 3.3 FLEET REDUCTION. If at any time after the Closing Date so long
as any Securities are Outstanding the total number of Aircraft of any Aircraft
Model (as defined below) in the Company's in-service fleet during any period of
60 consecutive days is less than the Specified Minimum (as defined below) for
such Aircraft Model (other than due to restrictions on operating such Aircraft
imposed by the FAA or any other instrumentality or agency of the United States),
then within 90 days after such occurrence the Company shall redeem Securities
pursuant to Article 4 of the Indenture or deliver Securities to the Trustee for
cancellation, or a combination of the foregoing, in an aggregate principal
amount not less than the principal amount of the Securities Outstanding at the
end of such 60 day period multiplied by a fraction, the numerator of which shall
be the Appraised Value of the Pledged Spare Parts that are appropriate for
incorporation in, installation on, attachment or appurtenance to, or use in only
Aircraft of such Aircraft Model or Engines utilized only on such Aircraft, and
the denominator of which shall be the Appraised Value of the Collateral. For
purposes of this Section "AIRCRAFT MODEL" shall mean each of the four models or
groups of models of Aircraft set forth below and "SPECIFIED MINIMUM" for any
Aircraft Model shall mean the number of Aircraft set forth opposite such
Aircraft Model below:
AIRCRAFT MODEL SPECIFIED MINIMUM
1. Boeing 737-700, Boeing
737-800 and Boeing 737-900
Aircraft 63 Aircraft
2. Boeing 757-200 and
Boeing 757-300
Aircraft 23 Aircraft
3. Boeing 767-200 and
Boeing 767-400 Aircraft 13 Aircraft
4. Boeing 777-200 Aircraft 9 Aircraft
Section 3.4 LIENS. The Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Spare Parts
Collateral, title to any of the foregoing or any interest of the Company
therein, except Permitted Liens. The Company shall promptly, at its own expense,
take such action as may be necessary to duly discharge (by bonding or otherwise)
any such Lien other than a Permitted Lien arising at any time.
Section 3.5 MAINTENANCE. The Company:
(a) shall maintain, or cause to be maintained, at all times the Pledged
Spare Parts in accordance with all applicable Laws issued by the FAA or any
other Governmental Entity having jurisdiction over the Company or any such
Pledged Spare Parts, including making any modifications, alterations,
replacements and additions necessary therefor;
(b) shall maintain, or cause to be maintained, all records, logs and other
materials required by the FAA or under the Federal Aviation Act to be maintained
in respect of the Pledged Spare Parts and shall not modify its record retention
procedures in respect of the Pledged Spare Parts if such modification would
materially diminish the value of the Pledged Spare Parts, taken as a whole; and
(c) shall maintain, or cause to be maintained, the Pledged Spare Parts in
good working order and condition and shall perform all maintenance thereon
necessary for that purpose, excluding (i) Pledged Spare Parts that have become
worn out or unfit for use and not reasonably repairable or become obsolete, (ii)
Pledged Spare Parts that are not required for the Company's normal operations
and (iii) Expendables that have been consumed or used in the Company's
operations.
Section 3.6 POSSESSION.
(a) Without the prior written consent of the Policy Provider, the Company
will not sell, lease, transfer or relinquish possession of any Pledged Spare
Part to anyone other than the grant of the security interest to the Security
Agent pursuant to the Security Agreement, except as permitted by the provisions
of Sections 3.2 and 3.6 of this Agreement and Sections 4.02 and 4.03 of the
Security Agreement and except that the Company shall have the right, in the
ordinary course of business, (i) to transfer possession of any Pledged Spare
Part to the manufacturer thereof or any other organization for testing,
overhaul, repairs, maintenance, alterations or modifications or to any Person
for the purpose of transport to any of the foregoing or (ii) to subject any
Pledged Spare Part to a pooling, exchange, borrowing or maintenance servicing
agreement arrangement customary in the airline industry and entered into in the
ordinary course of business; PROVIDED, HOWEVER, that if the Company's title to
any such Pledged Spare Part shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be a Sale with respect to such
Pledged Spare Part subject to the provisions of Section 3.2.
(b) So long as no Event of Default shall have occurred and be continuing,
the Company may enter into a lease with respect to any Pledged Spare Part to any
U.S. Air Carrier that is not then subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding and shall not
have substantially all of its property in the possession of any liquidator,
trustee, receiver or similar person (a "PERMITTED LESSEE"). In the case of any
such lease, the Company will include in such lease appropriate provisions which
(t) make such lease expressly subject and subordinate to all of the terms of the
Security Agreement, including the rights of the Security Agent to avoid such
lease in the exercise of its rights to repossession of the Pledged Spare Parts
under the Security Agreement; (u) require the Permitted Lessee to comply with
the terms of Section 3.8; and (v) require that the Pledged Spare Parts subject
thereto be used in accordance with the limitations applicable to the Company's
use, possession and location of such Pledged Spare Parts provided in this
Agreement and the Security Agreement (including, without limitation, that such
Pledged Spare Parts be kept at one or more Designated Locations), it being
understood that such Permitted Lessee shall be entitled to incorporate in,
install on, attach or make appurtenant to, or use in, any Aircraft, Engine or
Appliance leased to, or owned by, such Permitted Lessee (whether or not subject
to any Lien) any Pledged Spare Part subject thereto, free from the Lien of the
Security Agreement. No lease permitted under this Section shall be entered into
unless (w) the Company shall provide written notice to the Policy Provider and
the Trustee (promptly after entering into any such lease); (x) the Company shall
furnish to the Policy Provider (with a copy to the Trustee) evidence reasonably
satisfactory to the Policy Provider that the insurance required by Section 3.8
remains in effect; (y) all necessary documents shall have been duly filed,
registered or recorded in such public offices as may be required fully to
preserve the first priority security interest (subject to Permitted Liens) of
Security Agent in the Pledged Spare Parts; and (z) the Company shall reimburse
the Policy Provider for all of its reasonable out-of-pocket fees and expenses,
including, without limitation, reasonable fees and disbursements of counsel,
incurred by the Policy Provider in connection with any such lease. Except as
otherwise provided herein and without in any way relieving the Company from its
primary obligation for the performance of its obligations under this Agreement
and the Security Agreement, the Company may in its sole discretion permit a
lessee to exercise any or all rights which the Company would be entitled to
exercise under Sections 3.4 through 3.8, inclusive, of this Agreement and
Article 4 of the Security Agreement, and may cause a lessee to perform any or
all of the Company's obligations under Sections 3.4 through 3.8, inclusive, of
this Agreement and Article 4 of the Security Agreement, and the Policy Provider
agrees to accept (and to direct the Security Agent to accept) actual and full
performance thereof by a lessee in lieu of performance by the Company.
Section 3.7 INSPECTION.
(a) At all reasonable times, the Policy Provider and its authorized
representatives (the "INSPECTING PARTIES") may (not more than once every 12
months unless an Event of Default has occurred and is continuing, in which case
such inspection right shall not be so limited) inspect the Pledged Spare Parts
(including without limitation, the Spare Parts Documents).
(b) Any inspection of the Pledged Spare Parts hereunder shall be limited to
a visual inspection and shall not include the disassembling, or opening of any
components, of any Pledged Spare Part, and no such inspection shall interfere
with the Company's or any Permitted Lessee's maintenance and use of the Pledged
Spare Parts.
(c) With respect to such rights of inspection, the Policy Provider shall
not have any duty or liability to make, or any duty or liability by reason of
not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection with
any such inspection, PROVIDED that the Company shall reimburse the Inspecting
Party for its reasonable out-of-pocket expenses in connection with any such
inspection during the continuance of an Event of Default, except during the
Section 1110 Period.
Section 3.8 THE COMPANY'S OBLIGATION TO INSURE. The Company shall comply
with, or cause to be complied with, each of the provisions of Appendix IV, which
provisions are hereby incorporated by this reference as if set forth in full
herein. Nothing in this Section shall limit or prohibit (a) the Company from
maintaining the policies of insurance required under Appendix IV with higher
limits than those specified in Appendix IV, or (b) the Policy Provider, the
Trustee or the Security Agent from obtaining insurance for its own account (and
any proceeds payable under such separate insurance shall be payable as provided
in the policy relating thereto); PROVIDED, HOWEVER, that no insurance may be
obtained or maintained that would limit or otherwise adversely affect the
coverage of any insurance required to be obtained or maintained by the Company
pursuant to Section 3.8 and Appendix IV.
ARTICLE 4
MISCELLANEOUS
Section 4.1 BENEFITS OF AGREEMENT RESTRICTED. Subject to the provisions of
Section 4.6 hereof, nothing in this Agreement or the other Operative Documents,
express or implied, shall give or be construed to give to any Person, other than
the parties hereto, any legal or equitable right, remedy or claim under or in
respect of this Agreement or under any covenant, condition or provision herein
contained, all such covenants, conditions and provisions, subject to Section 4.6
hereof, being for the sole benefit of the parties hereto, PROVIDED that the
Trustee is an intended third-party beneficiary of each provision of this
Agreement that expressly grants it a right to receive certain documents that are
provided to the Policy Provider and of the last sentence of Section 4.6, and the
Trustee and the Security Agent each is an intended third-party beneficiary of
each provision of Section 3.8 and Appendix IV that expressly refers to it
(collectively, the "TRUSTEE PROVISIONS") (it being understood that the Company's
obligation to deliver a document to the Policy Provider and the contents of any
such document are not Trustee Provisions, and such provisions referred to in
this parenthetical may be amended, supplemented or waived without the consent of
the Trustee or the Security Agent, PROVIDED that the right of the Trustee to
receive a copy of such document if it is required to be delivered to the Trustee
or the Security Agent is a Trustee Provision).
Section 4.2 APPRAISER'S CERTIFICATE. Unless otherwise specifically
provided, an Independent Appraiser's Certificate shall be sufficient evidence of
the Appraised Value and Fair Market Value of any property under this Agreement.
Section 4.3 NOTICES; WAIVER. Any request, demand, authorization, direction,
notice, consent, waiver or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Company at:
Continental Airlines, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Treasurer
Telecopier No.: (000) 000-0000
(b) the Policy Provider shall be sufficient for every purpose hereunder if
in writing and sent by personal delivery, by telecopier, by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Policy Provider at:
MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Insured Portfolio Management, Structured Finance
Telecopier No.: (000) 000-0000
(c) the Trustee or the Security Agent shall be sufficient for every purpose
hereunder if in writing and sent by personal delivery, by telecopier, by
registered or certified mail or by nationally recognized overnight courier,
postage or courier charges, as the case may be, prepaid to the Trustee or the
Security Agent at:
Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopier No.: (000) 000-0000
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties listed
above. Any such delivery shall be deemed made on the date of receipt by the
addressee of such delivery or of refusal by such addressee to accept delivery.
Section 4.4 AMENDMENTS, ETC. This Agreement may be amended or supplemented,
and compliance with any obligation in this Agreement may be waived, by written
instrument executed by the Company and the Policy Provider, PROVIDED that the
Trustee Provisions, insofar as they relate to the rights of the Trustee or the
Security Agent, may not be amended, supplemented or waived without the written
consent of the Trustee or the Security Agent, as the case may be.
Section 4.5 NO WAIVER. No failure on the part of the Policy Provider to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. Failure by the Policy Provider at any time or times hereafter to require
strict performance by the Company with any of the provisions, warranties, terms
or conditions contained herein shall not waive, affect or diminish any right of
the Policy Provider at any time or times hereafter to demand strict performance
thereof, and such right shall not be deemed to have been modified or waived by
any course of conduct or knowledge of the Policy Provider or any agent, officer
or employee of the Policy Provider.
Section 4.6 SUCCESSORS AND ASSIGNS. This Agreement and all obligations of
the Company hereunder shall be binding upon the successors and permitted assigns
of the Company, and shall, together with the rights and remedies of the Policy
Provider hereunder, inure to the benefit of the Policy Provider and its
successors and assigns. The interest of the Company under this Agreement is not
assignable and any attempt to assign all or any portion of this Agreement by the
Company shall be null and void except for an assignment in connection with a
merger, consolidation or conveyance, transfer or lease of all or substantially
all the Company's assets permitted under the Indenture. Upon the occurrence of a
Policy Provider Default, all rights and obligations of the Policy Provider under
this Agreement shall automatically, without any notice, demand or other action,
be assigned to and assumed by the Trustee, and the Trustee shall take or refrain
from taking action under this Agreement at the direction of the Controlling
Party.
Section 4.7 GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 4.8 FFECT OF HEADINGS. The Article and Section headings and the
Table of Contents contained in this Agreement have been inserted for convenience
of reference only, and are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of this Agreement.
Section 4.9 COUNTERPART ORIGINALS. This Agreement may be signed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of an original executed counterpart of this Agreement.
Section 4.10 SEVERABILITY. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered all as of the date first above written.
CONTINENTAL AIRLINES, INC.
By:
--------------------------------
Name:
Title:
MBIA INSURANCE CORPORATION
By:
--------------------------------
Name:
Title:
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Securities issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report prepared as of the applicable Valuation
Date; (ii) reviewing the Independent Appraiser's internal value database for
values applicable to Qualified Spare Parts included in the Spare Parts
Collateral; (iii) developing a representative sampling of a reasonable number of
the different Qualified Spare Parts included in Spare Parts Collateral for which
a market check will be conducted; (iv) checking other sources, such as
manufacturers, other airlines, U.S. government procurement data and airline
parts pooling price lists, for current market prices of the sample parts
referred to in clause (iii); (v) establishing an assumed ratio of Serviceable
Parts to Unserviceable Parts as of the applicable Valuation Date based upon
information provided by the Company and the Independent Appraiser's limited
physical review of the Spare Parts Collateral referred to in the following
clause (vi); (vi) visiting at least two locations selected by the Independent
Appraiser where the Pledged Spare Parts are kept by the Company (neither of
which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of
the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that
at least one such location shall be one of the top three locations at which the
Company keeps the largest number of Pledged Spare Parts, to conduct a limited
physical inspection of the Spare Parts Collateral; (vii) conducting a limited
review of the inventory reporting system applicable to the Pledged Spare Parts,
including checking information reported in such system against information
determined through physical inspection pursuant to the preceding clause (vi) and
(viii) reviewing a sampling of the Spare Parts Documents (including tear-down
reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio and Rotable
Ratio, which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the
first day of the then applicable Interest Period plus (ii)
interest payable thereon during such entire Interest Period at
then effective LIBOR.
Y = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using then
effective LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using a rate
equal to the applicable London interbank offered rate for a period
commencing on the Applicable Date and ending on the last day of
the then applicable Interest Period, determined by the Reference
Agent as of two Business Days prior to the Applicable Date as the
discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 X.X.X.xx. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or
as agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the date of the Indenture, between the Company and the
Policy Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Securities until a successor replaces it pursuant to the Indenture and
thereafter means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Xxxxxx Square North 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding
Securities.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for
such Interest Period, as determined pursuant to the Reference Agency Agreement,
plus the Applicable Margin, PROVIDED that, solely in the event no Registration
Event (as defined in the Registration Rights Agreement) occurs on or prior to
the 210th day after the Closing Date, the Debt Rate shall be increased by an
additional margin equal to 0.50% per annum, from and including such 210th day to
and excluding the earlier of (i) the date on which such Registration Event
occurs and (ii) the date on which there ceases to be any Registrable Securities
(as defined in the Registration Rights Agreement)); or if the Shelf Registration
Statement (as defined in the Registration Rights Agreement) (if it is filed),
after being declared effective by the SEC, ceases to be effective at any time
during the period specified by Section 2(b)(B) of the Registration Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period, the Debt Rate shall be increased by an additional margin equal to 0.50%
per annum from and including the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to and excluding the date on
which the Shelf Registration Statement again becomes effective (or, if earlier,
the end of the period specified by Section 2(b)(B) of the Registration Rights
Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER
that, if a default in the payment of interest on the Securities occurs and is
continuing on any Interest Payment Date, then the Debt Rate applicable to the
Interest Period ending on such Interest Payment Date shall not exceed the Capped
Interest Rate, except that for purposes of any payment made by the Company
intended to cure such default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE OFFER" means the exchange offer which may be made pursuant to the
Registration Rights Agreement to exchange Initial Certificates for Exchange
Certificates.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement
that, pursuant to the Registration Rights Agreement, is filed by the Company
with the SEC with respect to the exchange of Initial Securities for Exchange
Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 0000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Indenture dated as of December 6, 2002, among the
Company, the Trustee, the Liquidity Provider and the Policy Provider under which
the Securities are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Xxxxxxx, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL PURCHASER" means Xxxxxx Xxxxxxx & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Security is Outstanding (commencing March 6, 2003),
PROVIDED that if any such day is not a Business Day, then the relevant Interest
Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date and ending on (but
excluding) the first Interest Payment Date following such date and (ii) in the
case of each subsequent Interest Period, the period commencing on (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of issuance of the Initial Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Indenture, providing for the guarantee by the Liquidity Guarantor of the
obligations of the Liquidity Provider under the Liquidity Facility.
"LIQUIDITY GUARANTOR" means Xxxxxx Xxxxxxx.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Xxxxxx Xxxxxxx Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MINIMUM ROTABLE RATIO" means 150%.
"MOODY'S" means Xxxxx'x Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity
Provider and the Policy Provider, excluding whichever is the Controlling Party
at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or
a Security, means all Securities theretofore authenticated and delivered under
the Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Securities, PROVIDED that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee has been made;
(c) Securities for which payment has been deposited with the Trustee
or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to
the extent provided therein); and
(d) Securities which have been paid, or for which other Securities
shall have been authenticated and delivered in lieu thereof or in substitution
therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Securities are held by
bona fide purchasers in whose hands the Securities are valid obligations of the
Company.
A Security does not cease to be Outstanding because the Company or one of
its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining
whether the Holders of the requisite aggregate principal amount of Securities
Outstanding have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or any other Operative Document, Section
2.13 of the Indenture shall be applicable.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the
Securities which is not in fact received by the Trustee (whether from the
Company, the Liquidity Provider, the Policy Provider or otherwise) on or within
five days after the Scheduled Payment Date relating thereto and which is not
subsequently paid in connection with the redemption or final maturity of a
Security.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Securities from the
Company, (ii) any payment of interest on the Securities with funds drawn under
the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from
the Policy Provider to Continental and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the date hereof among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Security redeemed pursuant to Article
4 of the Indenture, the following percentage of the principal amount of such
Security: (i) if redeemed before the first anniversary of the Issuance Date,
1.5%; (ii) if redeemed on or after such first anniversary and before the second
anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such
second anniversary and before the third anniversary of the Issuance Date, 0.5%;
PROVIDED that no Premium shall be payable in connection with a redemption made
by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, each nationally
recognized rating agency which shall have been requested by the Company to rate
the Securities and which shall then be rating the Securities. The initial Rating
Agency will be Moody's.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies that such action
would not result in (i) a reduction of the rating for the Securities below the
then current rating for the Securities (such rating as determined without regard
to the Policy) or (ii) a withdrawal or suspension of the rating of the
Securities.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to the Indenture and
such Security.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) in substantially the form of the replaced Liquidity
Facility, including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Securities (before
downgrading of such ratings, if any, as a result of the downgrading of the
Liquidity Provider), and be consented to by the Policy Provider, which consent
shall not be unreasonably withheld or delayed, in a face amount (or in an
aggregate face amount) equal to the amount of interest payable on the Securities
(at the Capped Interest Rate, and without regard to expected future principal
payments) on the eight Interest Payment Dates following the date of replacement
of such Liquidity Facility (or if such date is an Interest Payment Date, on such
day and the seven Interest Payment Dates following the date of replacement of
such Liquidity Facility) and issued by a Person (or Persons) having unsecured
short-term debt rating or issuer credit rating, as the case may be, issued by
the Rating Agencies which are equal to or higher than the Threshold Rating.
Without limitation of the form that a Replacement Liquidity Facility otherwise
may have pursuant to the preceding sentence, a Replacement Liquidity Facility
for the Securities may have a stated expiration date earlier than 15 days after
the Final Legal Maturity Date so long as such Replacement Liquidity Facility
provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the
Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Security, the
Redemption Date applicable thereto, and (iv) with respect to the final maturity
of the Securities, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the "Securities", as defined in the Indenture, that are
issued under the Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the date of the Indenture between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to the
Registration Rights Agreement, other than an Exchange Offer Registration
Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code xx.xx.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
Appendix II to the
Collateral Maintenance Agreement
[Address to Policy Provider and
to the Trustee]
APPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
MAINTENANCE AGREEMENT
Ladies and Gentlemen:
We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein
have such respective defined meanings. The Company hereby certifies that:
1. This Compliance Report is accompanied by an Independent Appraiser's
Certificate (the "RELEVANT APPRAISAL") dated [___________]. The Valuation
Date for purposes of the Relevant Appraisal was [___________] (the
"RELEVANT VALUATION DATE").
2. The following sets forth the calculation of the Collateral Ratio as of the
Relevant Valuation Date:
a. The aggregate principal amount of all
Securities Outstanding as of the
Relevant Valuation Date $[_______]
b. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
c. The Fair Market Value of the Collateral
(excluding Cash Collateral) as of the
Relevant Valuation Date, as set forth
in the accompanying Independent
Appraiser's Certificate $[_______]
d. The Collateral Ratio
((a - b) / c) [_______]%
3. The following sets forth the calculation of the Rotable Ratio as of the
Relevant Valuation Date:
a. The Fair Market Value of the Rotables
as of the Relevant Valuation Date, as
set forth in the accompanying
Independent Appraiser's Certificate $[_______]
b. The aggregate principal amount of all
Securities Outstanding as of the
Relevant Valuation Date $[_______]
c. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
d. The Rotable Ratio
(a / b - c) [_______]%
4. The Continental Cash Balance as of the Relevant Valuation Date was
$[___________].
Dated: [__________]
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:
--------------------------------
Name:
Title:
Appendix III to the
Collateral Maintenance Agreement
[Address to Policy Provider and
to the Trustee]
NONAPPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
MAINTENANCE AGREEMENT
Ladies and Gentlemen:
We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein
have such respective defined meanings. The Company hereby certifies that:
1. The most recent Independent Appraiser's Certificate furnished by the
Company (the "RELEVANT APPRAISAL") [was dated October 31, 2002] [pursuant
to Article 2 of the Agreement was dated [______________] (the "RELEVANT
DATE").] The Valuation Date for purposes of the Relevant Appraisal was
[___________] (the "RELEVANT VALUATION DATE").
2. The aggregate Appraised Value of all Collateral determined as of the
Relevant Valuation Date pursuant to the Agreement [, as subsequently
supplemented pursuant to Section 3.1 of the Agreement,] is $[________].
3. During the period (the "RELEVANT PERIOD") beginning on the [Closing Date]
[Relevant Date] and ending on [_______] (the "DETERMINATION DATE").
i) Sales did not exceed 2% of the Appraised Value of the Collateral, and
ii) Moves did not exceed 2% of the Appraised Value of the Collateral.
4. Loans outstanding on the Determination Date did not exceed 2% of the
Appraised Value of the Collateral.
5. Attached hereto as Exhibit 1 is a report that correctly sets forth as of
the Determination Date the percentage of the average cost of all Pledged
Spare Parts consisting of Rotables, Expendables and all Pledged Spare Parts
located at each Company facility.
6. Attached hereto as Exhibit 2 is a report that correctly sets forth the
following information as of the Determination Date with respect to each
Pledged Spare Part model among the 500 Pledged Spare Part models with the
highest aggregate Appraised Value:
i) Manufacturer's part number;
ii) the Company's part tracking number;
iii) part description;
iv) related aircraft model(s);
v) classification as Rotable or Expendable;
vi) quantity on hand; and
vii) the Company's average cost.
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:
--------------------------------
Name:
Title:
Appendix IV to the
Collateral Maintenance Agreement
INSURANCE
[OMITTED AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
